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Oral Questions - Wednesday 21st October 2009

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QUESTIONS FOR ORAL ANSWERS

To be raised by the Hon. Ravi Karunanayake when
Parliament meets on Wednesday 21st October 2009



1.    0015/’09
Hon. Ravi Karunanayake, – To ask the Minister of Irrigation and Water Management and Minister of Ports and Aviation, –

a)    Will he inform this House –

(i)    the number of Air Crafts leased out, bought or hired for Mihin Air from the inception to-date;

(ii)    the amount being paid or amount paid, per month basis;

(iii)    the load factor required to break even;

(iv)    the load factor from the origin of the airline per month basis; and

(v)    the total cargo lift capacity and data capacity lifted to-date per month basis?



b)    Will he state –

(i)    the total outstanding as of today with age analysis for fuel, airport aviation office space and warehouse space, taxes, aircraft dues, bank loans and any other obligation of significance;

(ii)    the total staff recruited along with the total remittance payable per month basis with perks included for all staff drawing over Rs. 200,000/- in total per month; and

(iii)    the additional cost that they pay for Aircraft Crew Maintenance Insurance (ACMI) even though the agreements cover the same?



c)    If not, why?




2.    0389/’09
Hon. Ravi Karunanayake, – To ask the Minister of Finance and Planning, –

a)    Will he inform this House –

(i)    the date that the Lanka Marine Limited, Water’s Edge and Sri Lanka Insurance Corporation were reverted back to the Government; and

Answer:

Lanka Marine Services (Pvt) Ltd (LMSL)
Lanka Marine Services (Pvt) Limited was not reverted back to the Government. Only the land of Lanka Marine Limited was taken back by the Sri Lanka Ports Authority (SLPA) in terms of a Supreme Court Order on 21st July 2008.

Waters Edge
Reverted date to Government – 8th February 2009

Sri Lanka Insurance Corporation Limited (SLICL)
Revered date to Government – 4th June 2009


(ii)    the profit and loss along with the balance sheet as at 31st December of the year and the date of transfer from the date it was privatized to-date on per year and per entity basis?

Answer:

Lanka Marine Services (Pvt) Limited (LMSL)
Not Applicable.


Waters Edge – Profit / Loss
Year ended: 31.12.2008
Profit / (Loss) – Rs. ‘000: 80,304

Year ended: 01.02.2009 to 31.08.2009
Profit/ (Loss) – Rs. ‘000:   2,346

**Profit excluding interest and depreciation


Sri Lanka Insurance Corporation Limited – Profit / Loss
Year ended: 31.12.2003
Profit / (Loss) – Rs. ‘000: 1,533,402

Year ended: 31.12.2004
Profit / (Loss) – Rs. ‘000: 631,772

Year ended: 31.12.2005
Profit / (Loss) – Rs. ‘000: 1,080,427

Year ended: 31.12.2006
Profit / (Loss) – Rs. ‘000: 559,703

Year ended: 31.12.2007
Profit / (Loss) – Rs. ‘000: 236,503

Year ended: 31.12.2008
Profit / (Loss) – Rs. ‘000: 583,685


b)    Will he state –

(i)    the amount that has been paid and the amount more that got to be paid to the entities that initially took over Lanka Marine Limited, Sri Lanka Insurance Corporation and Water’s Edge;

Answer:

Lanka Marine Services (Pvt) Limited
Nil.


Waters Edge
Amount payable to private ownership in terms of the Court Order –
406 Million + Inventory cost (not yet been estimated)

Amount already paid by Government to Private Ownership –
No.

Amount to be paid by Government to private ownership –
406 Million + Inventory cost.


Sri Lanka Insurance Corporation Limited (SLICL)
Amount payable to private ownership in terms of the Court Order –
6,050 Million + Retained Profit form 11/04/2003 to 04/06/2009 (We have requested Attorney General (AG) to clarify on retained profit)

Amount already paid by Government to Private ownership –
No.

Amount to be paid by Government to private ownership –
Rs. 6,050 Million + Retained Profit


(ii)    the number of people worked at the time of handling over to the private entities, and at the time of reverting back to the Government; and

Answer:

Lanka Marine Services (Pvt) Limited
Not Applicable.


Waters Edge
At the time of handing over to Private entities –
No employees

At the time of taking back to Government –
424 employees


Sri Lanka Insurance Corporation Limited (SLICL) –
At the time of handing over to Private entities –
2,977 Employees

At the time of taking back to Government –
2,051 employees


(iii)    the number of people that are working now?

Answer:

Lanka Marine Services (Pvt) Limited
Not Applicable.


