COLOMBO PORT

The Port of Colombo (known as Port of Kolomtota during the early 14th Century Kotte Kingdom) is the largest and busiest port in Sri Lanka as well as in South Asia. Located in Colombo, on the southwestern shores on the Kelani River, it serves as an important terminal in Asia due to its strategic location in the Indian Ocean. During the 1980s, the port underwent rapid modernization with the installation of Cranes, Gantries and other modern-day terminal requirements. Currently with a capacity of 4.1 million TEUs and a dredged depth of over 15 m (49 ft), the Colombo Harbour is one of the busiest ports in the world, and ranks among the top 35 ports. It is also one of the biggest artificial harbours in the world handling most of the country's foreign trade. It has an annual cargo tonnage of 30.9 million tons. The port is also the naval base for Sri Lanka Navy Western Fleet under the Commander Western Naval Area (COMWEST). The Port of Colombo is home to the second tallest building in South Asia and is the center for many commercial interests. Colombo Port is the natural transshipment hub port for the South Asian region. However, in recent years Colombo Port lost market share of the regional transshipment market because the fundamentals of the market changed and Colombo Port did not adapt. Colombo Port cannot offer the additional operating capacity required to compete for the Indian subcontinent transshipment market or the depth required to berth the latest generation container ships. Colombo Port will have to develop additional container berths with the required depth to address these capacity and depth infrastructure constraints if it is to remain a transshipment hub port.

EXPANSION PROJECT AT COLOMBO PORT

The Colombo Port Expansion Project provides for dredging and breakwater construction sufficient to accommodate three terminals, which will be constructed sequentially. The Project includes the establishment of a new marine operations center, relocation of a submarine oil pipeline, provision of navigational aids, and construction of shore utilities. The Project will be developed on a public-private partnership basis. The harbor infrastructure works, i.e., dredging, breakwater construction, and other works, will be implemented by the Sri Lanka Ports Authority (SLPA). The first two terminals will be operational in 2010 and 2015 respectively and constructed by operators chosen through open competitive bidding under a build-operate-transfer

concession agreement. The first concession bid will be for one terminal. COLOMBO INTERNATIONAL CONTAINER LIMITED (CICT) Colombo International Container Terminals Ltd., (CICT) is a joint venture Company between China Merchants Holdings (International) Co., Ltd. (CMHI), a listed blue chip Company in the Hong Kong stock exchange, and the Sri Lanka Ports Authority (SLPA). It is developing the 2.4 million TEUs capacity Colombo South Container Terminal in the Port of Colombo, under a 35 year build, operate, and transfer agreement with the SLPA. The largest shareholder of this company is CMHI with 85% ownership and the balance 15% being held by SLPA. CICT commenced construction works of the terminal in December 2011. With an envisaged investment of US$ 500 million, including the installation of the latest state of the art terminal equipment, it is so far the single largest foreign direct investment in Sri Lanka by a private entity. The Port of Colombo with a current capacity of over 4.5 million TEUs has embarked on a large infrastructure development programme to increase the total capacity of the Port of Colombo by another 7.2 million TEUs in three separate phases. PROJECT INVESTMENT PLAN The investment cost of the Project is estimated at $781 million. The public sector component is estimated at $480 million, including taxes and duties of $49.7 million. A loan of $300,000,000 from the ordinary capital resources of the Asian Development Bank (ADB) will be provided under ADBs London interbank offered rate (LIBOR)-based lending facility. The loan will have a 25 year term including a grace period of 5 years, an interest rate determined in accordance with ADBS LIBOR-based lending facility, a commitment charge of 0.35% per annum and such other terms and conditions set forth in draft loan and project agreements. The Government will make all proceeds from this loan available to Sri Lanka Ports Authority (SLPA) under the same terms and conditions as the ADB loan.

IMPACT AND OUTCOME The Project will promote economic growth by improving Sri Lankas competitiveness in the ports sector by expanding Colombo Port using public-private partnerships; and facilitate economic growth by enhancing national competitiveness in international trade via lower

transport costs and faster delivery times. Container-handling capacity will be increased from 3.3 million twenty-foot equivalent units (TEU) in 2006, to 5.7 million TEU by 2010, 8.1 million TEU by 2015 and 10.5 million TEU by 2024. The additional capacity will enable Colombo Port to increase its Indian subcontinent transshipment market share from 23% in 2002 to 30% by 2011. Sri Lanka will thus be able to generate additional income from transshipment. Foreign direct investment in the ports sector will increase by approximately $800 million by 2024.

SECTOR ANALYSIS OF COLOMBO PORT

Colombo Port is located in an artificial harbor formed by three breakwaters constructed more than a century ago. The port basin covers 200 hectares and is dredged to depths of up to 15 meters (m). Access to the harbor is provided on the western and northern sides. The entire perimeter of the harbor is occupied with berths, terminals, and vessel-related activities. The port is connected to the national rail network; however, virtually all cargo movements in and out of the port are by road transport. Because of the physical constraints, any growth in the capacity of the existing port is severely limited. The majority of container traffic is handled at three container terminals: 1. Jaya Container Terminal (JCT) on the eastern side comprises four berths totaling 1,292 m, the latest completed in 1996. Depths alongside range from 12 m to 15 m. The terminal area covers 45.5 hectares, has 6 super-post panamax and 8 panamax gantry cranes, with capacities of 35.5 tons (t) to 41 t service weight limit to serve the berths. 12.0m - 15.0m Dredged Depth. It has got 20 Nos. Quayside Container Cranes, 59 Nos. Rubber tired Container Transfer Cranes, 4 Nos. Rail mounted Gantry Cranes to stack empty container 8 high, 53,990 TEU Dry Container Stacking Capacity, 1,548 TEU Reefer Container Stacking Capacity, 15,000 Sq.m of Container Freight Station Area. Total dry container capacity is 48,056 and Reefer container capacity is 1,548.

2. Unity Container Terminal (UCT) is located at the northern end of the harbor. Opened in 2004, it comprises two berths for feeder vessels of 340 m with depths alongside of 9 and 11 m, and is served by three panamax gantry cranes of 41 t service weight limit. It has got

3. South Asia Gateway Terminal (SAGT) located inside the western breakwater became fully operational in 2003. The terminal comprises three berths totaling 940 m, all dredged to a depth of 15 m and served by 9 gantry cranes of 40 t service weight limit. 4. Colombo International Container Limited

FACILITIES AT COLOMBO PORT

EDI Services Bonded Warehousing Duty Free Shopping Excellent Operators Excellent Feeder Network Computer Facilities Tariff Concession Special Facilities