Mar 22, 2017 (LBO) – China Merchant Port Holdings may divest 20 percent of the initial shareholding of the proposed Hambantota port joint venture within 10 years, a minister revealed.
Initially, the joint venture company will be incorporated under the companies act with 80 percent of equity to the Chinese firm and 20 percent to Ports Authority on a public private partnership.
Sri Lanka’s Cabinet on Tuesday approved a proposal to enter into a concession agreement with China Merchant Port Holdings through which Hambantota port with 1,235 acres of land will be handed over to the proposed joint venture.
State Minister of International Trade Sujeewa Senasinghe, speaking at the cabinet press briefing, said the Chinese firm shall agree to divest a maximum of 20 percent from the initial shareholding of 80 percent to a Sri Lankan party within 10 years from the effective date.
The agreement also stipulated conditions if the divestiture of 20 percent took place within five months.
He said the proposed public private partnership will be capitalized with 1.4 billion US dollars and the Chinese firm will invest around 1.12 billion dollars which is equal to 80 percent.
However the minister did not revealed a specific date for when the final agreement would be signed.
The concession agreement aims at preparing future plans, financial provision, operational promotion and development of infrastructure including completed phase I and II and proposed phase III.
A concession agreement is a negotiated contract between a company and a government that gives the company the right to operate a specific business within the government’s jurisdiction, subject to conditions.
Accordingly, the development and operating rights for port related commercial activities will be transferred to the joint venture company without any military rights.
Cabinet decided to enter into the agreement after it was cleared by the Attorney General.
Cabinet has also appointed a cabinet subcommittee chaired by special assignments minister Dr. Sarath Amunugama to supervise its implementation.
The subcommittee also includes of Minister Susil Premajayantha, Patali Champika Ranawaka, Arjuna Ranatunga, Sagala Rathnayaka and Malik Samarawickrama.