Sri Lanka has officially informed CHEC Port City Colombo (Pvt) Ltd., developers of the upcoming US$ 1.4 bn Colombo Port City project that it could resume work immediately, CHEC announced in a statement last week. The official nod is seen as an effort to mend relations with China comes weeks ahead of Prime Minister Ranil Wickremesinghe’s visit to Beijing scheduled in April.
In March 2015, CHEC, a subsidiary of China Communications Construction Company Limited (CCCC) told Nation that the company has “a legal right for compensation by the Government for losses suffered due to the current suspension of the project”.
In a statement, CCCC, whilst noting that they had stopped work on the project on March 6, 2015, following a cabinet decision to suspend the project, had pointed out that Sri Lanka’s decision was likely to cause an estimated loss of US$ $380,000 per day (approximately Rs.53.2 million a day).
“CHEC Port City regrets that the suspension and the lengthy process taken to resume work have resulted in significant losses to the company and Sri Lanka,” the firm said in a statement last week though not elaborating on the extent of losses. The company will look to complete the project “in the expected timeframe,” the statement said.
The Port City project aims to build offices, hotels and shopping centres on 233 hectares (576 acres) of reclaimed land. Under the original deal, Sri Lanka was to own rights to 125 hectares, with 20 hectares owned by China Communications and the rest leased to CHEC Colombo Port City Ltd. for 99 years.
“Colombo Port City is a 100% privately funded Foreign Direct Investment of US Dollars 1.4 billion by the Company and is not a grant or loan to the Sri Lankan Government. The project is fully funded by CCCC’s internal financial resources. CCCC will provide 30% equity while 70% will be financed with the land.”
“The loss of USD 380,000 per day, incurred due to the on-going suspension on the project is therefore initially borne solely by CHEC Port City Colombo (Pvt) Ltd. However, the contractual obligation to obtain all key applicable permits for project commencement lies with the Government of Sri Lanka (GoSL) and Sri Lanka Ports Authority (SLPA). CCCC commenced reclamation work after being informed that the contractual obligation on the part of GoSL and SLPA had been fulfilled. The Project Company has a legal right for compensation by the Government for losses suffered due to the suspension,” the company then told Nation in an email response.
It is not clear whether Sri Lanka will have to compensate the firm in some way for the losses caused.
Meanwhile, reports say that CHEC Port -City is operating on an interim agreement with Sri Lanka’s ports agency which was extended for six months by the cabinet of ministers earlier this month.
The firm, however, still has to sign a long term deal with Sri Lanka. The new administration has said the port agency has no capacity to contract with company to reclaim land and such powers have not been conferred to it.
“The Project Company recognised this positive step in moving forward, appreciating the efforts of the Government in working towards a mutually beneficial solution,” the firm said in a statement.