Posted on August 25, 2016
By Faseeh Mangi and Prudence Ho, Bloomberg
Billionaire Li Ka-shing’s Hutchison Port Holdings Ltd. is set to start its second Pakistan terminal after a five-year delay, giving mega vessels access to the coastal city of Karachi for the first time.
Hutchison’s terminal operations in South Asia’s second-largest economy will commence before the end of this year, as agreed with the Karachi Port Trust, the company said in an e-mailed reply to questions on Monday.
Li’s company, a unit of his Hong Kong-based flagship CK Hutchison Holdings Ltd., is tapping into expanding growth in Pakistan as China plans investments valued at $46 billion in power plants and road projects. Prime Minister Nawaz Sharif’s government is targeting an annual growth rate of 7 percent next year as the country is set to complete an International Monetary Fund loan program next month.
“Pakistan has been lagging behind big time and now we are moving into the future with this terminal being one of the deepest in the region,” Abid Butt, chief executive officer of Karachi-based freight company e2e Supply Chain Management Ltd., said by phone. “The port can become a transshipment location given India is congested and located better than Dubai’s Jebel Ali.”
Hutchison Port shares gained 2.3 percent on Tuesday, the most since Aug. 1, to 0.445 Singapore dollars. The stock is down 16 percent this year.
Karachi Delays
More than half of the nation’s total trade is done through transshipment, said Butt. However, roads around the port in Pakistan’s biggest city will need to be expanded to accommodate cargo from the world’s largest ships, he said.
South Asia Pakistan Terminals Ltd. will handle as much as 1.7 million twenty-foot equivalent units a year and increase the nation’s container handling capacity by more than half, according to a person familiar with the matter, who asked not to be identified as the plans are private.
Hutchison’s terminal will begin operations in the last week of October and will aim to handle 250,000 twenty-foot equivalent units in the first year of operations and increase that to more than 2 million in five years, the person said. The terminal cost $1.4 billion with Hutchison spending $600 million and the local port authority spending the rest for land reclamation, dredging and other work, the person said.
The commercial operations of the terminal with a depth of 16 meters was initially expected to start in 2011, four years after the agreement. Bureaucratic wrangling and a slowdown in road construction and dredging delayed the port operator’s plans, the person said. Some road works and dredging are still not complete, the person said.
‘Leftover Dredging’
“Most of the work is done and the leftover dredging and road work will be complete before the launch,” said Shafiq Faridi, spokesman for the Karachi Port Trust said by phone.
Pakistan handles about 2.5 million twenty-foot equivalent, including Hutchison’s first venture Karachi International Container Terminal that started in 1998.
The Middle East, Asia, Australia and others including Panama are key to Li’s ports business, accounting for more than one-third of the container throughput volumes for the business last year. Li is Hong Kong’s richest man, with his wealth estimated to have risen $1.3 billion this year to $31.3 billion, according to the Bloomberg Billionaires Index.
However, a difficult global trading environment put Li’s ports business under pressure in recent years. The ports division, which accounted for 9 percent of CK Hutchison’s revenue, posted a 9 percent drop in earnings before interest and taxes in the first half due to a decline in throughput volumes.
Source: Bloomberg
