Posted on July 5, 2016
French outfit Kingston Freeport Terminal Limited assumed control of the Kingston Container Terminal (KCT) at midnight Friday, kicking off a 30-year concession more than year after the initial agreement was struck with Port Authority of Jamaica.
All 834 employees of KCT were made redundant the day before, but the concessionaire offered employment to all eligible workers as well as to technical staff who were employed by the Shipping Association of Jamaica. Their tenure also started on Friday.
Financial closure of the US$510 million ($64 billion) concession agreement was achieved on Thursday and upfront and other fees required were paid over to the Port Authority, allowing for the transfer to Kingston Freeport Terminal, Prime Minister Andrew Holness announced at a press conference at Jamaica House on Friday.
Kingston Freeport, the vehicle being used by French consortium Terminal Link-CMA CGM to operate the 30-year port concession, was initially expected to tie down financing by last December, but that was pushed back to March this year and later extended to June 30.
Under the agreement, Kingston Freeport will finance, develop, expand and transfer KCT back to the Port Authority at the end of the concession period.
Holness said Kingston Freeport has secured all the funding required for the first phase of the capital works, which will see the dredging and deepening of the Kingston Harbour.
FIRST PHASE
“The concessionaire and the lenders have signed loan agreements and are working to complete all conditions precedent to disbursement,” he added.
The first phase of the project will include 1,200 metres of berth, reinforced to European Union standards, and 800 cubic metres of dredging reinforced to a depth of 15.5 metres, with the ability to accommodate Panamax vessels. The first phase of the project will be undertaken over five years at a cost of US$259 million.
“The development is timely, coming on the heels of the opening of the expanded Panama Canal,” said PM Holness. The canal’s new locks were commissioned a week ago on June 26.
“The expansion was undertaken to facilitate the transit through the Panama Canal of much larger shipping vessels, which are now being built due to evolutions in materials, hull designs and manufacturing technologies. These vessels offer much greater economies of scale than the ones that they replace and which are typical of the vessels now being processed in Jamaica,” said Holness.
With much larger vessels being ushered from the Pacific Ocean into the Caribbean Sea, trans-shipment terminals must be expanded and upgraded to be capable of handling these huge vessels, he noted.
Holness said that in order to accommodate those ships, the access channel to the Kingston Harbour must be deepened, the quay walls must be reinforced, larger and more efficient ship-to-shore cranes must be installed and advanced container-handling equipment must be provided.
NO GUARANTEE
As the then government announced when the consortium signed the concession agreement in April 2015, Holness emphasised that the Government will not provide a guarantee for the transaction.
Under the agreement, the Port Authority was required to receive an upfront payment of US$75 million, equivalent to the value of the equipment at KCT.
It also required the state-owned agency to be paid a fixed US$15 million per year as lease for the port, and a variable fee of eight per cent of gross revenues, payable monthly.
Last December, when the IDB disclosed it was backing the transaction with a senior secured loan of up to US$175 million, the development bank said it was the largest non-sovereign guaranteed transaction ever done for a project in Jamaica.
The IDB loan will help finance the deepening of the navigation channel, reinforcing part of the existing quay and the procurement of new equipment to expand the terminal capacity from 2.8 million to 3.2 million TEUs, or twenty-foot equivalent container units, per year.
