- Loan unutilised by two governments
- Govt. paying late fee for 8 years
- Construction yet to begin
[caption id="attachment_73147" align="alignleft" width="300"]
Graphical illustration of the proposed second terminal[/caption]
By Madhusha Thavapalakumar
The delay in commencing the construction of the second terminal at the Bandaranaike International Airport (BIA) has forced the Sri Lankan Government to pay 'commitment charges' and 'front-end fees' to Japan for eight consecutive years.
This stunning revelation was made to The Sunday Morning Business by the Airport and Aviation Services (Sri Lanka) Limited (AASL) and the Japan International Corporation Agency (JICA), the fund provider of this terminal project, which has been receiving these payments.
“The Government is paying a certain amount to JICA. This is the percentage we have to pay them if we do not start the work on time. I cannot disclose the amount we are paying. It is confidential,” AASL Chairman Maj. Gen. (Rtd.) G.A. Chandrasiri told The Sunday Morning Business.
Meanwhile, the JICA office in Sri Lanka confirmed to us that the Sri Lankan Government has been paying commitment charges every six months for eight years for a loan agreement signed in 2012 with JICA. It has also been paying a front-end fee every six months for another loan agreement with JICA signed in 2016. Both of these loans were obtained for the development of BIA, Sri Lanka’s main airport.
“Borrowers of the JICA loan have to pay commitment charges for the undisbursed amount until they commence the project. Commitment charges would encourage borrowers to start the project soon. JICA disburses the full amount only when the project is about to take off,” a JICA official told The Sunday Morning Business.
A commitment fee is a fee that is charged by a lender from a borrower to compensate the lender for keeping a credit line open. The fee also secures a lender’s promise to provide the credit line on the agreed terms at specific dates, regardless of the conditions of the financial markets. A front-end fee is paid to a banker for setting up a transaction. It is usually calculated as a percentage of the value of the loan.
According to the JICA office in Sri Lanka and the research carried out by The Sunday Morning Business, plans for the construction of a second terminal at BIA were first mooted at least eight years ago.
In March 2012, the Sri Lankan Government entered into a loan agreement with JICA to undertake phase two of the BIA development project and obtained a loan amount of Rs. 36 billion. This phase two covered expansion of the capacity of BIA to 15 million passenger movements per annum, which presently stands at 6 million, and the construction of an additional finger pier to the west of the existing one.
In addition to this, the phase also covered construction of a two-tier passenger terminal with arrivals and departures physically separated and construction of a rapid exit to the Colombo-Katunayake Highway directly from the terminal. The entirety of phase two was said to be implemented in two stages and the first stage was scheduled to be completed by early 2017.
The separate stages of phase 2 are “Package A” and “Package B”. Package A includes the terminal building and associated works while Package B includes remote apron and taxiway construction.
While Package A is yet to commence, Package B was started in April 2017, a little over five years from the signing of the loan agreement with JICA, according to AASL. Until the commencement of Package B, the Sri Lankan Government was paying commitment charges to JICA which was later reduced and was applied only for Package A. The Sri Lankan Government is still paying commitment charges for Package A every six months and would have to pay until they commence the construction of the second terminal at the BIA.
In addition to this loan, AASL entered into another loan with JICA in March 2016 for Rs. 56 billion for the construction of a new multi-level terminal building where arrivals and departures would be separated vertically, consisting of two pier buildings. This loan was also obtained for the construction of development Package A. Altogether, JICA’s financing for the expansion of the BIA is Rs. 92 billion.
According to the second loan agreement signed with JICA for the development of BIA in 2016, construction of the terminal was expected to be completed by 2020. However, delays in finalising a construction company to undertake this project has resulted in the Sri Lankan Government, paying a front-end fee to JICA every six months for this second loan of Rs. 56 billion since 2016, in addition to the commitment charges that are being paid for the first loan of Rs. 36 billion, since 2012.
S
ri Lanka called bids to construct the new terminal (Package B) at BIA in late 2016 and received bids from two Japanese contractors who bid 96% and 46% higher than the engineer’s estimate. Since the JICA loan came with a strict regulation of awarding the contract only to a Japanese construction company, the Sri Lankan Government was negotiating with JICA to bring down the bid prices, to which JICA refused initially.
