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Sri Lanka seeking SAGT-style deal for Colombo’s East terminal: PB Jayasundera

ECONOMYNEXT – Sri Lanka is encouraging a build operate transfer style deal for Colombo’s East terminal which may require over 500 million US dollars in investments from India and Japan, President’s Secretary P B Jayasundera said.

Sri Lanka would like India and Japan to develop the East Terminal in a deal like the existing South Asia Gateway Terminals he said.

The SAGT is built with private equity and debt, for which Sri Lanka Ports Authority or the government is not responsible.

On top of servicing debt, SAGT also pays throughput charges to the Sri Lanka Ports Authority which increases its profits and can be used to repay any other debt during its concession period.

The Colombo International Container Terminal with China Merchants also has a similar arrangement.

After the end of the concession period, which may run into around 30 years, the entire BOT terminal comes back to the state agency.

Sri Lanka’s last administration signed an unorthodox deal with India and Japan where a terminal operating company jointly owned by the state port agency, Japan and India would run the terminal.

A soft-loan would be given by Japan to purchase cranes, raising questions about who will service the loan.

The terminal may require around 500 to 700 million dollars to complete raising questions about who will service the debt and whether enough cashflows will come from the terminal operating company to service the debt.

The TOC deal was struck amid opposition from President Maithripala Sirisena and his economic advisors to a standard BOT deal.

In 2015 the last administration called for a BOT style deal for the East Terminal getting responses from top global port and shipping firms, but the exercise was abandoned mid-way.

The new administration in a policy frame work released this month, has said it will also call for private investment for a West Terminal.

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The feasibility of a new cross-berth terminal between the East Terminal and existing South Asia Gateway Terminals will be studied. (Colombo/Dec20/2019).

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