China’s CMPorts said a Fujian-based logistics group will take an indirect stake to join the development of Hambantota port, in a move that will bring in new industries from the province to Sri Lanka and reduce its debt.
Fujian Provincial Communication Transportation Group Co., Ltd (FJCT), will take a 23 percent stake in Gainpro Resources Limited, British Virgin Islands company that holds CM Ports’ 85 percent stake of Hambantota Port International Group, the operating company of the port.
“FJCT will take this cooperation as an opportunity to deepen the cooperation between Hambantota port and Fujian ports as well as shipping enterprises,” Li Xinghu, Chairman of FJCT said in a statement.
‘At the same time, FJCT will also strive to attract and encourage Fujian enterprises to participate in the construction of Hambantota port, and strive to make Hambantota Port a homebase for Fujian enterprises to enter the South Asia and overseas markets.”
FJCT will pay 268 million dollars to take a 23.52 percent stake in Gainpro Resources through a special purpose vehicle, Fujian Transportation Maritime Silk Road Investment and Management Co. Limited (Fujian TMSR) and appoint directors to HIPG.
The money will be used to reduce CM Port debt.
Gainpro has a 976 million dollar shareholder loan from the parent. CMPorts paid Sri Lanka 976 million US dollars to take an 85 percent stake in HIPG.
In 2019, Hambantota operations had lost 20.1 million US dollars, and in 2018, 21.39 million US dollars.
CMPorts chairman Deng Renjie said FJCT and China Merchants groups had had a long history of collaboration and he expected the new partnership to expand co-operation in port business and lead to the speeding up of industries into the industrial park of Hambantota port.
Hambantota has been increasing its vehicle transshipment and is developing bunkering. In 2019 it had handled 410,000 vehicles.
Sri Lanka sold a stake in Hambantota port to CM Ports as the state-run Sri Lanka Ports Authority could not develop enough business to repay loans taken to build the port.
Control of the port is to revert back to Sri Lanka after 80-year for one US dollar and Sri Lanka also had the option to buy control after the lapse of 70 years, documents tabled in Sri Lanka parliament said.
A 20 percent stake could also be bought back after 10-years, Sri Lanka’s parliament had been told.
Source: Economy Next