MRMR Hambantota Port

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1 MRMR Hambantota Port The Government of Sri Lanka chose to build a port in Hambantota given its proximity to one of the busiest sea lanes in Asia and developed it as a Services and industrial port. Total estimated construction cost of the Phase 1 of the project was US $ 361 million, out of which 85% was funded by the Exim Bank of the People's Republic of China. The main construction work of Phase 1 commenced in January 2008 with a project duration of 39 months. Layout plan Phase 1 The SLPA tried to develop the MRMR port by calling for 2 RFPs, RFP I and RFP II. However, half way through the process of RFP I, the Central Environment Authority wanted the SLPA to IEE study using the Moratuwa University. This study was done, but none of the private business proposals ranging from sugar, to cement, to logistics to petrochemicals materialized. It is also noted that none of the RFP II bidders have moved ahead leaving the port without any business

2 except for some RO-RO cargo, whilst the GoSL has been making large loan repayments to the Exim Bank. However 3 companies from RFP II seems still keen to move forward and they are Energy World (40Ha), Advanced Surfactants (40Ha) and Laughs Gas (0.5Ha). The Phase II of Hambantota Port has a total project cost of approximately US$ 808 million with 2% interest and was built by CHEC and is to be completed by November 2015, but expected to take a few months longer. Phase II is to be equipped with 4 container berths (comprising two 100k-dwt berths and two 10k-dwt berths) on a 1,298m-shoreline, and with an annual design capacity of 2 million TEUs. The Agreement on Key Terms for Supply, Operate and Transfer (SOT) of Container Terminal Hambantota Port Development Project Phase II was entered into on September 2014 in the presence of President Mahinda Rajapaksa and his Chinese counterpart Xi Jinping. This was signed by signed by President of CMHI Li Jianhong and the President of China Communications Construction Company Ltd. (CCCC) Chen Fenjian with the Chairman of the Sri Lanka Ports Authority Dr. Priyath Bandu Wickrama. China Harbour Engineering Company Ltd (CHEC), an engineering contractor and subsidiary of CCCC was to handle the project on their behalf. CMHI had stated, The concession period to be granted to the Project Company under the SOT Agreement shall initially be 35 years from the commencement of operation of the SOT Project, which can be extended by five years at the option of the Project Company. This was for CCCC to operate the container terminal in Phase II to service the also included 200Ha of Industrial Zone within the port, which CCCC was also meant to operate. However, the current government has stated that the SOT agreement is not legal binding and hence not valid. Within this Industrial Zone, the parties were to explore the feasibility of a series of investment projects surrounding the set-up of an international shipping center in Sri Lanka, balancing longterm development goals and near term benefits of Sri Lanka, with preparatory work of two preliminary projects initiating in the near future, including, firstly, the core functional area of the international shipping center with a proposed size of 60Ha, to offer integrated bonded logistics operations and commercial services, such as bonded warehousing, export processing, entrepot trade, e-commerce distribution and exhibition services; and, secondly, an agglomeration of high-end maritime related services, with a proposed size of 20Ha, providing a concentration of complimentary facilities and infrastructures supplementary to the international shipping center. The proposed artificial island that was being built in Hambantota as part of Phase II was to belong to SLPA and used for port-related activities and front-end services, not warehouses or industries. The Chinese government had offered to bring business to the industries zone as well as bring investments over a five years period. TRANSHIPMENT VEHICLE HANDLING

3 Hambantota is ideally located amongst major manufacturing bases of automotive parts. It can provide best logistics solutions for major automotive manufacturers in Europe and East Asia and parts manufacturers in South East Asia to work in synergies as a center for assembly and value addition. Further with skilled labor and land available in abundance in Hambantota, it offers the strategic advantage for the automobile and manufacturing/assembly industry. This provides MRMR Port an edge over other ports for RORO operations and also as major automotive manufacturers & also shipping lines are showing interests in vehicle assembling & transshipment operations. Under the phase II development project, it is planned to develop two dedicated Ro-Ro cargo berths. Bunkering Operations The envisaged bunkering service will form a major portion of the activities in the MRMR Port. The targeted traffic will be vessels passing the south coast of Sri Lanka traversing the major East West shipping route which was historically the ocean silk road. The tank farm constructed in the port, is directly connected to the two oil berths. Bunker supply for vessels could either be obtained directly from the oil berths or through offshore bunkering vessels. The tank farm owned by SLPA consists of 14 tanks and eight of these are used by the SLPA for bunkering, whilst three tanks have been leased out to the Ceylon Petroleum Corporation (CPC) for aviation fuel to be supplied to the Mattala Rajapaksa International Airport and the other three tanks have been leased out to Litro Gas company for LP gas storage. The 14 tanks have an overall capacity of 80,000 cubic meters. The bunkering capacity at the port is 51,000 cubic metres and the capacity for aviation and LP Gas is 23,000 cubic metres and 6,000 cubic metres. The SLPA has invested $ 76 million in the tank farm and bunkering infrastructure that includes offshore bunkering facilities. The project was financed by a $ 65 million loan from China EXIM bank and remaining by the SLPA. Phase II Construction at MRMR Port The plan for Phase II is a basin excavation of 17 metres and provide vessels with a turning circle of 600 metres diameter while the approach channel will be dredged up to 18 metres. The quay wall will be 2,140 metres long with 6 births. There will also be a 300 metre long oil terminal and an artificial island of 50 hectares with a top elevation of 8 metres. A fly-over bridge, roads and yards facilities have also been factored in. Phase II will have a yard area of 60 hectares adjacent to the quay wall.

4 Vision of Port Services & Logistics Hub Free Port Sea Air Hub (with Matala International Airport) Excellent Rail - Road Connectivity Public Private Partner Ship (PPP) One Stop Shop for Investors & Port Users Value Added Logistic Facilities Cargo Consolidation & Deconsolidation Proposed Businesses & Services Oil & Gas Cement Fertilizer Flour Sugar Automobile Trans shipments Ro-ro cargo Vehicle assembly Coal / Iron Ore Industrial Cargo Off-Shore Services

5 Port related Industries Warehousing Handling Large Fishing vessels Bunkering / High Sea bunkering Ship Repair and Building Supply of Water / Ship s handling