USD 300 mn agreement on Kantale Sugar Factory to be finalised

The government, MG Sugar and Singapore based SLI are about to finalize an agreement on the discarded Kantale sugar factory land.

The nominated representative of MG Sugar Anura Fernando yesterday (15) told The Island that the USD 300 mn Foreign Direct Investment (FDI) would be a big boost against the backdrop of the economic slowdown caused by the rampaging coronavirus.

Having entered into an agreement with the Board of Investment (BoI) recently, MG Sugar and SLI were expecting to conclude the contract for the relevant land with the Treasury, Fernando said. The government and SLI owned 51% and 49% of MG Sugar, respectively.

A number of previous attempts to restore the Kantale operation had failed. During the previous administration, two senior government officials, including Chief of Staff of the then President Maithripala Sirisena, were arrested for allegedly receiving a massive bribe to allow a foreign party access to Kantale premises.

The Singapore headquartered enterprise would make the investment.

According to Fernando, the company met the stipulated conditions, including the bank guarantee and awaiting the finalization of the contract to proceed with the operation. Fernando emphasized that a delay in finalizing the leases for the Kantale land could cause a severe setback.

The investors planned to set up a state-of-the-art factory, Fernando said, adding that world-renowned SLI experts Moussy Salem and Mendel Gluck would spearhead the project. The team consists of Booker Tate, Grupo TSK would handle industrial EPC (Engineering, Procurement and Construction) and O&M (Operations and Maintenance) along with Netafim-world leaders in irrigation technology and equipment, for the agricultural EPC and O&M, the company said in a statement. Hogan Lovell together with financial advisers Fieldstone, have developed all contracts and financial models for the Kantale project, the company stated.

The company said: “The landmark project will welcome a 27.5 MW maximum capacity cogeneration plant from biomass, with an export of 10 MW to the National Grid. This will produce 80,000 tons of direct consumption sugar per annum to the local market, resulting in foreign exchange savings of approximately US$50 million per annum in payments for imported sugar.

This project will offer progressive solutions to the economic development of the Trincomalee district region and wider rural economy. Direct employment opportunities will see 3,500 local people salaried, and a further 3,000 farmer families will benefit. To fulfill the proposed expansions, plans to train a cadre of skilled workers will be put in motion, and 10,000-15,000 indirect employment opportunities will be created nationwide. 

The plans also outline additional infrastructure development in the area, and will see the establishment of new schooling and health facilities. The wider social support will assist in solving health issues and related public costs arising from consumption of illicit alcohol. Sri Lanka’s economic and social development is intrinsically linked to the Kantale Sugar Factory, and the onset of the project is a cause for national celebration.”

Fernando said if the final agreement could be concluded before the end of this year, the plant could be commissioned by July 2023 (SF).