Hyatt hits another roadblock
By Skandha Gunasekara
The beleaguered Grand Hyatt Colombo Hotel project has hit yet another roadblock as a direct result of the ongoing political crisis, with Canwill Holdings – the project key shareholder – stating that all activities had come to a standstill.
Current Managing Director of Canwill Holdings Raj Abeysinghe told The Sunday Morning that due to the prevailing political upheaval causing a change in the Cabinet of Ministers, Canwill Holdings now needed to be gazetted under a new ministry.
Canwill Holdings at present comes under the purview of the Ministry of Public Enterprise Development. Abeysinghe then noted that the future of the Board of Directors at Canwill Holdings was also tied to the gazetting process.
“Once the company has been gazetted under a new ministry, it will be the sole discretion of the minister whether to keep the current board or not. He has the option of keeping the board as is or dismissing us and appointing a completely new board,” Abeysinghe said.
The Minister of Media and Government Information, Government Spokesman Keheliya Rambukwella said that the new Government under Prime Minister Mahinda Rajapaksa was categorically opposed to privatisation.
“We have to look into the Hyatt Hotel project and what the former Government was doing. Broadly speaking, our Government’s policies are that of non-privatisation. We have no intention of selling state assets to the private sector or foreign entities,” he said, adding that the divestment process would be revisited.
Furthermore, in a clarification to an article run by The Sunday Morning last month, Managing Director of Canwill Holdings Raj Abeysinghe, on Thursday (1 November), said that a representative of the Hyatt Hotel franchise had informed him that the franchise would not be pulling out of its Sri Lankan arm.
“I met with the President of Hyatt Hotels during a visit to Zurich and he told me that the franchise would not be withdrawing from its Sri Lankan project. So the hotel will remain as the Hyatt project,” Abeysinghe said.
The hotel was initially to be built in time to host the 2013 Commonwealth Heads of Government Meeting and construction was kicked off in 2012. The Rajapaksa administration, at the time, took over the project under Canwill Holdings Ltd. – a fully state-owned enterprise. Rs. 18.5 billion was entrusted as equity from three key shareholders, with Sri Lanka Insurance contributing Rs. 8.5 billion and Litro Gas and the Employees Providence Fund (EPF) providing Rs. 5 billion each.
However, the progress of the project was hindered on various occasions and a financial audit in 2015 uncovered massive financial fraud, including the payment of Rs. 40 million in excess to acquire land, among other financial irregularities, with the former Chairman of Canwill Holdings Gamini Senerath being implicated.
That same year, after the Canwill Holdings board was fully restructured and a new board appointed, the Government, in its Budget for the year 2016, proposed that the Hyatt Hotel project be divested and in December, 2016, Canwill Holdings requested the Ministry of Public Enterprise Development to procure a foreign currency loan of $ 125 million to finance the completion of the project.
In August, 2017 the Cabinet of Ministers gave its approval to go for 100% divestment of the hotel project, and in October that year, the Cabinet Committee on Economic Management (CCEM) – on the basis of the report submitted by the chairman of the National Agency for Public Private Partnership (NAPP) – recommended the ownership of the Grand Hyatt be privatised, construction contracts be negotiated to minimise cash outflow, appointment of experts to carryout audits and examine contracts to minimise the burden of meeting progress payment, NAPP assist process of restructuring, $ 125 million not be obtained and a bridging loan be negotiated for honouring prolongation cost with the assistance of the NAPP, and the selection of a transaction advisor.
In May, 2018, Lazard Asia was selected as the international transaction advisor by the Cabinet Consultants Procurement Committee (CCPC).
Thereafter, in the latter part of October this year, the Ministry of National Policies and Economic Affairs and the Ministry of Finance issued media advertisements calling for bidders, both local and international.
Former Secretary to the Ministry of National Policies and Economic Affairs and current Secretary to the Ministry of Agriculture K.D.S. Ruwanchandra told The Sunday Morning that there had been no bids for the project as of his last day at the Ministry.
“Since the Government changed, I have been shifted to another ministry but when I left the Ministry of National Policies and Economic Affairs, there had been no bids for the project,” Ruwanchandra said while noting that the final day for bidding was 12 November.
He said that a Cabinet Paper had been prepared with regard to the bidding process, but was not yet presented to the Cabinet of Ministers.
“The paper will most likely have to be presented when a new cabinet has been properly appointed,” he said.
However, he noted that interim period construction work was at a standstill and that various contractors and consultants, such as Lazard Asia, were still being retained by the Government.