Adani Group Cancels $553 Million U.S. Loan To Build Sri Lankan Port Meant To Counter China

India’s leading conglomerate Adani Group has decided to withdraw from a $553 million loan agreement with the U.S. International Development Finance Corporation (DFC) to fund the construction of a new container terminal at the Port of Colombo, Sri Lanka.

In a company filing on December 10, Adani Ports and Special Economic Zone Ltd (APSEZ), the subsidiary responsible for the project, said that the project will now be financed through internal funds.

“The project is on track for commissioning by early next year,” the company added. APSEZ also confirmed that they have withdrawn the request for financing from the DFC.

The project, known as the Colombo West International Terminal (CWIT), was originally part of the U.S. government’s effort to counter China’s influence in Sri Lanka by offering alternative infrastructure financing.

The U.S. loan was approved in November 2023, but it stalled due to ongoing concerns over bribery allegations against the Adani Group. Despite this setback, Adani plans to continue with the project, which is already in its first phase of construction.

In November 2023, the U.S. Department of Justice charged Adani and several senior executives with fraud and bribery. According to U.S. prosecutors, the charges involve a bribery scheme in which Adani allegedly paid more than $250 million in bribes to Indian government officials to secure solar energy contracts.

These actions, prosecutors claim, misled U.S. investors while raising funds for the company.

Adani Group has denied all allegations and called them baseless. The bribery allegations have had a significant impact on other Adani projects as well. For example, a $1.85 billion deal to modernise Kenya’s Jomo Kenyatta International Airport was cancelled after the charges.

Additionally, U.S. officials have been scrutinising other Adani deals, including the loan agreement for the Colombo port terminal.

The Port of Colombo, located on a major international shipping route, is one of the busiest ports in the Indian Ocean.

The CWIT terminal, when completed, is expected to be Sri Lanka’s largest and deepest container terminal, capable of handling Ultra Large Container Vessels (ULCVs) with capacities of up to 24,000 TEUs.

The port project is a joint venture between Adani Ports, the Sri Lanka Ports Authority (SLPA), and Sri Lanka’s John Keells Holdings Plc. Adani holds a 51% stake in the project. The terminal will provide significant capacity to handle the growing shipping demand in the Bay of Bengal region.

Despite the legal challenges, Adani has continued to assert that it is conducting business as usual. The group’s founder, Gautam Adani has denied any wrongdoing in connection with the fraud and bribery allegations.

However, the scandal has resulted in a sharp decline in the market’s value, with shares dropping to 10% after the charges.

The Adani Group’s ties to India’s ruling government have come under increased scrutiny. Opposition leaders, including Rahul Gandhi, have called for an investigation into the group’s dealings.

References: WION, Straits Times

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