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After years of negotiation, the future of one of the Caribbean’s most important transhipment ports, the Jamaican hub of Kingston, appears finally settled. Ownership of its container terminal is to be handed over to a CMA CGM-controlled consortium.

The effective privatisation of Kingston container terminal in a deal worth $509m was confirmed by the Port Authority of Jamaica (PAJ) this week, which transferred ownership to CMA CGM on a 30-year build-operate-transfer (BOT) model.

This will see the terminal expanded in two phases, with capacity taken successively up to 3.2m teu and then 3.6m teu, and the port’s draught deepened to 14.2 metres by the end of 2016, and then to 15.5 metres.

CMA CGM formed a special purpose vehicle to bid for the project – Kingston Freeport Terminal Ltd – comprising its remaining port business, CMA Terminals, and Terminal Link, its container terminal operating company in which China Merchants has a 49% stake.

The consortium eventually ran out as the only bidder interested in the project.

Requests for expression of interest had been sent out to 22 port operating companies and three other “shipping industry groups” that had expressed an interest in the terminal. Five submitted bids: Singapore’s PSA; DP World; the CMA CGM-led consortium; Ports America; and a consortium led by Stevedoring Services of America that also included Israeli shipping line Zim.

PAJ revealed this week that its shortlist was PSA, DP World and CMA CGM. The former two subsequently dropped out following the emergence of another potential Jamaican transhipment project at a greenfield site at Goat Island, proposed by China Harbour Engineering Company.

PAJ said: “During the due diligence process all the bidders expressed concern about the likely impact of the proposed Portland Bight/Goat Island Project on the regional industry, with the likely effect of adverse price competition.

“The Goat Island Project was constantly in the news. The project called for the development of an industrial park and a deepwater container terminal. The likely additional transhipment capacity coming on stream so close to the prospective concessionaire assuming responsibility for KCT was considered to represent a high level of risk that would likely threaten the viability of KCT,” it added.

However, there has been little development at the $1.5bn Goat Island project for over a year, and it was not mentioned in the recent annual speech by the governor general marking the opening of parliament.

The protracted nature of Kingston’s development has been further complicated by the after-effects of the global financial crisis. The port had long been a crucial North American transhipment hub for Zim, but its potential involvement was derailed by the huge financial hole, from which the carrier is only now beginning to emerge.

At the same time, new government debt management policy, whereby it eliminated guarantees of future loans taken on by statutory authorities, meant the port authority itself was unable to finance the box terminal’s expansion because it could neither access capital markets nor fund it from cash reserves.

As a result, the deal features an unusual arrangement for BOT schemes, whereby the concessionaire is responsible for the dredging – usually undertaken by the port authority – while the existing equipment at terminal is now owned by CMA CGM.

Both port and operator insist that the facility will operate on a common user basis, with CMA CGM saying its cargo at the port amounts to 35-40% of its total volume. The completion of dredging is set to coincide with the opening of the expanded Panama Canal, which will see 12,000-13,000 teu vessels able to pass its new locks.

Another factor will be how the port is included as a hub in the rotation of transatlantic and Asia-US east coast east-west services, and the north-south services between North and South America and South America and Europe, given the burgeoning levels of co-operation between CMA CGM and German shipping line Hamburg Sud, which currently focuses its Caribbean transhipment at Cartagena.

The possibilities of relay transhipment operations at Kingston are interesting, especially as the two lines, along with United Arab Shipping, are increasing the number of jointly-run services.

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