China Merchants Port Holdings has withdrawn from a proposed US$392 million logistics hub at the Port of Colombo, and the Sri Lanka Ports Authority (SLPA) has agreed to a US$21.9 million settlement after the cancellation.
The Chinese port operator confirmed the termination of the South Asia Commercial and Logistics Hub (SACLH) project in a filing to the Hong Kong Stock Exchange on 15 October.
The filing said the decision followed changes in external circumstances, adjustments to the project’s implementation environment and timetable, and commercial considerations among the parties.
China Merchants Port held a 70 percent stake in the project through its subsidiary, Fortune Centre Group Limited. The SLPA and Sri Lanka’s Access Engineering PLC each held 15 percent. The three shareholders had invested a combined US$37.14 million, including US$26 million from the Chinese company’s subsidiary.
Under the settlement agreement, the SLPA will pay US$21.905 million to the project company within 30 days. That payment, together with about US$7.85 million in remaining distributable cash, will be shared among the shareholders according to their stakes, after applicable deductions and expenses.
Background
The project was planned as one of South Asia’s largest logistics complexes. It was to be developed as a five-storey complex under a 50-year build-operate-transfer arrangement, in which a private investor builds and runs a facility for a fixed period before handing it back to the state.
Sri Lanka granted the hub Strategic Development Project status in December 2023. The status carried several tax concessions, including exemptions from corporate income tax and dividend taxes for 15 years.
The project ran into delays and implementation difficulties and could not proceed as originally planned. Lloyd’s List, the maritime industry publication, reported that it also faced land and regulatory hurdles.
What it means
The cancellation removes a planned logistics facility from the Colombo port area, along with the investment and activity it was expected to bring. The settlement means the SLPA, a state institution, will make a payment of US$21.905 million to the project company within 30 days.
The SLPA is expected to seek fresh investment proposals for the land. Any new proposal will determine what, if anything, is built on the site, and what terms and tax concessions would apply.
For Sri Lankans, the outcome matters because port-related logistics projects are tied to the wider aim of drawing foreign investment, creating jobs and strengthening Colombo’s role as a regional trans-shipment centre.
