Manila-based port operator International Container Terminal Services, Inc. (ICTSI) says it will renew its concession to operate the Manila International Container Terminal (MICT) and will pay the Philippine Ports Authority (PPA) an upfront fee of P670 million or US$16.3 million for the extension when the current agreement expires in May.
Renewing the agreement would extend ICTSI’s exclusive management, operation, and development concession of its flagship project, MICT, for another 25 years until May 18, 2038. It signed the original contract with the PPA on May 18, 1988.
“ICTSI will recognize new concession rights when the renewal agreement becomes effective on May 18, 2013 to the extent that ICTSI receives a license or right to charge users for the public service it provides,” ICTSI corporate secretary Rafael Durian said in a company report.
Apart from upfront fees, conditions for the renewal include payment of completion of agreed additional investments in port equipment and infrastructure prior to 2013, and turnover and execution of a deed of transfer of port facilities and equipment currently being used at MICT as well as part of committed investments under the original concession agreement.
ICTSI has committed to pay PPA a fixed fee of $600 million payable in 100 advanced quarterly installments. It will pay a variable fee of 20% of gross revenue earned at MICT and needs to upgrade, expand and develop the MICT, particularly the construction and development of Berth 7.
Earlier, port magnate Enrique K. Razon Jr. said the group is investing P3.5 billion to P4 billion for MICT’s Berth 7 project to accommodate expected accelerated cargo volume growth in the future.
Under the provisions of the contract, the gross revenues will include all income generated by ICTSI from MICT from every source and on every account except interest income, whether collected or not, to include but not limited to harbor dues, berthing fees, wharfage, cargo handling revenues, cranage fees, stripping or stuffing charges, and all other revenues from ancillary services.
Harbor dues, berthing fees, and wharfage included in gross revenues amounted to $12.1 million in 2010, $13.0 million in 2011 and $13.7 million in 2012.
The total variable fees paid to PPA, shown as part of the “port authorities’ share in gross revenues” account in the consolidated statements of income, amounted to $44.6 million in 2010, $48.0 million in 2011 and $55.9 million in 2012.
Fixed fees formed part of the capitalized concession rights which are being amortized over the period of the concession.
Related concession rights payable amounted to $37.9 million, $21.3 million and $0.3 million, as of December 31, 2010, 2011 and 2012, respectively.
PPA prohibits the change of the parent company’s controlling ownership without prior consent from the regulator and it must adhere to a container terminal equipment acquisition program and deployment schedule.
Upon the expiration of the contract or in case of pre-termination, all equipment of ICTSI being used at MICT will become the property of PPA.
The PPA will not reimburse ICTSI except for those acquired during the last five years before the termination of the contract, for which the PPA has the option to buy them at book value or to pay rentals.
ICTSI public ownership
Meanwhile, it has been reported that ICTSI’s public ownership totaled 956.83 million shares as of March 31, complying with the 10% public ownership required of listed companies by the Securities and Exchange Commission.
Enrique K. Razon Jr., ICTSI chairman and CEO, still holds the biggest stake of 957.143 million shares, 69 million or 2.6% of which are directly held shares and 888 million or 33.6% indirectly held shares.
Genesis Asset Managers LLP, an investment management company based in the UK, has recently acquired a 5% interest in ICTSI, online news hub Port Technology International reported.
Genesis bought a total of 97.01 million ICTSI shares from the open market.
Established in 1989, Genesis is a research-driven organization that intends to provide institutional clients with investment returns. It focuses on emerging markets equities, serving institutional clients in the UK, the US, Europe, Australia and the Middle East.
Photo from www.ictsi.com
