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Business News/ Companies / News/  US sanctions see Adani exit Myanmar Port with $120 mn hit

MUMBAI : Adani Group’s ports arm APSEZ, has been forced to take a $120 million hit on its balance sheet as the company, on Thursday, agreed to sell its ambitious Myanmar Port project for barely $30 million to an overseas firm Solar Energy Ltd in the wake of sanctions imposed by the US on Myanmar Economic Corp. Ltd (MEC), a Burmese military-controlled company.

Karan Adani, whole-time director and CEO, APSEZ, said in a statement, “This exit is in line with the guidance provided by the APSEZ board based on the recommendations made by the risk committee in October 2021."

There were no details available on Solar Energy, the buyer.

In May 2019, APSEZ had announced its intent to set up a container terminal at Yangon, Myanmar and entered through a lease agreement with the Myanmar government, under which Adani Group had to pay $30-50 million in fees for 54-acre land leased from MEC, out of a total planned investment of $290 million by Adani Group.

According to an earlier filing, by 4 May 2021, APSEZ had already invested around $127 million (including $90 million for the upfront payment for land lease) in the Myanmar Port project.

Subsequently, around $25 million more was invested in the planned container terminal project, which was being built by Adani Group with an aim to establish a strong South-East Asia port footprint. The group planned to do this by creating synergies with Adani’s existing container terminal operations on the east and south coast of India and the trans-shipment hub at Vizhinjam, Kerala.

The Myanmar Port terminal was planned to have a quay length of 635 meters with a capability to handle three vessels at a time. In March 2021, MEC and another Burmese military holding company were sanctioned by the US following a military coup against the democratically elected civilian government of Myanmar then. The companies were sanctioned over alleged human rights violations.

Adani’s latest decision to write-off the Myanmar Port project with a $120 million hit on investment, is in sharp contrast to the group’s earlier announcement on 24 May 2022, which stated that Adani Ports “signed a share purchase agreement for the sale of Myanmar asset at a price that will enable APSEZ to recover the entire investment".

On Thursday, while writing down the Myanmar Port at a throw-away price, Adani Ports said, “Given the continuous delay in the approval process and challenges in meeting certain condition precedents, APSEZ has obtained an independent valuation on ‘as-is-where-is’ basis. Thereby the buyer and seller have renegotiated the sale consideration to $30 million."

Two years ago, a group of Australian and other international human rights activists had criticized the Gautam Adani-led group over the Myanmar Port deal, stating that Adani Ports should be held accountable for doing business with MEC.

Due to allegations of the Burmese government ignoring basic human rights, the Myanmar Port project has been a pain-point for the group on the critical ESG ratings scale for Adani Ports, which is the country’s largest private port operator, with a majority stake in at least 12 major ports along the Indian coast.

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Updated: 04 May 2023, 11:00 PM IST
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