Kingston port concessionaire turns to IDB for financing
Kingston Freeport Terminal Limited, the new port concessionaire for the Kingston Container Terminal (KCT), is sourcing a US$175-million loan from the Inter-American Development Bank (IDB), a portion of which is being backed by the China Infrastructure Fund.
IDB is lending Kingston Freeport US$125 million from its own resources for the first-phase development of the port, but says it is willing to scale up the financing to 40 per cent of the project cost. The other US$50 million will come from the China Infrastructure Fund.
Kingston Freeport won the 30-year concession in April to manage the port under a 'finance, design, build, operate, transfer' agreement. While the port's assets are being transferred to Kingston Freeport during the period of the concession - for which the concessionaire will make an up front payment of the US$75 million - it will not own KCT. Ownership of the port remains in the hands of the Port Authority of Jamaica, which effectively will be Kingston Freeport's landlord.
In the first phase of the project, Kingston Freeport is expected within five years to deepen the navigation channel, turning circle and 1,200 metres of quays, to allow access by 14.2 metre draft vessels; and to expand KCT's annual capacity from 2.8 million TEUs to 3.2 million TEUs within six years of taking over the port. The current draft is up to 13 metres.
There is a differential between the US$509 million that was announced as the concession deal by the Jamaican Government and the US$437 million cited in the IDB documents as the full project cost, but that may be explained by the US$75-million up front payment that Kingston Freeport is expected to make to the Port Authority for KCT's assets.
Gordon Shirley, Port Authority president and CEO, had not clarified up to press time.
The IDB said the US$437-million project cost was submitted to it at the top of this year when negotiations on the concession contract were still ongoing.
The operating equipment owned by Port Authority comprises 14 gantry cranes, 28 operating straddle carriers, nine reach-stackers and empty-handler, eight tractors, 64 trailer chassis, and 27 truck chassis. Equipment upgrades under the project will include purchase of four new cranes and 64 straddle carriers.
Additionally, the IDB documents indicate that while Kingston Freeport is expected to upgrade the port's capacity to 3.6 million TEUs under a second phase of the development programme, this aspect of the project is dependent on the port operator achieving annual throughout of 2.9 million TEUs. Notably, container moves in 2014 totalled 1.44 million TEUs, which means Kingston Freeport would have to double the port's business in six years for the next round of expansion to happen.
Even so, Jamaica is hoping events will align - or, more precisely, that the promise of a boost in business from the expanded and soon-to-be commissioned Panama Canal will be realised - for the Kingston port to grow capacity even further to 4.5 million TEUs.
It would require land reclamation to create a 14-hectare yard, and the development of a new 400-metre berth at Gordon Cay. And while this is built into the KCT concession agreement, both the Port Authority of Jamaica and Kingston Freeport's French owner, CMA CGM Group, seem to have cast it as a long shot, saying it is optional and subject to market conditions.
Kingston Freeport is expected to invest US$259 million overall in the first phase of the port project, the majority of which would be, if approved, financed by the IDB/China Infrastructure Fund loan.
Under the second phase, which the IDB has said it may also consider funding, the project scope would cover the deepening of the access channel, turning circle and 800m of existing quays to allow access by 15.5m draft vessels, and capacity upgrade to 3.6 million TEUs.
Under the current timetable, the Port Authority is expected to hand over KCT to Kingston Freeport sometime between January and March 2016, assuming the concessionaire meets the yearend schedule for financial closing of the deal.
IDB said Friday that it has just began the due diligence on the project.