Adani’s Colombo Port Terminal Proceeds Despite International Challenges

Adani Group’s Colombo Port West Container Terminal, set for February launch, emerges as the company’s sole advancing international project. 
| Photo Credit: Thilina Kaluthotage/Bloomberg

For the Adani Group, there is one major good news from abroad, after the string of bad news beginning with the 2023 Hindenburg Report on Adani’s round tripping of capital, and the indictment in a US court in 2024: Adani’s first major investment in Sri Lanka, the Colombo Port West Container Terminal is well on course for a soft launch in February. 

Adani Ports had earlier secured a majority stake in a Build-Operate-Transfer BOT agreement in September 2021, when the BJP government decided to hand over the US $700 million prestigious project to its most-favoured business house. There were minor protests in Colombo over the handing over of a ‘national asset’ to a foreign company but these did not get any traction because China already operates a terminal at the Colombo Port. As much as 70 per cent of traffic from this Port is either from or to India. 

After the US indictment, the Sri Lankan Ports Minister Bimal Rathnayaka, who is the most powerful face in the new Sri Lankan Cabinet, said that his country had no problem with Adani funding the Port project with the company’s own resources.

The good news ends there. The Sri Lankan government has decided to renegotiate an already negotiated and settled power purchase agreement with Adanis, following a Cabinet decision. The corporate group is setting up wind power projects in Mannar and Pooneryn. Ahead of being voted to run the government, the National People’s Power, the ruling coalition, said that the deal, signed by the previous Ranil Wickremesinghe government, will be cancelled. On January 24, the Cabinet also highlighted the corruption allegations and wanted the entire project reviewed. “The project itself has not been cancelled,” a Sri Lankan official said. 

A release from the Adani group, issued the same day, said: “Reports that Adani’s 484 MW wind power projects in Mannar and Pooneryn have been cancelled are false and misleading. We categorically state that the project has not been cancelled. The Sri Lankan Cabinet’s decision…to re-evaluate the tariff approved in May 2024 is part of a standard review process, particularly with a new government, to ensure that the terms align with their current priorities and energy policies. Adani remains committed to investing $1 billion in Sri Lanka’s green energy sector, driving renewable energy and economic growth.” 

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The Adani group has faced challenges in both Kenya and Bangladesh. The US indictment over bribery charges in 2023 caused both Kenya and Bangladesh to initially review the projects. While Kenya cancelled its airport project as well as a project to build power transmission lines, Bangladesh’s new rulers said that the problem was corruption. The Kenyan President William Ruto announced the cancellation of a $2.5 billion deal over a national address. Kenya has approached the World Bank to finance its power transmission project, the Nation Media Group reported on January 31.   

In Bangladesh, the agreement was to produce power in India, at Godda, Jharkhand, and supply the whole power to Bangladesh. A power purchase agreement was signed in 2017, and the 1600 MW plant began operations in 2023. While there were a few protests in India related to environmental concerns, the bigger challenge was in Bangladesh, after the Awami League government was overthrown. In November 2024, the Dhaka High Court ordered the formation of a high-level inquiry committee to re-evaluate all energy deals with the Adani group. 

The adverse publicity has affected Adani’s international operations. The group has denied all charges and has been combative in its press releases. Frontline spoke to a few Indian corporate heads to understand what impact the issues will have. Three top executives told this correspondent that the short-run certainly looked bleak, despite the Indian stock market remaining ‘Adani positive’. 

Asked what the fallout of the negative moves in different countries will mean for future operations of the company, a senior corporate professional who has worked with the Adani Group said that the Adanis usually plan out a strategy well ahead of time. “They have public policy plan projections for two decades. They invest in the future. They would have foreseen many of these problems. It is only a matter of time before they bounce back,” he added. 

Another corporate CEO shared almost the same lines, though he said that the near term would be problematic for the company. “In the short term, Adani will face difficulty in raising finance because of issues in the U.S. So, raising money will be expensive even if they resort to round-tripping,” said the CEO who has business interests in the US and Europe. In his view, the problem that Adani’s ventures abroad will face will be that competitiveness in some areas will go down. “As log as he [Gautam Adani] has the support of the [BJP] government, he will grow. The problem will be that the rate of growth will go down. This will hold true unless the US investigators discover some other wrongdoing.”   

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The founder of an information technology company with multiple branches in the UK and the US said that the problem is that all future deals that the Adanis enter into will be affected. “The US [market] is good for raising cheap money. The kind of money that a company can raise from the US cannot be done anywhere else. This will be affected because of the regulatory issues that Adani faces in the US,” he said. 

The lack of ready access to capital will limit expansions. Asked if Indian public sector banks will not be able to lend as much as Adanis want, he said this was not practical. “Yes, he will be able to raise capital from India. But the problem in India is the volatility of the rupee. Because of the volatility, there will be a huge impact, and companies will not be able to make any decent projections based on it,” he added.