Waters Edge
349 Employees


Sri Lanka Insurance Corporation Limited (SLICL)
2,018 employees.



c)    If not, why?

Answer:

Does not arise.


A briefing note on Parliamentary Question No. 0389/09


Lanka Marine Services (Private) Limited (LMSL)

Background
LMSL was established as a subsidiary of Ceylon Petroleum Corporation (CPC) in 1993 under the Companies Act No. 17 of 1982 to take over the bunkering operations of the CPC. LMSL operates barges within the harbor and provides bunkers to ships calling in at the Colombo Port.

Restructuring Strategy
LMSL has a storage facility at Bloemendhal Road which has a capacity of 28,000 Metric Tonnes and three pipelines from the storage tanks to the Oil Jetty at the Colombo Port, where the two barges operated by LMSL are located. In order to make the Colombo Port as attractive destination for bunkering, the provision of bunkering services need to be competitive. In this regard, it is essential that certain infrastructure facilities currently utilized by LMSL be made available to any party wishing to provide bunkering services at the Colombo Port.

Bidding Process
The sale of 90% Shares of LMSL was carried out through a competitive bidding process. Advertisements calling for Expressions of Interest (EOI’s) were placed in the local newspapers. A “Guidelines for Parties Expressing Interest” document was made available to all interested parties and on the due date received EOI’s from 17 parties.

Evaluation
The Technical Evaluation Committee (TEC) was appointed by the Secretary to the Treasury, to evaluate bids for the sale of 90% of shares of LMSL. The TEC evaluated the EOI’s based on the following criteria as specified in the Guidelines for parties Expressing Interest document.

•    Access to the Bunkers – tie up to a refinery that has exportable surplus
•    Volume of bunkers done in Regional Ports.
•    Tanker Company or tie up to one
•    Location of bunkering operations

The TEC shortlisted all parties who received a total 70 points or more out of 100. Thirteen parties were shortlisted based on the technical and financial capabilities. Confidential agreements signed by all the parties with the exception of Singapore Petroleum Company and were given Request for Proposal (RFP). Company background and general information, proposal and selection process and contractual agreement – Share Purchase and Sales Agreement were contained in the RFP.

A pre-proposal conference was also held on the 30th of April 2002 to clarify the questions that the bidders had regarding the procedure outlined in the RFP. The TEC selected five bidders out of the six final submissions of proposals.

PERC set the base price at Rs. 1.2 Billion based on the independent/professional business valuation done by DFCC Bank and informed the bidders by letter dated 25th June 2002 of the base price and that the Undertaking to Pay as described in the RFP document was due on the 10th July 2002.

The pre-selected bidder who offers the highest price on the day of bidding at the CSE will be deemed to be the successful bidder. Upon drawing down ion the Undertaking to Pay, the successful bidder will be immediately called upon to enter into the Share Sale and Purchase Agreement and Ancillary Agreements. In the event successful bidder does not comply, the second highest bidder will be selected.

John Keells Holdings Limited was the sole party that submitted the undertaking to pay by the required deadline. Therefore, the sale was not carried out through the CSE. 90% if Shares were divested to John Keells Holdings Limited on 20th August 2002 for Rs. 1.2 Billion based on the Cabinet approval obtained on 14th August 2002. The balance of 10% shares were gifted to its employees.

As a result of a Fundamental Rights case filed by Mr. Vasudeva Nanayakkara, the Supreme Court declared that within one month form 21st July 2008 restore possession of the land (an extent of 8A 2R 21.44P) to Sri Lanka Ports Authority.



Waters Edge Limited
Waters Edge property about 200 acres belonging to the Urban Development Authority  (UDA) was leased out to Asia Pacific Golf Course for a period of 99 years. This land was mainly kept as water retention area except of a small area of less than 04 acres, no construction was permitted. Since the lessee wished to construct a Golf Course he was permitted to do so on this land. Subsequently, further additional land was also leased out to the lessee who then subdivided this land into plots and sold them to various  persons with the concurrence of the UDA. Purchasers of these plots were given free hold title by the UDA.

In November 2008, Supreme Court cancelled the lease agreement and reverted the land back to the UDA.

In respect of the Restaurant and other facilities, since there were nearly 400 employees, the Supreme Court appointed a Board of Management consisting of –

Dr. P. Ramanujam – Chairman
Mr. Prema Cooray
Mr. Sanjeev Gardiner
Ms. Kimarli Fernando
Mr. Ismeth Raheem
Mr. Sudath Karunanayake

to manage the facilities so that the employment of the workers was ensured. Subsequently, the Cabinet appointed three Service Commanders and a Representative of Treasury to the Board of Management.

