China Development Bank provides $805 million loan for Colombo Port City Project Phase 1 (Linked to Project ID#55528)

The Colombo Port City (CPC) Project was initially conceived as a public sector project that would be undertaken by the Sri Lanka Port Authority (SLPA). Consequently, the SLPA commissioned at its own cost an ‘initial technical feasibility study’ in April 2010 for the reclamation of land south of the new breakwater. Around June 2010, an environmental impact assessment (EIA) study was commissioned by SLPA also at its own cost through the University of Moratuwa (UoM) for a reclamation area of 200 hectares. In October 2010, Sri Lanka’s Urban Development Authority (UDA) completed a master plan study based on the initial technical feasibility study and submitted a project proposal to the SLPA for consideration. Then, in April 2011, based on an unsolicited concept proposal submitted by China Communications Construction Company, Ltd. (CCCC), the Government of Sri Lanka (GOSL) decided to not to commit public funds to construct the CPC Project and proceeded to negotiate with CCCC to implement the project entirely as a foreign direct investment, with no financial guarantees by the GOSL on the investment. After a 2.5 year period of negotiation with a Standing Cabinet Appointed Review Committee (SCARC) and a Technical Evaluation Committee (TEC) represented by 16 GOSL organizations, a Colombo Port City Franchise Agreement was signed by CHEC Port City Colombo (PVT) Ltd. — a special purpose vehicle and wholly-owned subsidiary of CCCC — and Sri Lanka Ports Authority (SLPA) on September 16, 2014 by the Secretary to the Ministry of Highways, Ports and Shipping (acting for and on behalf of the GOSL). On the same day, China Development Bank agreed in principle to provide an $805 million commercial loan for the project and the project’s construction works were ceremonially inaugurated in the presence of the President of the People’s Republic of China and the President of the Democratic Socialist Republic of Sri Lanka (during the Chinese President’s State visit to Sri Lanka). The Colombo Port City (CPC) Project is being implemented on a public-private partnership (PPP) and Build-Own-Operate-Transfer (BOOT) basis and financed according to a 70:30 debt-to-equity ratio. The $1.396 billion project is divided into two phases: the first phase investment was expected to cost $1.150 billion and the second phase investment was expected cost $246 million. On May 12, 2017, China Development Bank provided a $805 million loan to CHEC Port City Colombo (Pvt.) Ltd. for the first phase of the project, or roughly 70% of the total cost of the first phase project of the project. The loan carries a 10-year maturity and a 3-year grace period. No sovereign guarantee was provided by the central government in support of the loan. As of September 2018, CDB had disbursed RMB 1.964 billion in support of Phase 1 of the Colombo Port City (CPC) Project. The purpose of the phase 1 is to construct a 269-hectare artificial island and related structures. The project also involves the creation of a 5,325 meters-long breakwater that has a geometrically closed core partially consisting of sand material, rock and interlocking concrete “pods” weighing from 17 tons to 22 tons and placed in predefined lozenge-shaped grids. Upon completion, the artificial island consists of 71 million square meters of sand, with an average reclamation thickness of 20 meters. Twelve types of rock material are being used, obtained from 20 quarries located about 50 km away. CCCC-FHDI Engineering Co., Ltd. is responsible for project design. China Harbour Engineering Company (CHEC) is the EPC contractor responsible for project implementation. The project’s first phase officially commenced on September 16, 2014. Its originally planned completion date was April 2020, but construction was suspended due to a change of government in March 2015. Construction then resumed in August 2016. The new expected completion date is April 2024.

Additional details

1. This project is also known as the Colombo International Financial City (CIFC) project. The Chinese project title is 斯里兰卡科伦坡港口城项目 or 里兰卡科伦坡港口城基础设施项目（一期). 2. The second phase of the project is also expected to be financed with a debt-to-equity ratio of 70:30. This issue warrants further investigation. 3. For details regarding the equity investment made by CCCC in this project, see Project ID#55528. 4. Phase 1 disbursement information can be found at https://www.neac.gov.cn/seac/c102599/201812/1130072.shtml.

Number of official sources

25

Number of total sources

71