Hit by bribery charges, Adani opts out of US funding for its Colombo Port project

Adani Ports to self-finance Colombo Port Terminal Project

Hit by US SEC indictment for bribery charges, industrialist Gautam Adani‘s Group has pulled out of a loan deal with a US agency to fund a port terminal in Sri Lanka, saying it will use its resources for the project. In an exchange filing late on Tuesday, Adani Ports and Special Economic Zone Ltd (APSEZ) said the project “is on track for commissioning by early next year”. After the US indictment, it is not easy to get loans from a US-based consortium.

“The project will be financed through the company’s internal accruals and capital management plan,” the firm said. “We have withdrawn our request for financing from the International Development Finance Corporation (DFC)”. The US IDF had in November last year agreed to provide a USD 553 million loan to support the development, construction, and operation of a deep-water container terminal called the Colombo West International Terminal (CWIT) at the Port of Colombo in Sri Lanka.

The CWIT is being developed by a consortium of Adani Ports, Sri Lankan conglomerate John Keells Holdings Plc, and the Sri Lanka Ports Authority (SLPA). DFC financing was part of the US government’s broader efforts to counter China’s growing influence in the region and was seen as an endorsement of Adani’s ability to develop world-class infrastructure.

However, the loan process stalled after the DFC asked that the agreement between Adani and the SLPA be amended to align with their conditions, which then went under review by Sri Lanka’s Attorney General. As the project is nearing completion, Adani Ports, which holds 51 percent of the venture, chose to proceed with the project without funding from the DFC, officials privy to the process explained.

The US agency had recently stated that it was “actively assessing the ramifications” of the bribery allegations against the Adani Group executives. It had so far not disbursed any money to the ports-to-energy conglomerate. Last month, the US Department of Justice charged the Adani Group’s founder chairman Gautam Adani, nephew Sagar Adani, and six others over allegedly conspiring to pay USD 265 million in bribes to Indian officials to secure lucrative solar power supply contracts that were expected to yield USD 2 billion in profits over 20 years.

The Port of Colombo is the largest and busiest transshipment port in the Indian Ocean. It has been operating at more than 90 percent utilization since 2021, signaling its need for additional capacity.

The geopolitically sensitive port project in Sri Lanka is as much of a move by the US to counter Chinese influence in the island nation. Phase 1 of the project is scheduled to become commercially operational by Q1 2025.

The CWIT project was initiated in September 2021, when Adani Ports signed an agreement with the Sri Lanka Ports Authority and Sri Lankan conglomerate John Keells Holdings, pledging over USD 700 million to expand the capabilities of Colombo Port. The CWIT will be Sri Lanka’s largest and deepest container terminal, with a quay length of 1,400 metres and an alongside depth of 20 metres. When complete, the terminal will be able to handle Ultra Large Container Vessels (ULCVs) with capacities of 24,000 TEUs and is expected to have an annual handling capacity of over 3.2 million TEUs. As of September 30, 2024, Adani Ports had approximately USD 1.1 billion (Rs.8,893 crore) in cash reserves and generated an operating profit of USD 2.3 billion (Rs.18,846 crore) in the past 12 months.

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