Karaikal Port

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Karaikal Port is a private port developed by the Chennai based MARG Limited and operated by Karaikal Port Private Limited (KPPL). The port is located in Puducherry state, around 300 Km along the coast south of Port of Chennai and around 360 Km along the coast north of Tuticorin Port, in India.

The port has two mechanized coal terminals with total capacity of ten million tonnes per annum, with plans to expand to 20 mtpa coal capacity.[1] It became operational in April, 2009.[2]

Location

The port is located in Keezhavanjore village in Karaikal District. The shoreline of the port is between 10o 50’56’’ N and 10o 49’44’’ N.

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Background

Karaikal Port project began with a Letter of Interest issued by Govt. of Puducherry for development of a port at Karaikal in September 2005. MARG Ltd. signed the concession agreement in 2006 [3] and construction began in February, 2007. Phase 1 was envisaged to be operational in Aug 2009 but commenced commercial operations four months early, receiving its first vessel in April 2009. Phase 1 of the port project comprises two Panamax size berths capable of handling 5.2 million MT of cargo per annum (3 MT at Berth 1 and 2.2 MT at Berth 2).[4] KPPL has partners in Ocean Sparkle (marine operations) and PSTS (Stevedoring). Cargo evacuation is assisted by MARG Logistics, a sister concern of KPPL.

Karaikal Port is a multi-cargo handling terminal. According to MARG's website, the port is currently equipped to handle coal, fertilizer, sugar, gypsum, agricultural products, bagged cement, stell plates & pipes, project cargo, crude oil, edible oil, petroleum, oils & lubricants.[5] On completion, the port will be capable of handling all types of cargo. Karaikal Port is also a hub for oil exploration activities and OSV/PSVs belonging to companies such a Hindustan Oil Exploration Company (HOEC) and Reliance Petroleum regularly call at the port.

Karaikal Port is a deep draft, all weather port. The current depth of 14.5 m allows for handling of Gearless Panamax size vessels (up to 80000 MT). The final depth of 16.5 m will allow cape size vessels (up to 120000 MT) to call at the port. The lagoon type basin protected by breakwaters allows operations all around the year.

Karaikal Port received its first Gearless Panamax vessel in November, 2009 and became the first Commercial port on Tamil Nadu coast to do so.[6] The port also has the distinction of being the only private port to export cargo belonging to power equipment major Bharat Heavy Electricals Ltd (BHEL), which is a government agency.[7]

The port obtained rail connectivity in January 2010 [8] and its 3 railway sidings are connected to Trichy via Nagore. Karaikal Port regularly dispatches 4-5 rakes of coal as well as Fertilizer everyday.

Expansion

With completion of its Phase 2A expansion in 2012, Karaikal Port currently has five berths with a total capacity of 28 million tonnes per annum (mtpa). The port's coal facility, which initially had a capacity of 3 mtpa[4] was fully mechanized in June 2012,[9] raising the port's overall capacity from 21 to 28 metric tons per annum (mtpa) and increasing coal processing capacity to 10 mtpa.[10] The port's two coal berths (Berths 3 and 4) are 15.5 meters deep and capable of accommodating capesize vessels.

The port's proposed Phase 2B expansion, scheduled for completion in 2018[11], would add four additional berths with a combined capacity of 19 mtpa, bringing the port's total capacity up to 47 mtpa.[12] Expansion would include an additional 10 mtpa for coal, bringing the port's total coal capacity to 20 mtpa.[1]

After a period of early success and rapid expansion between 2009 and 2011, Karaikal has struggled to utilize even a fraction of its 28 million tonne capacity since then. The port handled only 6.5 million tonnes of cargo in fiscal year 2012-13, with 10 million tonnes projected for FY 2013-14, and port operations were unprofitable in both fiscal years. In April 2014, IL&FS announced that it had agreed to import up to 5 million tonnes of Indonesian coal annually through Karaikal Port to feed the two new 600 MW units of its Cuddalore Ultra Mega Power Project, which is expected to give the port a boost.[13] Other pending coal-fired power projects mentioned on MARG's website as potential importers of coal include Mettur Thermal Power Station and Nagai Power project (Nagapattinam).[12]

In a June 2017 interview with The Hindu, Karaikal Port officials reported that the port's mechanized coal handling operation would become operational in March 2018. Karaikal Port chairman G.R.K. Reddy stated that the port has invested ₹90 crore (approximately US$13 million) in mechanization of coal handling facilities, including a 3km conveyor belt, ship unloaders, and truck and wagon loading systems. Meanwhile, overall cargo handling at the port has remained well below capacity, with only 5.9 million tonnes passing through the port in FY 2016 and 9 million tonnes in 2017. Imports of sugar, wheat, coal, pet coke and iron ore are expected to account for most of the 2018 increase. [14] In FY 2020, the port handled 10 million tonnes of cargo, its highest amount to date.[15]

The mechanization of the port's coal berths was completed in October 2018, bringing the port's annual coal-handling capacity up to 20 million tonnes.[15] The mechanization project cost ₹600 crore (approximately US$90 million).[16]

Finances and Ownership

Operating well under installed capacity, the Karaikal Port has consistently struggled to achieve profitability. In 2013, the port restructured ₹1,268 crore (approximately US$230 million) in debt.[17] Edelweiss Asset Reconstruction Co. (ARC) acquired 97% of the debts of Karaikal Port Private Limited (KPPL) in 2015.[18] By February 2017, the port's debts had increased to ₹1,800 crore. In March 2017, ARC was seeking to transfer management of day-to-day operations from MARG to its operational turnaround team, led by Sumanth Cidambi, an expert in distressed asset management.[17] ARC had taken over day-to-day management by September 2017.[18]

