The withdrawal of Aitken Spence (AS) from the Colombo South Harbour Terminal project has left its Chinese partner with a nagging problem: Is it now technically qualified to handle it alone? The issue is also raising concerns that this could be a flawed deal on the lines of Lanka Marine Services (LMS), Waters' Edge and Sri Lanka Insurance Corporation (SLIC), in all cases where the proper process wasn't followed.
According to the Request for Proposal (RFP) issued in February 2009 to all bidders for the project, "any Tender Proposal that after evaluation fails to obtain a minimum of 25% for each of the criteria 1 to 13 given in Section 9.4.1 and a total of sixty points (60%) for criteria 1 to 14 will not be considered further and the Financial Proposal will not be opened." AS was the local partner to China Merchant Holding International (CMHI) and jointly submitted a proposal which received a total of 64 points, sources close to the transacting parties, said. However, CMHI had gained only 54 points while AS contributed to obtaining the rest of the 10 points based on which the proposal was accepted, which technically means CMHI has not met the full criteria. The RFP bases this requirement under section 9.2 which identifies criteria for Experience and Technical Proposal.
These issues in the project, these sources said, were worrying as it could be challenged in court as a flawed deal similar to the LMS, Waters Edge and SLIC privatization deals which were reversed by the Supreme Court. In the SLIC case, the Supreme Court reversed the privatization since after the Cabinet awarded it to a consortium of three partners led by Distilleries Corp., there was another share sales agreement to two other parties. The LMS case was almost similar. It was alleged that the initial bid of John Keells Holdings (JKH) was made in collaboration with Fuel and Marine Marketing (FAMM) owned by the Chevron Corporation of USA. "That, JKH could have got above the threshold of 70 marks to be shortlisted, only on the credentials of FAMM, being a market leader in bunkering.
After clearing the initial threshold, the Technical Evaluation Committee (TEC) was notified that FAMM was not pursuing the bid in collaboration with JKH and it is alleged that the TEC erred in continuing to evaluate the bid on financial capability and business strategy as an individual bid of JKH. It was submitted that with the withdrawal of FAMM, the Committee should have struck off the marks attributed on the credentials of FAMM and removed JKH from the shortlist." The court ruled that the Technical Evaluation Committee erred in shortlisting the bid submitted by FAMM in collaboration with JKH after it was indicated that FAMM would not continue with their joint bid, and that JKH had made a false representation of collaboration with FAMM for the purpose of securing the 70 marks to be shortlisted.
Other sources in the shipping industry raised another irregular development. They said the directors of the Sri Lanka Ports Authority (SLPA) had at a board meeting on January 19 approved the AS sale of its 30 % stake to CMHI. The next day, January 20, the SLPA had informed the two parties - CMHI and AS - of this board decision.
"This is an utterly irregular procedure since the board minutes (in any company) must be confirmed at the next board meeting and any decision is deemed invalid until then," one source said, adding that this communication to the parties without confirmation of the minutes of the meeting raised some fundamental issues, that could be challenged later. On Thursday, AS informed the Colombo Stock Exchange that it had finalized the sale of the 30 % stake to CMHI which was on normal commercial transactions. "The directors consider the sale is in the best interests of the company and the shareholders.
We are pleased that having attracted CMHI to partner us the sole bidder for the development and operation of the Colombo south port terminal, the project has now commenced which is in the greater interests of the country," the AS statement said adding that the company realized a cool capital gain of approximately Rs 630 million from the sale. Meanwhile, SLPA Chairman Dr. Priyath Bandu Wickrama told the Business Times that they are currently having discussions on the modalities and the manner in which finances could be obtained to purchase the 6.5% shares from CMHI, a development that was reported earlier.
The shares have been offered by CMHI to SLPA at the same price at which they were sold by AS. He noted that they would have to seek Cabinet approval in this respect although it is yet to be submitted. With the purchase of these shares the SLPA, which currently owns only 15%, would increase its stake. On the other hand, CMHI currently, after the purchase of the shares from AS, has increased its own stake in the project to 85% which would drop if the SLPA takes another 6.5%.
AS opted to pull out when the China Development Bank (CDB) made it known that that the costs would overrun by US$125 million in the US$475 million project. |
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