CHEC Colombo Port City (Pvt) Ltd (Project Company) this week responded to what it termed as “inaccuracies” in an article titled ‘To sink or swim with Port City’ by Eng. Channa Fernando published recently in the Sunday Times. Following are excerpts from their statement: The writer acknowledges there could be gaps due to non-availability or [...]


Port City company says it has required government approvals


CHEC Colombo Port City (Pvt) Ltd (Project Company) this week responded to what it termed as “inaccuracies” in an article titled ‘To sink or swim with Port City’ by Eng. Channa Fernando published recently in the Sunday Times. Following are excerpts from their statement:

The writer acknowledges there could be gaps due to non-availability or inaccessibility of certain project information. The writer could have demonstrated greater diligence by contacting the Company to clarify such information gaps prior to writing the article.

The Project Company is alarmed that, when the Government of Sri Lanka is currently reviewing the project, the writer, who is a member of a Committee appointed by the Prime Minister to carry out this task as indicated in recent reports, has not disclosed this fact in his article.
As a member, the writer should be fully aware that the Project Company had already complied with the Government’s suspension notice and within two working days submitted copies of permits/approvals granted by Government authorities and Sri Lanka Ports Authority (SLPA), though given 14 days to respond.

The Project Company is, therefore, of the view that it is unprofessional for the writer, being a Committee member and possibly having access to proprietary information, to bring to the public domain conclusions and views formed even prior to the Project Company being afforded an opportunity to be heard and the review process being completed.

Feasibility Study

The writer has claimed he could not find an “approved feasibility study” for the project. A Standing Cabinet Appointed Review Committee (SCARC) carried out project negotiations with the assistance of a Government-appointed Technical Evaluation Committee (TEC) and recommended the project on the basis that it is feasible.

As this project is based on a Public-Private-Partnership (PPP) model, the Company provided unrestricted access to financial and other aspects on feasibility from an investor’s perspective to the SLPA, the Ministry of Ports and SCARC.

The detailed feasibility report was finalised well prior to the commencement of reclamation works, as required for internal approvals by the investor, China Construction & Communications Company (CCCC), and lenders. The Project Company would have been unsuccessful in obtaining loans if international lenders did not consider the project feasible.

In addition, Port City commissioned the London offices of the world’s two largest real estate consultancy companies, CB Richard Ellis (CBRE) for preparing the development feasibility, and Jones Lang LaSalle (JLL) for the marketing plan and global marketing strategy. These feasibility studies, prepared at great expense, contain sensitive commercial information and are, therefore, not available in the public domain though, as and when requested, were shown to the project’s direct stakeholders, including the SLPA and the Ministry of Ports.

World-renowned consultants Atkins of UK did the project master plan review; AECOM of USA undertook the design of utilities, roads and landscaping; and SWECO of Sweden, the detailed master planning. These followed lengthy discussions with Government agencies such as the National Water Supply & Drainage Board, Ceylon Electricity board, Urban Development Authority, etc.

The writer asserts the Colombo South Port Development was done after a feasibility study unlike Port City. However, the former was a public investment where the feasibility and Environmental Impact Assessment (EIA) had to comply with the project’s main lender, the ADB, and the Sri Lankan Government, which extended counter-party funds. It, therefore, had to be made available for public scrutiny. Port City is a PPP where the entire financial risk is the investor’s.

The writer asserts that the Port City development is “ad hoc” and not properly conceived. The company refutes this claim and notes the project’s main investor, CCCC, is a Global Fortune 500 company bound by the strict standards of governance of a Hong Kong and Shanghai listed company. It would only embark on an investment of over US$ 1 billion after careful consideration.

The project is not ad hoc even from the Sri Lankan Government’s perspective, as reclaiming the sea at this location was first mooted in the early 2000s, and then considered as a public investment in 2011. It was finally launched as a private investment on a PPP model after negotiations with CCCC.

Commercial terms

The writer claims he is not qualified to analyse the conditions of the Agreement between the Government and Port City. While the Project Company appreciates such frankness, conclusions on the adequacy of the project’s technical and environmental aspects cannot be reached without concurrently relating to the commercial and legal aspects of the project agreements.

