Japan’s Taisei Corp. secures US$ 650mn airport terminal deal

Bandaranaike International Airport is the main international airport serving Sri Lanka

• New terminal to boost BIA passenger capacity to 18mn per annum
•  Construction to be completed by end of 2023
• JICA funding the project under STEP
• Annual air passengers handled by BIA projected to increase up to 20 million by 2025

Japan’s Taisei Corporation has secured a US$ 560 million contract to build a new multi-level terminal building expanding the capacity of Sri Lanka’s Bandaranaike International Airport (BIA) to 18 million passengers per annum by end of 2023.

The Cabinet of Ministers on Wednesday approved the proposal submitted by the Minister of Tourism and Aviation, Prasanna Ranatunga to award the contract of the much-delayed project to Taisei Corporation.

“The proposal submitted by the Minister of Tourism and Aviation was approved by the Cabinet of Ministers to award the contract related to package ‘A’ of step 2 of the stage II of the Bandaranaike International Airport project to Taisei Corporation to a total contracted sum of Japanese Yen 41,553.89 million (Rs. 35,135.84 million),” the Cabinet office stated.Â

The project consists of construction of a new multi-level terminal building of around 104,000 square metres where arrivals and departures to be separated vertically with two pier buildings.
The new terminal is planned to be innovatively designed for the provision of barrier-free access with many environment-friendly initiatives.Â

“Once it’s built, our capacity will increase to 18 million passengers per annum (ppa) with 12 million ppa being added,” Airport and Aviation Services Ltd. (AASL) Director Shehan Sumanasekara told Mirror Business.Â

Following Cabinet approval, AASL has been instructed to finalise an action plan and move forward with the construction immediately.

Sumanasekara noted that a formal meeting would be held between Taisei Corporation and AASL to finalise the action plan of the project.  The new terminal is expected to come in to operation by end-2023.

The Japan International Co-operation Agency (JICA) is funding the project on the condition that the project contract is offered to a Japanese contractor. JICA is providing the loan under the Special Terms for Economic Partnership (STEP) at 0.1 percent per annum interest and a 40-year repayment period.

The project was originally scheduled to commence construction work by November 2017 with the selection of the main contractor, and the construction was expected to be completed by the end of this year.

The package ‘A’ included construction of car parks and roads, utility works and power supply system.

However, the project was delayed as the quotations submitted by two Japanese contractors were significantly higher than the local engineers’ estimate in 2016. Consequently, the Cabinet of Ministers in 2018 decided to slice Package A into 04 packages and allow participation of local contractors for the construction of car park and roads, utility works and power supply system with the concurrence of JICA. JICA agreed to the proposal in principle in late December 2018, and fresh bids were called upon.Â

During recent discussions with the new government,  Taisei Corporation, which was the lowest bidder, has agreed to bring down their earlier quoted price to acceptable levels.Â

Taisei was also a party of the joint venture that built BIA. The current terminal which was built for six million passengers per annum has already been running out of capacity by 2-4 million passengers per annum over the past several years. The BIA handled 10.8 million passengers in 2018. The government estimates that the number of annual air passengers handled by BIA would be increased up to 20 million by the year 2025.

Sri Lanka is also planning to generate US$ 10 billion revenue from tourism earnings by 2025, more than doubling the current estimated tourism revenue of US$ 3.5 billion.