Financial Closure and Handover of KCT in March

Financial closure for the upgrading of the Kingston Container Terminal (KCT) is expected to take place by the end of March, with handover of the facility to port concessionaire, Kingston Freeport Terminal Limited (KFTL), to occur simultaneously.

Financial closure is defined as a stage when all the conditions of a financing agreement are fulfilled prior to the initial availability of funds. This is attained when all the tie-ups with banks/financial institutions for funds are made and all the conditions precedent to the initial drawing of debt are satisfied.

Speaking in the House of Representatives on Tuesday (January 13), Transport, Works and Housing Minister, Dr. the Hon. Omar Davies, said the necessary documentation and other legal requirements are being put in place.

The Government signed a 30-year concession agreement with KFTL in April 7, 2015, to finance, expand, operate, maintain, and transfer the KCT.

The agreement, Dr. Davies said, gave KFTL and its sponsors six to eight months within which to secure funding for phase one of the capital works.

He said that based on this timetable, the financing arrangements should have been completed by early December.

However, this was delayed to allow for the Office of the Contractor General (OCG) to investigate the privatisation process and the pending lease of KCT to Terminal Link, following concerns raised.

Dr. Davies noted that the OCG, after a thorough investigation, advised that the transaction had adhered to the applicable policies and procedures.

He told the House that “the exhaustive nature of the due diligence” undertaken by the main lender, the Inter-American Development Bank (IDB), and other financiers, also delayed the date for financial closure.

“It should be noted that the IDB, as part of their due diligence, required that the environmental study for KCT be posted on their website for a period of four months. This further delayed the process. The board of the IDB approved the loan in mid-December and the other financial entities are in the process of doing so,” he informed.

Meanwhile, phase one works will commence immediately after the handover, and will include the dredging of the access channel and basin to accommodate vessels with draught of 14.2 metres.

It will also include the rehabilitation of 1,200 metres of sheet piles on the South Terminal to facilitate additional deepening of the berth, and strengthening of the piles to be consistent with international codes.

The overall construction is scheduled to be completed within 24 months and will be phased to ensure that transhipment operations at the port are maintained throughout the construction period.

Dr. Davies said that notwithstanding the delay in achieving financial closure, the concessionaire and the Port Authority “have been working in a focused way to prepare for the handover to the concessionaire and the commencement of the dredging and civil works of phase one.”

He also stated that several activities are in progress, for example, the purchase of key container handling equipment needed to supplement KCT’s stock.

In addition, during the negotiations with KFTL, it was recognised that the container handling equipment at KCT required upgrading.

“It was agreed that specified pieces of equipment costing up to an amount of US$15 million would be purchased by PAJ on the understanding that such sums will be reimbursed to PAJ once handover took place. Orders for these have already been placed and the major items will be delivered starting in (the second quarter) of 2016,” Dr. Davies said.