Facing a corruption scandal at home and investment-fraud charges in U.S. courts, India's Adani Group is withdrawing from a U.S. development finance loan to build a new container terminal at Colombo, Sri Lanka. Adani plans to continue with the project, but will self-finance the $550 million tranche of funding that would have come from the U.S. government.
In charging documents unveiled last month, American prosecutors claimed that billionaire industrialist Gautam Adani bribed Indian officials to secure high-priced power offtake contracts for a giant solar farm, then defrauded U.S. investors about the nature of the agreements. The U.S. charges have seen other Adani deals scrutinized or canceled, including the $1.85 billion project to modernize Kenya’s Jomo Kenyatta International Airport (JKIA).
Adani Group holds a dominant position in India's ports sector through subsidiary Adani Ports and Special Economic Zones (APSEZ), and it has significant ambitions for port expansion abroad - including in Sri Lanka, where it is building a new container terminal at the port of Colombo. In November 2023, this project received approval for a $550 million loan from the U.S. International Development Finance Corporation (DFC), a new agency formed in 2019 as a counterweight to China's Belt and Road.
The Port of Colombo was a natural investment choice for DFC, given China's active construction program in Sri Lankan ports. The collapse of the loan to Adani will be a setback for the newly-formed agency, but it should have limited impact on U.S. taxpayers: no funds have yet been disbursed, according to DFC. Adani will proceed with the port project, which is already nearing completion of its first phase. The rest of the construction "will be financed through the company's internal accruals and capital management plan."
Going forward, Adani may also have regulatory challenges in Sri Lanka. Given recent allegations of bribery in Adani Group's operations, Sri Lanka's newly-elected government has said that it will review Adani's agreements with previous administrations, starting with a controversial wind energy project at Mannar. The proposed wind farm happens to be located at an important stopover point for migratory birds, and the agreed power offtake price is twice the amount that Adani charges to Indian wholesale customers, opponents say. The power price deal signed by the previous government "was a problem," Foreign Minister Vijitha Herath said earlier this year, and he suggested that it would need to be reviewed.