In October 2020, Adani Ports and Special Economic Zone Ltd. (APSEZ) formally expressed interest in purchasing the 49% stake in the KPPL controlled by Private Equity investors. At that time, private equity firms Standard Chartered Private Equity, Ascent Capital, NYLIM Jacob Ballas India and GIP India together held a 49.05% stake in Karaikal Port, Indian Bank held a 36.75% stake, and MARG Ltd, the original promoter of the port, held a 7.69% stake.[19]

In May 2021, APSEZ was still seeking to purchase the Karaikal Port, but was facing difficulties finalizing the deal due to the equity structure and the outstanding debt. In order to put pressure on MARG and expedite the deal, ARC formally demanded that MARG pay the entirety of its debt, which had reached ₹1,996 crore (approximately US$268 million), in July 2021. At this time, the equity structure had changed: MARG held a 45% stake, the private equity firms together held a 44% stake, and the balance of 11% was owned by ARC.[20][21]

In September 2021, APSEZ made an offer to buy all of the outstanding debt. If APSEZ's bid wins in a public auction in a process known as a "Swiss Challenge," the next step would be taking control of the board of KPPL by writing off existing equity. The debt is being sold on 100 per cent cash basis.[22] Details later emerged that Omkara Asset Reconstruction Co., on behalf of APSEZ, had made a bid of ₹1,500 crore for the full ₹2,059 crore in debt and EARC's 11% equity stake. However, representatives of MARG challenged the legal validity of the Swiss Challenge process. EARC did not receive any counter-bids during the Swiss Challenge process, so if the legal maneuver by MARG fails, ownership will transfer to Omkara and APSEZ. As of November 2021, the case is pending in front of the Indian Supreme Court.[23]

In 2022, Adani Ports and Special Economic Zone (APSEZ) and an entity owned by Vedanta group, were in the final race to acquire Karaikal Port.[24]

Project Details

  • Operator: Karaikal Port Private Limited (KPPL)
  • Owner:
  • Location: Karaikal, Puducherry, India
  • Existing Coal Capacity (Tonnes per annum): 20 million
  • Status: Operating
  • Type: Imports
  • Coal source: Indonesia
  • Cost of expansion:
  • Financing for expansion:

Articles and Resources

Sources

  1. ↑ 1.0 1.1 "IHS McCloskey Coal Report," Feb 7, 2014
  2. ↑ "Private Port at Karaikal begins its operations". hindu.com. April 16, 2009. Retrieved 2009-08-16.
  3. ↑ "Marg Constructions achieves financial closure for Karaikal Port Project". domain-b.com. November 14, 2006. Retrieved 2006-11-14.
  4. ↑ 4.0 4.1 "Karaikal Port Limited" D&B India website, accessed February 2015.
  5. ↑ "MARG Karaikal Port" MARG Karaikal Port website, accessed February 2018.
  6. ↑ "Karaikal Port receives first Panamax vessel". karaikalport.com. November 28, 2009. Retrieved 2009-11-28.
  7. ↑ "For exports, BHEL chooses Karaikal port over Chennai". sify.com. November 28, 2009. Retrieved 2009-11-28.
  8. ↑ "Karaikal Port scores high on rail connectivity". hindubusinessline.com. February 1, 2010. Retrieved 2010-02-01.
  9. ↑ "Mechanised coal handling facility at Karaikal port to be ready by June" The Hindu, April 9, 2012.
  10. ↑ "About MARG Karaikal Port; Master Plan for Proposed Terminals; Berth no.4 - Coal terminal" MARG Karaikal Port report, accessed February 2015.
  11. ↑ "About MARG Karaikal Port" MARG Karaikal Port website, accessed February 2015.
  12. ↑ 12.0 12.1 "Berthing Facilities" MARG Karaikal Port website, accessed February 2018.
  13. ↑ "IL&FS gives Karaikal Port a booster shot" The Hindu Business Line, April 14, 2014.
  14. ↑ "KPPL’s coal handling system to go operational next year" The Hindu, June 19, 2017.
  15. ↑ 15.0 15.1 Milestones, Karaikal Port, Accessed November 2021
  16. ↑ Karaikal port gets mechanised bulk cargo handling system, The Hindu, Oct. 31, 2018
  17. ↑ 17.0 17.1 Edelweiss ARC looks to take over Karaikal Port’s daily operations, Mint, Mar. 27, 2017
  18. ↑ 18.0 18.1 Edelweiss ARC revives Karaikal Port, plans LNG terminal to monetise operations, The Economic Times, Sep. 26, 2017
  19. ↑ Adani Ports, Shapoorji Pallonji and Brookfield file EoI to buy stake in Karaikal port, Business Line, Oct. 1, 2020
  20. ↑ P Manoj, Adani Ports and SEZ looks to acquire Karaikal Port, Business Line, May 30, 2021
  21. ↑ P Manoj, Edelweiss ARC is under pressure to recover ₹1,996 crore in unpaid dues from Karaikal port, Business Line, July 27, 2021
  22. ↑ P Manoj, Karaikal Port debt restructuring: Edelweiss ARC opts for Swiss challenge, Business Line, Sep. 8, 2021
  23. ↑ P Manoj, Marg promoter GRK Reddy put legal spokes in Adani’s plan to buy Karaikal Port, Business Line, Oct. 23, 2021
  24. ↑ Karaikal Port: Adani And Vedanta Group In Final Race To Acquire Debt-laden Port Under NCLAT Insolvency Proceedings, Oct 3, 2022

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External Articles

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