CMPort remits $ 585 m new cash despite Hambantota undercurrents

The money for the latest tranche of lease payment for the Hambantota Port from the China Merchants Port Holdings Company (CMPort) reached the Sri Lankan banking system this week even though the Public Private Partnership (PPP) initiative is facing some fresh undercurrents.

The Daily FT learns that $ 585 million, the value of the pending payment due in early June, reached Standard Chartered Bank mid this week. However, the funds have not been released as yet since a few conditions precedent to be complied with by the Government haven’t been met.

Financial analysts welcomed the entry of CMPort funds as it will help ease off the pressure on the Rupee even though the recent spike in the exchange rate is viewed by the Central Bank as unwarranted. 

Last month, the Central Bank listed the IMF’s $ 252 million release last week and the $ 585 million from CMPort by early June as key developments that would further boost the reserves situation.

On 22 May, the Central Bank said the country’s Gross External Reserves currently amount to $ 9.1 billion. They are expected to increase to about $ 11 billion by mid-June. 

The Rupee has declined 3.7% to date, hitting a fresh record low of 159.00 per dollar yesterday.

Banking analysts opined that entry of $ 585 million to the banking system may not be widely known and expect the Forex markets to adjust next week. 

Shipping industry sources said that the fact that CMPort has remitted the money irrespective of finality of all conditions precedent reinforces the global giant’s commitment to Sri Lanka and the Hambantota Port joint venture with the Sri Lanka Ports Authority. 

“There had been several rounds of discussions in the past few days over compliance of conditions precedent. The funds have come notwithstanding failure to wrap-up talks and iron out the issues. Given the complexities, some of the conditions precedent appear to require more time to be complied with,” said an official source. 

Other sources said that among the few non-compliant precedent conditions was the legality and transfer of the artificial island spanning 110 hectares that was built using sand sourced during the breakwater development of the Hambantota port. Another is the release of oil tanks which contain bunker fuel originally imported by SLPA but subsequently seized by the Customs. There has been a delay in the disposal of seized cargo and connected issues.

In a major move to revive the “white elephant” Rajapaksa regime-built Hambantota Port, the Yahapalana Government in December last year facilitated a 80:20 joint venture between CMPort and SLPA to lease the port for 99 years for $ 1.1 billion. This saw an immediate first lease payment of $ 292.1 million followed by another worth $ 97.3 million in January this year. To date, $ 389.5 million has been paid. The final payment is to be paid within six months from 9 December 2017.

CMPort, last year, reached a milestone by handling over 100 million TEUs in its global operations. In China, the group has operations in Hong Kong, Shenzhen, Ningbo, Qingdao, Dalian, Tianjin, Zhanjiang and Xiamen Bay. CMPort also has container terminal operations in the United States, Nigeria, Djibouti, Togo and Turkey, as well as many countries in Asia and Europe.

Mainland China contributed 77.1 million TEUs to the total volume, while Hong Kong and Taiwan handled 7.5 million TEUs. Overseas ports reached 18.3 million TEUs, with the Colombo International Container Terminals Ltd. (CICT) in Sri Lanka and the Lomé Container Terminal (LCT) in Togo throughput increasing by 18.5% and 67.5%, respectively.