Supreme Court further ordered that the UDA or the newly formed Waters Edge Limited should pay Asia Pacific Golf Course Limited the cost of construction of the building and cost of the inventories taken over by the Waters Edge Limited. The total payment to Asia Pacific Golf Courses consists of building cost of Rs. 406 Million and the cost of inventories about Rs. 50 Million. A total of nearly Rs. 456 Million. This is yet to be paid to the Asia Pacific Golf Course Limited, since there is an injunction, as the persons who have purchased plots of land have intervened in the Supreme Court requesting the return of their money.

At present Waters Edge Limited continues to function under the new management and after initial set back due to the uncertainty that prevailed in the early months of operation it has now recovered and running at a profit.


Re-divesture of 90% Shares of Sri Lanka Insurance Corporation Limited (SLICL)

Background
The SLIC was converted from being a Corporation into a Limited Liability Company under the Conversion of Public Corporations or Government Owned Business Undertakings into Public Companies Act No. 23 of 1987 in February 1993.

The Company need the Management and Technical skills necessary to compete effectively in the market. The Company also needed expertise and upgrading of its technology to increase capacity and efficiency of operations. It was expected that the Private Sector to address these issues more efficiently than the Government and service better the interest of the Policy holders.

Restructuring Strategy
On 20th July 2001, a Core Group was appointed by the Secretary to the Treasury to recommend on the restructuring of SLIC.

The Hon. Minister of Economic Reform, Science and Technology appointed a Steering Committee on 21.01.2002 to advise the Government on the restructure of SLIC.

The Cabinet of Ministers at its meeting held on 3rd April, 2002 approved the divesture of 90% of the shares of SLIC to strategic investor and for 10% of the shares or its equivalent in cash to be gifted to the employees of the Company.

In terms of the above Cabinet decision, Financial Advisors were also appointed to advise and assist in the conduct of the transaction.

Bidding Process
Expressions of Interest were called for the purchase of 90% of shares of SLIC, through advertisements place in the international and local print media, beginning mid July 2002.

17 parties expressed interest in the transaction.

The parties who expressed interest were given the Information Memorandum and other information containing details of SLIC.

Six parties submitted Preliminary Technical Proposals out of which five parties were short-listed to move forward into the final bidding stage based on the information provided. These investors were then given detailed information about SLIC through the Data Room and were invited to submit Final Technical and Financial Proposals.

Three parties submitted Final Technical and Financial Proposals.

Evaluation
A Cabinet appointed Tender Board (CATB) and a Technical Evaluation Committee appointed by the Secretary to the Treasury evaluated the bids for the purchase of SLIC.

The technical bids were evaluated by TEC with the assistance of the financial advisor, PricewaterhouseCoopers and presented its recommendations to the CATB.

Negotiations were held with both the bidders with a view to seeking clarifications on the terms of the technical bids and to obtain the best possible price. After the negotiations and clarifications, Distilleries Consortium and Commercial Bank Consortium offered final bid prices of Rs. 6,050 Million and 3,600 Million respectively for 90% Shares of SLIC.

Distilleries Consortium offer of Rs. 6,050 Million was higher than the valuation of the Financial Advisors PricewaterhouseCoopers, which reflected a valuation range of Rs. 5,100 – Rs. 5,400 Million for 100% Shares of SLIC.

The CATB agreed with the recommendations of the TEC on the sale of 90% Shares of SLIC as a price of Rs. 6,050 Million to the Distilleries Consortium.

The Cabinet of Ministers at its meeting held on 2nd April 2003, accepted the offer made by Distilleries Consortium for the purchase of 90% of the Shares of SLIC at Rs. 6,050 Million.

90% of the Shares of SLIC was transferred to Milford Holdings (Private) Limited and Distilleries Consortium on the 11th April 2003 and the GOSL, Milford Holdings Private Limited, Greenfield Pacific EM Holdings Limited and Distilleries Consortium signed a Share Sale and Purchase Agreement setting out inter alia  the conditions of sale cleared  by the Attorney General.

In terms of Clause 4A of the above Share Sale and Purchase Agreement, an Adjustment of Consideration to be made on the increase/decrease of “Net Working Capital” of the Company between 31.03.2002 and the date of sale of the share i.e. 11.04.2003, within two months of the sale. However, this became a dispute among GOSL and the purchaser.

As a result of a Fundamental Rights case filed by Mr. Vasudeva Nanayakkara, the Supreme Court ordered SLIC to be vested with the Government with effect from 4th June 2009.