US$100m port expansion!
Published:Sunday | August 7, 2011 | 12:00 AM
Steven Jackson, Business Writer
French shipping group CMA CGM will invest US$100 million (J$8.6 billion) and employ 1,000 in exchange for a 35-year lease to set up a major hub at the Kingston Container Terminal (KCT), the Government announced on Friday.
CMA CGM, described as the world's third largest, will use Jamaica as a hub, then feed its vessels via the Panama Canal (the shortest sea link between the Pacific and Atlantic Ocean) onward to a final destination.
"Yes, it will be CMA CGM's hub in the Caribbean. Based on the expansion of the Panama Canal and the ability to accommodate ships 10,000 TEUs and larger, CMA CGM's will use Kingston transshipment point," stated the state body, Port Authority of Jamaica (PAJ), in response to Gleaner queries.
TEUs or 20-foot equivalent describe containers or trailers shipped on the seas and transported on land. The agreement offers CMA CGM the option to increase its investment in the state-owned KCT.
"Under of the terms of the agreement, CMA CGM will have a 35-year lease of the Gordon Cay Terminal and will invest approximately US$100 million to improve infrastructure and equipment," stated a release from public relations firm CGR Communications on behalf of the PAJ, which runs the port. "The improvements will be the catalyst for an increase in cargo volumes, and the creation of approximately 1,000 jobs by 2015."
CMA CGM will make its investment by 2014. Led by its founder Jacques R. Saadé, CMA CGM has become a global carrier with 170 major shipping lines and 403 ports of call in 150 countries, according to its home page.
Speaking at the signing ceremony, Mike Henry, minister of transport and works, said "this MOU represents a significant step forward in the government's programme for the privatisation of the Kingston Container Terminal and is an important milestone in the history of the shipping industry."
Dredging programme
The MOU positions CMA CGM to take advantage of the expansion of the Panama Canal, which is scheduled to be completed in 2015 and will increase its capacity to accommodate larger ships. The PAJ will undertake a dredging programme to increase the depth of the sea lanes at the Port of Kingston, keeping pace with the requirements of the new generation of larger ships.
KCT has three main terminals to the north, west and south. The PAJ, set up by the Port Authority Act of 1972, is responsible for the regulation and development of Jamaica's port and shipping industry. The PAJ is also responsible for the safety of all vessels navigating the ports of entry and regulation of the tariffs charged on goods passing through the public wharves.
The PAJ stressed that this agreement was separate from the planned privatisation of the KCT.
"PricewaterhouseCoopers (PwC) was only recently awarded the consultancy contract for the privatisation, so we are just in the very preliminary stages of the process," explained the PAJ.
PAJ recently negotiated at least two contracts with PwC amounting to a total US$3.8 million (J$333 million) related to consultancy services for the privatisation of the KCT. The larger transaction, US$3.33 million (J$286 million), was endorsed by the National Contracts Commission in June - which described the contract as consultancy for phase two of the divestment - but would need Cabinet approval prior to its award. The first contract in May 2009 was for US$525,000.
Prime Minister Bruce Golding officially announced in February 2009 his administration's intention to divest the profitable but capital-intensive port. The model of divestment is still uncertain, though there have been suggestions that a stock market float was a possibility.
The KCT is projected to earn J$10.4 billion in revenues in fiscal year 2011-12, up 11 per cent over year earlier levels. Capital expenditure was estimated at J$530 million last fiscal year, spent on the KCT and the KCT 5 Western Expansion. Some J$150 million is projected for expenditure this fiscal year. PAJ is projected to earn $2.17 billion in profit this fiscal year, down from $2.78 billion in 2010-11. It operates with J$14.7 billion in equity.
Having borrowed heavily to finance its infrastructure expansion over recent years, in 2007-08 the PAJ announced plans to refinance US$143 million of the loans on its books in an effort to bring down its spiralling debts, which were estimated to have hit J$34 billion last year amid disclosures that PAJ was short on working capital and facing a liquidity crunch.