Adani Ports opts out of U.S. funding for Colombo project

Representational view of the Colombo main port
| Photo Credit: Reuters

Billionaire Gautam Adani-led conglomerate on Tuesday (December 11, 2024) said it will use its own resources to fund a Sri Lankan port project and not seek U.S. funding.

In an exchange filing late on Tuesday, Adani Ports and SEZ Ltd said the project “is on track for commissioning by early next year” and added that the company will fund the ongoing project through “internal accruals”, aligning with its capital management strategy.

The company said it has withdrawn its 2023 “request for financing from the U.S. International Development Finance Corporation (DFC)“.

In November 2023, the U.S. International Development Finance Corp agreed to provide a $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 U.S. 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.

Loan process stalled

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% of the venture, chose to proceed with the project without funding from the DFC, officials privy to the process explained.

The U.S. 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 U.S. Department of Justice charged the Adani group’s founder chairman Gautam Adani, and seven others over allegedly conspiring to pay $265 million in bribes to Indian officials to secure lucrative solar power supply contracts that were expected to yield $2 billion in profits over 20 years.

Adani group has denied all charges as baseless and vowed to pursue all possible legal recourse.

Busiest port in Indian Ocean

The Port of Colombo is the largest and busiest transhipment port in the Indian Ocean. It has been operating at more than 90% utilisation since 2021, signalling its need for additional capacity.

The geopolitically sensitive port project in Sri Lanka is as much of a move by the U.S. to counter Chinese influence in the island nation.

Phase 1 of the project is scheduled to become commercially operational by Q1 2025.

The new terminal will cater to growing economies in the Bay of Bengal, taking advantage of Sri Lanka’s prime position on major shipping routes and its proximity to these expanding markets.

The Colombo West International Terminal (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 $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 $1.1 billion (₹8,893 crore) in cash reserves and generated an operating profit of $2.3 billion (₹18,846 crore) in the past 12 months.