This resulted in the Sri Lankan Government opting for the plan of constructing a $ 19 million interim terminal in November 2017 to facilitate two million departing passengers. However, the awarding of this tender embroiled in a legal battle as a local construction company filed a lawsuit against the Technical Evaluation Committee’s decision to avoid the construction of the interim terminal being awarded to a Chinese bidder. Eventually, the plan of constructing an interim terminal was abandoned.
According to Minister of Tourism and Civil Aviation Prasanna Ranatunga, following this, the former Government was in talks with Taisei Corporation, one of the bidders who bid for the permanent terminal (Package A). However, Cabinet had some issues with Taisei and the Technical Evaluation Committee sorted them out later on. But even until this point, the price bid by the contractor was well above the engineer’s estimate.
Following the presidential election in November, Ranatunga held meetings with the Japanese Embassy in Sri Lanka and JICA to bring down the price of the contractor and gave a timeline to do so.
JICA later agreed to negotiate bid prices with the contractor, Taisei Corporation. Following this, Ranatunga’s proposal to award the terminal project to Taisei was approved by the Cabinet of Ministers on 19 February, this year. However, the Government is yet to sign the agreement with Taisei.
The new terminal at the BIA is expected to be completed by 2024, a delay of four years from its initial plans. It is learnt that changes would not be made to the initial plan as any changes at this point would delay the construction further.
BIA has more than 170 aircraft movements per day, including an average of more than 60 movements of heavy aircraft per day. The capacity crunch caused by a six-million-passenger terminal handling 10 million passengers, results in hours of delays – particularly as passengers try to collect their baggage.
According to the 2017 Annual Report of the AASL, the airport experiences heavy congestion in both arrival and departure zones, as well as vehicular traffic – particularly during peak hours.
In order to promote technology transfer and economic cooperation between Sri Lanka and Japan, JICA’s loan is provided under the Special Terms for Economic Partnership, with 0.1% p.a. interest and 40 year repayment period.
Graphical illustration of the proposed second terminal[/caption]
By Madhusha Thavapalakumar
The delay in commencing the construction of the second terminal at the Bandaranaike International Airport (BIA) has forced the Sri Lankan Government to pay 'commitment charges' and 'front-end fees' to Japan for eight consecutive years.
This stunning revelation was made to The Sunday Morning Business by the Airport and Aviation Services (Sri Lanka) Limited (AASL) and the Japan International Corporation Agency (JICA), the fund provider of this terminal project, which has been receiving these payments.
“The Government is paying a certain amount to JICA. This is the percentage we have to pay them if we do not start the work on time. I cannot disclose the amount we are paying. It is confidential,” AASL Chairman Maj. Gen. (Rtd.) G.A. Chandrasiri told The Sunday Morning Business.
Meanwhile, the JICA office in Sri Lanka confirmed to us that the Sri Lankan Government has been paying commitment charges every six months for eight years for a loan agreement signed in 2012 with JICA. It has also been paying a front-end fee every six months for another loan agreement with JICA signed in 2016. Both of these loans were obtained for the development of BIA, Sri Lanka’s main airport.
“Borrowers of the JICA loan have to pay commitment charges for the undisbursed amount until they commence the project. Commitment charges would encourage borrowers to start the project soon. JICA disburses the full amount only when the project is about to take off,” a JICA official told The Sunday Morning Business.
A commitment fee is a fee that is charged by a lender from a borrower to compensate the lender for keeping a credit line open. The fee also secures a lender’s promise to provide the credit line on the agreed terms at specific dates, regardless of the conditions of the financial markets. A front-end fee is paid to a banker for setting up a transaction. It is usually calculated as a percentage of the value of the loan.
According to the JICA office in Sri Lanka and the research carried out by The Sunday Morning Business, plans for the construction of a second terminal at BIA were first mooted at least eight years ago.
