Adani Ports and Special Economic Zone (APSEZ) on Monday said it has received the letter of intent from the Kandla Port Trust (KPT) to set up a dry bulk terminal at the Kandla Port.
The company had recently emerged as the highest bidder on revenue-share basis and was awarded the 30-year concession in a highlycompetitive bidding scenario.
The dry bulk terminal will be off Tekra, near Tuna, outside Kandla Creek at the Kandla Port. The construction of the new bulk terminal will begin after signing of the concession agreement with the KPT.
The Kandla Port's strategic location will be an important factor in attracting cargo from the north-west hinterland and will assist AdaniPorts to cross cargo handling volumes of 200 million tonnes by 2020, said Mr Rajeeva Sinha, Wholetime Director, APSEZL.
BL Research Bureau reports
The newly bagged bulk terminal at Kandla Port will add a little over 10 per cent to Adani Ports & SEZ's total capacity.
The 20 million tonnes of dry bulk terminal to be built by Adani Ports by 2014 and operated on a built, operate, transfer basis, will also add 40 per cent to its dry bulk capacity.
In the context of recent delays in security clearances for some port projects, this project has both security and environmental clearances.
This project is significant for a couple of reasons. One, Kandla is the largest major port in the country with capacity of 88 million tonnes and with utilisation rate of 93 per cent in FY-11.
Two, the new terminal to be built, being dry bulk, will attract fertiliser, coal and iron ore among other traffic.
Kandla Port handled well over 40 per cent of the total fertiliser volume across all major ports.
The planned terminal by Adani, expected to be fully mechanised (unlike the current multi-cargo terminal in Kandla), may catalyse volumes with superior operating efficiency. Adani Ports' cargo handling profile may also see more diversification with this terminal as the company's flagship port - Mundra Port – derives a chunk of volume from coal.
Adani Ports will operate this terminal by sharing 25 per cent of the revenue with the Government.
Being a major port, the tariff rates are capped. But rates are unlikely to be significantly different from the Mundra Port as ports in that region operate in a highly competitive environment.
For the nine months ending December 2011, Adani Ports enjoyed EBITDA margins of over 70 per cent.
Investment
Adani Ports needs to invest Rs 1,200 crore in this project which can be expected to be a 60-70 per cent debt-driven investment.
While on a standalone basis, Adani Ports' debt is comfortable, its ability to borrow at reasonable rates, especially after its leveraged buyout of Australian Port Abbott Point (debt in subsidiary's books) will determine whether the returns for this terminal are as attractive as Mundra Port.
The 20 million tonnes terminal, to be built by Adani Ports by 2014 and operated on a built, operate, transfer basis, will also add 40 per cent to its dry bulk capacity.