BEIJING - China Merchants Group Ltd (CMG), one of the nation's largest State-owned conglomerates, is investing in a container port in Sri Lanka as it seeks to expand in South Asia.

"The Colombo South Container terminal (CST) is CMG's largest investment project overseas", and the port will have annual throughput of 2.4 million 20-foot equivalent units (TEU) after opening in 2013, Fu Yuning, chairman of CMG, said on Monday.

Under the agreement between CMG and the Sri Lankan government, China Merchants Holdings International (CMHI), CMG's Hong Kong-listed subsidiary, will manage the facility for 35 years.

A consortium led by CMG will invest more than $500 million to build and operate the port. CMG has a 55 percent stake in the project.

Sri Lankan conglomerate Aitken Spence PLC will hold a 30 percent stake in the project, while the Sri Lankan port authority will hold the remaining 15 percent stake.

"We are aiming to expand business opportunities in South Asia and East Africa through the establishment of the new facility, which will anchor the port of Colombo's position as a transshipment hub in South Asia," Hu Jianhua, managing director of CMHI, said on Monday.

"We're also targeting synergy between our home port and Sri Lanka and South Asia at large," Hu said.

CST, which is expected to be the largest container facility in Sri Lanka, will have a total wharf length of 1,200 meters and a depot land area of 58 hectares with a water depth of 18 meters.

The project has two phases with the first to open by early 2013.

The entire facility is scheduled for completion within five years after the contract takes effect, Hu said.

"Sri Lanka's economy is currently at an important turning point and it is our country's strategy to enhance our ports-related economy," Mahinda Rajapaksa, president of Sri Lanka, said.

The total handling capacity of Sri Lankan ports exceeded 4 million TEUs last year with 70 percent taken up by transshipment of goods from Indian companies.

CMHI began to invest in overseas ports in 2008. In 2010, the company formed a joint venture with the China-Africa Development Fund, acquiring a 47.5 percent stake in the Tin Can Container Terminal in Lagos, Nigeria.