In March 2012, the Sri Lankan Government entered into a loan agreement with JICA to undertake phase two of the BIA development project and obtained a loan amount of Rs. 36 billion. This phase two covered expansion of the capacity of BIA to 15 million passenger movements per annum, which presently stands at 6 million, and the construction of an additional finger pier to the west of the existing one.
In addition to this, the phase also covered construction of a two-tier passenger terminal with arrivals and departures physically separated and construction of a rapid exit to the Colombo-Katunayake Highway directly from the terminal. The entirety of phase two was said to be implemented in two stages and the first stage was scheduled to be completed by early 2017.
The separate stages of phase 2 are “Package A” and “Package B”. Package A includes the terminal building and associated works while Package B includes remote apron and taxiway construction.
While Package A is yet to commence, Package B was started in April 2017, a little over five years from the signing of the loan agreement with JICA, according to AASL. Until the commencement of Package B, the Sri Lankan Government was paying commitment charges to JICA which was later reduced and was applied only for Package A. The Sri Lankan Government is still paying commitment charges for Package A every six months and would have to pay until they commence the construction of the second terminal at the BIA.
In addition to this loan, AASL entered into another loan with JICA in March 2016 for Rs. 56 billion for the construction of a new multi-level terminal building where arrivals and departures would be separated vertically, consisting of two pier buildings. This loan was also obtained for the construction of development Package A. Altogether, JICA’s financing for the expansion of the BIA is Rs. 92 billion.
According to the second loan agreement signed with JICA for the development of BIA in 2016, construction of the terminal was expected to be completed by 2020. However, delays in finalising a construction company to undertake this project has resulted in the Sri Lankan Government, paying a front-end fee to JICA every six months for this second loan of Rs. 56 billion since 2016, in addition to the commitment charges that are being paid for the first loan of Rs. 36 billion, since 2012.
S
ri Lanka called bids to construct the new terminal (Package B) at BIA in late 2016 and received bids from two Japanese contractors who bid 96% and 46% higher than the engineer’s estimate. Since the JICA loan came with a strict regulation of awarding the contract only to a Japanese construction company, the Sri Lankan Government was negotiating with JICA to bring down the bid prices, to which JICA refused initially.
This resulted in the Sri Lankan Government opting for the plan of constructing a $ 19 million interim terminal in November 2017 to facilitate two million departing passengers. However, the awarding of this tender embroiled in a legal battle as a local construction company filed a lawsuit against the Technical Evaluation Committee’s decision to avoid the construction of the interim terminal being awarded to a Chinese bidder. Eventually, the plan of constructing an interim terminal was abandoned.
According to Minister of Tourism and Civil Aviation Prasanna Ranatunga, following this, the former Government was in talks with Taisei Corporation, one of the bidders who bid for the permanent terminal (Package A). However, Cabinet had some issues with Taisei and the Technical Evaluation Committee sorted them out later on. But even until this point, the price bid by the contractor was well above the engineer’s estimate.
Following the presidential election in November, Ranatunga held meetings with the Japanese Embassy in Sri Lanka and JICA to bring down the price of the contractor and gave a timeline to do so.
JICA later agreed to negotiate bid prices with the contractor, Taisei Corporation. Following this, Ranatunga’s proposal to award the terminal project to Taisei was approved by the Cabinet of Ministers on 19 February, this year. However, the Government is yet to sign the agreement with Taisei.
The new terminal at the BIA is expected to be completed by 2024, a delay of four years from its initial plans. It is learnt that changes would not be made to the initial plan as any changes at this point would delay the construction further.
BIA has more than 170 aircraft movements per day, including an average of more than 60 movements of heavy aircraft per day. The capacity crunch caused by a six-million-passenger terminal handling 10 million passengers, results in hours of delays – particularly as passengers try to collect their baggage.
According to the 2017 Annual Report of the AASL, the airport experiences heavy congestion in both arrival and departure zones, as well as vehicular traffic – particularly during peak hours.
In order to promote technology transfer and economic cooperation between Sri Lanka and Japan, JICA’s loan is provided under the Special Terms for Economic Partnership, with 0.1% p.a. interest and 40 year repayment period.