The specific responsibilities of the Project Company and the Sri Lankan Government are spelt out in detail in the Port City Concession Agreement, signed with necessary clearances by the Attorney General’s Department and the Cabinet of Ministers.

Accordingly, the technical, commercial and investment risks of the project are borne by the investor. The responsibility for securing approvals and permits and providing the necessary utility connections to the site’s periphery is vested with the Sri Lanka Government and SLPA.

EIA process

It is inaccurate for the writer tostate that the ProjectCompany framed the Project’s Terms of Reference (ToR).

Even before the Project Company submitted its initial proposal in April 2011, it was SLPA that decided to embark on the project as a public investment and, in 2010, selected and commissioned the University of Moratuwa (UoM) to conduct an Initial Technical Feasibility Study followed by an EIA for the reclamation.

The Port City project falls under the Coast Conservation Department (CCD) which, as the Project Approving Agency (PAA), appointed a TEC comprising officials from 16 Government agencies. The TEC formulated the ToR for the EIA. The SLPA then instructed the UoM to carry out the EIA in keeping with the ToR.

According to a letter dated December 2011, the CCD wrote to the SLPA stating that, at a meeting held in October 2011, the TEC had granted preliminary approval to the EIA on four conditions.

Responding to an SLPA letter dated October 2013, outlining the expansion of the project area, the CCD stated in November 2013 that the CCD had no objection to design modifications being addressed via an Addendum to the EIA report. Accordingly, it was the SLPA that had instructed the UoM to carry out the Addendum.

Other misinformation in the article states that a few senior professionals in their individual capacities had done the Technical Pre-feasibility. The company clarifies that the study was officially commissioned by the SLPA and the specialists were handpicked by the SLPA from UoM, Scott Wilson of UK and Lanka Hydraulics.

The article notes the developer prepared the EIA report through its consultants in April 2011 without an impact assessment of the sand burrow areas. The company states that the EIA was commissioned by SLPA before the Project Company’s initial proposal. SLPA also commissioned the National Aquatic Resources Agency (NARA) to do IEEs for two sand burrow pits, covering two separate GSMB exploration licences issued.

The writer notes the CEA was excluded from discussions on the Addendum to the EIA. While this fact remains to be clarified by the SLPA or CCD, the company notes the CCD informed SLPA of its acceptance of the Addendum. A new EIA would have been prepared, had the CCD requested it.
The writer also notes there was no socio-economic assessment on fisheries and fisherman, despite this aspect covered in the project EIA, sections 3.8.3 and 4, with statistics obtained by the Dept. of Fisheries and the IEE report, section 3.1.3, by NARA in 2012.

The EIA report was completed by the time the Company submitted its investment proposal. The public, including the writer, had the opportunity to challenge the EIA report when it was made available by the CCD through newspaper advertisements in all languages.

The EIA report was up for review at 11 locations. Comments from the public were received, analysed and responded to by the UoM, and incorporated into the Environmental Management Plan (EMP). It is also necessary to point out that the CCD approved the EMP in a letter to the SLPA dated December 2014.

Sand extraction

In response to the argument on the absence of an EIA for offshore sand extraction, the Project Company points out, as correctly acknowledged by the writer, that it was the CEA that requested an IEE instead of an EIA.

Accordingly, the IEE report was prepared by NARA at the request of the SLPA, in keeping with CEA’s ToR. The Project Company, thus, had no involvement in deciding to do an IEE, instead of an EIA.

The CEA also appointed a TEC to review the IEE report for sand mining. In September 2013, the CCD, a member of the TEC, had written to the CEA approving the extraction of 6mn cubic meters of sand from the identified area, along with other conditions.

On October 21, 2013, the CEA had informed the SLPA that based on a decision of the TEC, the IEE report should be amended considering the observations sent by the CCD, Department of Fisheries and CEA and resubmitted together with nine copies to the CEA. NARA duly amended the IEE report as suggested by the CEA and SLPA and resubmitted it.

