the 07/23/2008

John Keells Ordered to Return Land Near Ship Refueling Unit

John Keells Ordered to Give Up Land in Colombo Port (Update1)

By Anusha Ondaatjie

July 22 (Bloomberg) -- John Keells Holdings Ltd. , Sri Lanka's biggest group that earns half its profit fromtransportation, was ordered by the Supreme Court to vacate land inColombo port where it operates a ship refueling business.

John Keells will also lose tax and investment concessions givenwith its purchase in 2002 of Lanka Marine Services Ltd. from thegovernment, the apex court ruled yesterday, according to registrarPriyani Perera. The court didn't order a reversal of shareownership, she said late yesterday. Keells Chairman Susantha Ratnayake wasn't immediately available for comment.

The decision may hamper John Keells' plans to increase profit from the nation's biggest port. The Colombo-based group owns acontainer terminal and had bid with Port Klang, Malaysia- basedWestport Holdings Sdn. to develop and finance a $400 millionfacility that will increase cargo traffic by 50 percent.

The 1.2 billion rupee ($11.2 million) purchase had been challengedby Vasudeva Nanayakkara , a Leftist-oriented former parliamentarian, who claimed thetransaction was undervalued.

``John Keells and Lanka Marine Service are reviewing the optionsavailable to ensure the continuity of business at LMS and alsoassess the financial impact of this judgment on the two entities,''the group said in an e-mailed statement.

Sales from its projects in Colombo port including Lanka Marine, thenation's biggest supplier of fuel for ships, lifted John Keells'full-year profit 45 percent.

Keells, which is also Sri Lanka's biggest hotel operator, said inMay its leisure unit's net income fell 31 percent from a yearearlier as an escalation in fighting between government forces andTamil Tiger rebels keeps tourists away from the island's white-sandbeaches.

Shares of John Keells, Sri Lanka's second-biggest publicly tradedcompany, fell 1.50 rupees, or 1.4 percent, to 103 at 12:21 Colombotime yesterday when trading was suspended for an announcement.

To contact the reporter on this story: Anusha Ondaatjie in Colombo at anushao@bloomberg.net . Last Updated: July 21, 2008 23:34 EDT