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Two big contracts for Chinese companies, talks to get US$ 500 million from China bank
View(s):The Cabinet has decided to award to the China Harbour Engineering Company (CHEC) Ltd the civil work in a project to enhance the deep berth capacity of the Jaya Container Terminal (JCT) of the Sri Lanka Ports Authority (SLPA). The Cabinet also sanctioned the granting of a contract to procure container handling equipment for the same terminal to another Chinese company — Shanghai Zhenhua Heavy Industries Co. Ltd — using US$ 25.7 million from the SLPA.
These decisions were made amidst an announcement this week that the Government will negotiate a further US$ 500 million loan from the China Development Bank (CDB) to meet part of its 2019 debt repayment commitments. Sri Lanka has already borrowed US$ 1 billion from CDB. That facility, at an interest rate of 5.3 percent, matures in eight years with a three-year grace period.
Sri Lanka has to settle a US$ 1 billion sovereign bond maturing on January 15, 2019 and another US$ 500 million sovereign bond maturing in April. The total debt service obligations next year amount to about US$ 5.8 billion. Under the provisions of the Active Liability Management Act passed in March, funds raised to repay public debt are exempt from the application of the provisions of the Appropriation Act. It allows the Government to take advanced action to refinance debt.
And it allows the borrowing cap to be exceeded to Rs 310 billion for liability management. The JCT project to deepen the berth will be implemented with credit secured by CHEC. The Cabinet decision published online did not specify terms such as interest rate. CHEC has a significant footprint in Sri Lanka and is best known for building the Hambantota port and the Mattala airport.
CHEC recently won a US$ 90.48 million project from the Megapolis Ministry to build the sanitary landfill at Aruwakkalu in Puttalam. It is building the Colombo Port City. And it also secured another massive tender for the Southern Transport Development Package 1.
In June this year, the company ran into controversy when the New York Times reported that during the 2015 elections, “large payments from the Chinese port construction fund flowed directly to campaign aides and activities for Mr (Mahinda) Rajapaksa…” The newspaper said the payments–at least US$ 7.6 million — were confirmed by documents and cash checks detailed in a government investigation seen by the newspaper.
CHEC later issued a statement which said, among other things that “the speculation by an international media organisation that CHEC funded former President’s 2015 Presidential Election campaign is completely inconsistent with the facts”.