July 08, 2014

ICT ends management contract for Indian port

In a disclosure to the Exchange yesterday, International Container Terminal Services Inc (ICT) said its subsidiaries have terminated a contract with Larsen & Toubro Shipbuilding Ltd (LTSB) to manage and operate the Kattupalli Container Terminal in Tamil Nadu, India. Both parties have concluded that the contract is not beneficial to either party.

In a press statement, ICT said the company is isolated from the day-to-day operations of the facility, including the regulatory and commercial activities, and thus limiting its ability to make the operations profitable. The company will be reimbursed for the license fee it paid to operate the terminal.

Our take: We gathered that ICT is paid a fixed fee for managing the facility and that in three years it will be paid based on traffic and volumes. However, the port is reportedly facing challenges and competition from the nearby Chennai and Kamarajar ports. We do not view this as a setback for ICT given the reported problems in the facility. ICT face better prospects and opportunities in much bigger projects in Australia and the Americas.– WealthSec