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Kantale Sugar factory revives with US300 million SLI investment

Sri Lanka’s over 30 year discarded Kantale Sugar factory and its land is set to be revived and restructured jointly by SLI Development Pte. Ltd, Singapore and its original investor M G Sugars Lanka (Pvt) Ltd under Built Operation and Transfer (BOT) agreement, Finance Ministry cabinet paper revealed.

According to this memorandum, this factory and land will be leased to the Singaporean company for ten years on the basis of granting 85 percent of shares to the investor and 15 percent to the government for an investment of US$ 300 million.

In the next shareholding ratio will be changed to 75 percent to 25 percent and keep on changing in accordance with s25 percent share reduction basis to the end of the BOT agreement.

The lease agreement will be signed by the M G Sugars Lanka, SLI Development and the treasury soon after the receiving of cabinet approval for this arrangement, Finance Ministry sources said adding that the Attorney General has given consent to go ahead with the project.

Conveying its protest to government authorities, Convenor of the Federation of National Organisations prominent Sinhala writer, poet Dr. Gunadasa Amarasekera noted that this was a pointblank handing over of the Kantale sugar factory and 20000 acres of fertile land to a Singapore company to set up Asia’s largest Ethanol production factory with the approval of the cabinet.

The new investment agreement to be signed will be to revive and restructure Kantale Sugar factory to process 4000 Tons of sugarcane cane per day and manufacture 72,000 MT sugar per year,production of ethanol , generation of electricity and dairy products, as per the approval which is to be granted by the Cabinet of Ministers.

Several previous attempts to restore the Kantale operation had failed while the action taken for the revival of the factory during the previous regime abruptly halted following a bribery scandal involving two senior government officials, including Chief of Staff of the then President Maithripala Sirisena.

They had allegedly blocked the transfer of machinery, scrap metal and other assets belonging to the Kantale sugar factory to a joint venture company that had signed a $ 100 million deal to revive the facility.

The investors planned to set up a state-of-the-art factory with world-renowned SLI experts Moussy Salem and Mendel Gluck spearheading 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 .

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 Kantale Sugar Factory, in the 1960’s was considered as the largest sugar production facility in Asia, providing about 10,000 direct and indirect job opportunities.

The factory complex also had luxury housing, sports club, shopping complex and social club which are now abandoned.

It was also running at a profit and from 1980 to 1986, the factory earned a Rs. 70 million profit.

However in 1993 the then UNP government handed it over to a private company which resulted in a closure by the end of 1999.

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