Media reports suggest that funding for Adani Ports and Logistics new development in Sri Lanka has been hit by the controversy over the corruption allegations against Adani Ports and Special Economic Zone Ltd CEO, Gautam Adani.
Reports in the Times of India and the Financial Times have stated that Adani has “withdrawn” from the financing facility previously agreed by the U.S. International Development Finance Corporation. This loan, worth US$553m, was announced in November of 2023. The facility had the objective of creating a new container terminal at the port of Columbo. This terminal, called the West Container Terminal, would be of importance both to Sri Lanka but also within the wider container shipping network in South Asia, with Columbo being an important trans-shipment port. Expanding Columbo ports capacity with a new terminal would have strengthened its capabilities significantly. The loan was important to the U.S. International Development Finance Corporation both due to its size but also its political significance, with the new terminal representing an American response to Chinese port investment elsewhere in Sri Lanka.
The U.S. International Development Finance Corporation, the U.S. state-owned development bank, has made no public statement over the matter, however media reports assert that the organisation had not dispersed the funds to Adani Ports and was still engaged in due diligence. In a comment to the press, Adani Ports and Logistics is reported to say that it was looking to finance the project through its own resources. However, previous statements from U.S. International Development Finance Corporation asserted that the loan was specific to the West Terminal, with Adani Ports & Special Economic Zones Limited being one “sponsor”, with the Sri Lankan company John Keells Holdings being the other.
Adani has encountered a number of problems around investments outside India in recent months. The government of Sri Lanka has questioned some investments the company has made in energy projects in the country, and the Kenyan government has cancelled projects with Adani, including a plan to lease Jomo Kenyatta International Airport to Adani.
What the future of the Columbo West Container Terminal will be is unclear. Possibly Adani Ports & Special Economic Zones has the resources to build the terminal itself, as it has done in India. However, pressure on the Adani balance sheet or political problems may lead to the project failing, at least in the short term.
Source: Ti Insight
Author: Thomas Cullen
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