As such, the CEA did not reject the IEE report, but withheld full approval pending the compensation process for fisherman being finalised prior to issuing the extraction permit. Also, another IEE study was done for a new burrow-pit area, as more sand was required. The SLPA has already obtained the exploration license for the second burrow-pit and NARA finalised the draft final report for the IEE.

In view of the Government’s wish to inaugurate the project at the time of the State visit by the President of China, the Project Company was permitted to commence reclamation works on September 16, 2014. On this day, the Agreement between the Project Company and the Government was signed, witnessed by the Presidents of Sri Lanka and China.

The Agreement specifically provides for the rectification of any pending approvals by the Government within a specified time period. Accordingly, on September 22, 2014, the SLPA wrote to the Project Company granting permission to extract sand from the Colombo Harbor Navigation channel.

On the same day, the SLPA wrote to the Project Company stating the sand mining license for this burrow pit was obtained from the GSMB and a copy of the said license was forwarded. Based on the above, the Project Company wrote to the SLPA in November 2014, indicating the sand mining plan for the project dredger used by EPC Contractor.

On December 24, 2014, the SLPA wrote to the Project Company, agreeing to the sand mining plan. Therefore, the Project Company commenced sand mining and reclamation on the date the Project Agreements were signed and with written consent of the SLPA, which was responsible for obtaining required environmental clearances.

Reclamation area

The writer claims the developer decided to expand the project by nearly 200 percent, which is incorrect. The extent of the reclamation area was 133ha in the EIA carried out by SLPA in 2010, when the project was conceived entirely as a Government investment.

The CCC’s initial concept proposal to the Ministry of Ports/SLPA in April 2011 proposed a reclamation area of 200ha, with the investment to be made according to three options that included a Build, Operate and Transfer Structure (BOT) with the Government as a Joint Venture Partner.
In the more detailed proposal containing the preliminary layout plans submitted in October 2012, the area proposed was 233ha, which included 62ha of land to be allocated to the SLPA and 63 ha as public areas (parks, beaches, play areas) to enhance marketability of the salable land.
Thereafter, the SLPA submitted the Addendum to the EIA for 233ha to the CCD, who granted approval and issued the development permit to the SLPA. The Project Company did not participate in the process of environmental approvals, which was the responsibility of the Sri Lankan Government.

MEPA licence

The writer comments “the Developer has yet to comply with obtaining permits from MEPA for dumping of materials to sea notwithstanding being informed to do so in October 2013″.

The SLPA has already obtained the only approval required by MEPA (Marine Environmental Protection Authority), which relates to the oil spill contingency plan. The Project Company’s position, having obtained a comprehensive legal opinion, is that the MEPA has no authority to request a permit for seabed reclamation works, as it is a subject under other government entities such as the CCD.

Two-stage EIA

Decisions to carry out a two-stage EIA process for Port City construction and two IEEs for the sand mining in two different sand burrow areas were taken by the Sri Lanka Government authorities and not the Project Company.

The SLPA and respective TECs decided that the Port City would be developed in two stages requiring two separate EIAs. The first stage of the project, with the CCD as PAA, will cover the landfill, offshore island breakwater and coast protection for the landfill. This will take two to three years and was covered by the EIA and Addendum already approved by the authorities.

The second stage, with UDA as the PAA, will cover the development of buildings, infrastructure and support services. This will require a fresh EIA to be carried out once the required plans are finalised. In addition, each new building to be constructed would require separate EIAs or IEEs.

The Government also went by historic precedence when it waived the application of any royalty for sand mining. The Project Company was made to understand that royalty had not been levied in many other major reclamation works using sea sand, public and private.

The project company duly acknowledges the writer’s comment, “There are no significant issues related to the proposed location of Port City, with regards to longshore sediment movement and erosion.”

This statement best confirms that there will be no erosion from the north to the south of the site. The company notes erosion has not manifested even after the massive Colombo South Port was built. The Port City is being built on possibly the most monitored coastal site in Sri Lanka over the last decade and the company is open to discuss further matters relating to the project with relevant authorities.

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