China Merchants, Spence Picked for $500 Million Deal to Build Colombo Port

China Merchants Holdings (International) Co. and Aitken Spence & Co. have won a contract to build a new terminal in Sri Lanka’s Colombo port, the head of the island nation’s ports authority said.

A special meeting of the cabinet approved the order and construction on the terminal will start within six months, Sri Lanka Ports Authority Chairman Priyath Wickrama said today. China Merchants will take a 55 percent stake in the $500 million project, Managing Director Hu Jianhua said at a media briefing after earnings were announced in Hong Kong earlier today.

Sri Lanka, 31 kilometers (19 miles) southeast of India, wants to exploit its location to compete with Singapore and Dubai as a sea-trading hub in Asia. President Mahinda Rajapaksa plans to spend $1 billion a year on infrastructure including ports, roads and power plants to help stoke an economic recovery after the end of a 26-year civil war.

Aitken Spence, Sri Lanka’s biggest operator of resorts, and China Merchants, which has stakes in ports that move about a third of China’s container traffic, in July 2009 submitted the sole bid for the terminal after the government in 2008 scrapped earlier bids for the facility.

A government-appointed committee will likely announce the contract “as early as possible,” Sri Lankan Ports Ministry Secretary Ranjith de Silva, said by phone earlier today.

Construction may start early next year, depending on negotiations with the government, China Merchants’ Hu said.

Hutchison Port Holdings Ltd. and PSA International Pte., the world’s biggest container port operators, were among five companies that earlier bid for the 2.4 million-containers-a-year facility at Colombo’s south harbor.

The existing three terminals at the Colombo port can handle 4.5 million standard 20-foot containers a year.

To contact the reporter on this story: Anusha Ondaatjie in Colombo at anushao@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.