"We have received notification today that the Cabinet Sub-committee on Investment Facilitation (CSIF) has approved the issuance of a Letter of Intent (LOI) in favour of John Keells Holdings Limited (JKH) in connection with a proposal submitted by JKH to the Government of Sri Lanka," John Keells Holdings Chairman Susantha Ratnayake said in a statement.

"The proposal envisages the reclamation and development of approximately 459 acres of land adjacent to the proposed Colombo South Harbour in a Public - Private Partnership."

The firm said another announcement would be made after the letter of intent is issued.

Investment Promotion Minister Sarath Amunugama told reporters last week that the government had accepted a proposal by JKH to reclaim and develop the sea around the proposed Colombo south harbour.

However at the time, top officials of the company said they had not been officially informed by the government that their proposal had been accepted.

Minister Amunugama said the first phase of the reclamation would cost around 500 million dollars.

Media reports later said the project would be structured as a 45/45 joint venture with the Colombo Port and 10 percent would be reserved for foreign funding agencies.

John Keells already runs a container terminal at the Colombo Port with P&0, in which the International Finance Corporation invested at the beginning.