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Van Oord-JSW Set to Win India’s First PPP Dredging Deal

Posted on November 2, 2015

A consortium of the Netherlands’ Van Oord Dredging and Marine Contracting and India’s JSW Group is the sole remaining bidder for a contract to deepen the channels at state-owned Mormugao Port in Goa, India.

The outer channel will be dredged to 19.8 m and the inner channel to 19.5 m to accommodate Capesize vessels.

This is the first contract India’s port sector in which capital dredging work will be carried out on a private-public-partnership (PPP) annuity basis.

The Van Oord-JSW team quoted a price of about USD248 million for deepening the channel in six months and for maintaining the depth for the next 12 years, a Mormugao Port representative told IHS Maritime.

Four other bidders backed out without submitting price quotations.

Mormugao Port will pay the Van Oord-JSW team the quoted amount biannually in 23 instalments over the contract’s 12 years.

The capital dredging will involve about 14.9 million m³ of soil and 125,000 m³ of rock while maintenance dredging will involve 4.2 m³ of material.

The annuity contract differs from typical dredging contracts followed in India and globally where the contractor is paid upon reaching the mandated depth or on dredging the contracted quantity.

Instead, Mormugao will pay off the work as it collects a dredging levy on ships calling at its berths 5, 6, and 7. Rates will be INR71.43 (USD1.10)/gt for Indian coastal vessels over 60,000 gt and below 75,000 gt and INR119.05/gt for similar-sized foreign-going vessels; and for ships above 75,000 gt the levy will be INR95.24/gt for Indian coastal vessels and INR158.73/gt for foreign-going vessels.

South West Port, a unit of JSW Group, runs berth 5 (used for finished steel exports) and 6 (for coal imports) while berth 7 is run by Adani Group for importing coal.

“Coal importers stand to gain significantly in terms of freight benefit if imports are done through Capesize vessels,” a Mormugao Port representative said.

Most of the European dredging contractors shied away from participating in the Mormugao tender on their own, citing the deferred payment (annuity) method as a disincentive, an industry insider in India told IHS Maritime.

JSW said, “Van Oord offered the best technical and financial terms to JSW for undertaking the channel deepening work.”

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