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The House of Representatives yesterday (December 13), approved a Government Guarantee for a US$44 million loan from the Bank of Nova Scotia (BNS) Jamaica Limited to the Port Authority of Jamaica, to finance the expansion of the Kingston Container Terminal (KCT IV).
Finance and Planning Minister, Dr. Omar Davies who moved the Resolution, said the loan was to assist with the completion of the fourth phase of the expansion programme of the KCT.
He explained that the work to be done was essentially to meet increasing market demand for the use of Kingston as a transshipment port and to upgrade berths 10 and 11 to accommodate post Panama vessels and also to extend the berth at the South Terminal at Gordon Cay. The phase to be completed on the South Terminal comprises 91 metres of berth extension and the paving of 7.7 hectares of container storage space.
The Finance and Planning Minister said the Port Authority remained one of the island’s success stories as a public sector entity. He pointed out that the reason for negotiating the loan in US dollars was because 60 per cent of the authority’s income comprised foreign exchange earnings.
“The real situation is that sooner rather than later, I will be back for additional support,” Minister Davies told the House, adding that currently the area to be constructed has already being booked out and there was a demand for additional space, which would lead to the transshipment port being further extended beyond its present boundaries.
He informed that a loan agreement has been executed between BNS and the Port Authority. It will attract a three month London Inter-Ban Offered Rate (LIBOR) plus 4.75 per cent interest per annum and will be repaid in 17 equal quarterly payments of US$750 commencing on March 1, 2006 and a final payment of US$31.25 million on June 1, 2010.
Opposition Spokesman of Finance, Audley Shaw in his comments, said the Port Authority should be commended for the expansion work being done on the port. However, Mr. Shaw argued that the loan could be obtained at a cheaper rate than was being currently accessed for the long-term infrastructure work to be undertaken on the port.
“There is a need for Jamaica to begin to tap into lower cost sources of funds from whatever source they may be derived,” he maintained.
In his reply, Dr. Davies said while Mr. Shaw’s observation that the cheapest funding should be sought for an investment of that type was correct, in this instance the rate of growth of the demand for the facilities was faster than anticipated. He said obtaining concessionary funding was difficult, as there was a quota for countries and a long gestation period and the construction was being undertaken at a much faster pace.
Dr. Davies further assured that there was no desire on the part of the government to have the authority pay higher than necessary interest rates.
“It’s a good point, but in this instance we are just seeking to respond to demand that has grown at a faster rate than we would have anticipated,” the Minister pointed out.
In January 2004, Cabinet granted approval for an award of a Civil Works contract to E. Phil and Son to undertake a fourth phase expansion of the terminal at a cost of US$49.6 million.
The Authority anticipates that Phase four of the expansion will be completed at the end of 2005, providing additional container capacity of 300,000 tonnage equivalent unit (TEUs), resulting in total capacity of 1,500,000 TEUs.