The Sri Lanka Ports Authority (SLPA) has agreed to pay US$21.905 million to settle the investment made in a proposed South Asian Commercial and Logistics Hub project at the Port of Colombo, following the decision to abandon the project.
According to a notice submitted by China Merchants Port Holdings Company (CMPort) to the Hong Kong Stock Exchange, the parties decided that terminating the project was the most appropriate course of action due to changes in external circumstances, the project’s implementation environment and timeline, and the commercial considerations of the parties involved.
The proposed five-storey South Asian Commercial and Logistics Hub (SACLH) was approved by Sri Lanka as a Strategic Development Project in December 2023.
Under the approval, the project was granted exemptions from corporate income tax and tax on dividends for a period of 15 years.
The report also states that CMPort had been granted exclusive rights for 50 years to operate logistics and warehousing services within the Port of Colombo.
Under the terms of the agreement, the SLPA was restricted from granting a third party the right to provide such services at a royalty rate lower than that payable by the project company.
To implement the project, CMPort established a wholly owned subsidiary, Fortune Centre Group Limited (FCGL), in the British Virgin Islands.
CMPort held a 70% stake in the company, while the SLPA held 15% and Access Engineering PLC held the remaining 15%.
Following the termination of the project, the parties have decided to settle the amounts invested to date and reach a final agreement on all related matters.
Of the approximately US$26 million invested by the Chinese company’s subsidiary, the SLPA has agreed to pay US$21.905 million as the principal settlement amount, after deducting the relevant tax liabilities and obligations relating to late payments.
The amount is to be paid in a single instalment within 30 days of the signing of the settlement agreement and will subsequently be distributed among the project’s three shareholders.
However, the report also notes that there was no evidence on the Government Printer’s Department website indicating that the Gazette notification granting tax concessions for the project in 2023 had been revoked.