Adani Ports has yet to find a buyer for the sanctions-hit Myanmar terminal

“We have worked aggressively to find a buyer and obtain all permits so that every time we exit, we make a proper exit because the worst thing we can do is leave behind an asset that could be used for human rights abuses.” , APSEZ CEO Karan Adani said during a earnings call on Feb. 7.

Adani Ports and Special Economic Zone Ltd (APSEZ) has yet to find a buyer for the container terminal under construction in Myanmar after announcing a “binding” deal with an unnamed company to sell the facility in May last year It has invested some $150 million, extending the agony over a project that has become a sore point for the company’s environmental, social and governance ESG credentials, multiple sources said.

APSEZ chief executive officer Karan Adani hinted at the company’s predicament as it exited the terminal during a conference call on third-quarter earnings Feb. 7.

When asked about the impact of a much longer delay in closing the deal, which is a sticking point for the company’s ESG profile, Karan Adani replied: “One hundred percent agree with you and we are aware of the fact that it is a sticking point is a point in our ESG ratings. If we look at the overall situation, a year ago we had received a call that we had to pull out and we’ve been working aggressively to find a buyer and get all the permits. So whenever we make an exit, we make a proper exit because the worst thing we can do is leave an asset that could be used for human rights abuse purposes. At this point we are aware of the fact that it takes little (more) time than expected, but we just want to do it in a correct way so that it goes to the right buyer and is not used for other purposes”.

APSEZ was forced to evacuate the terminal in the Yangon region after the sanctions imposed by the United States on serving and former Burmese military officials responsible for the February 1, 2021 coup d’état by Burma’s democratically elected government and the oppression of the Burmese.

“The Company entered into a binding share purchase agreement (SHA) on May 22, 2022 to sell its investment in Coastal International Terminals Pte Ltd, which has investments in the Myanmar project,” APSEZ said in announcing its fourth quarter and full year results for FY22 in May 2022 without revealing the name of the buyer.

Coastal International Terminals was formerly known as Adani International Terminals Pte Ltd, a Singapore-based entity formed by APSEZ in July 2017 to operate port and related businesses in the ASEAN region.

“The SPA is signed on the basis of a completed project, which ensures full repayment of its investments, loans granted and costs of completing the project. The transaction will be completed upon receipt of the proceeds in accordance with the agreed conditions precedent. Management has concluded that net realizable value is higher than book value,” the company said in May last year.

In announcing its fiscal 23rd quarter results on Feb. 7, the company said in an update that “as the project has yet to be commissioned, both parties mutually agreed in the prior quarter to extend the long stop date by further.” to be extended for six months. .

Regarding the sale of Myanmar during the February 7 earnings call, Karan Adani stated, “We are only awaiting certain pre-conditions (CPs), which are government approvals. Once these approvals are in place, we should be able to complete the transaction.”

That, he said, would be either this quarter (late March) or next quarter at the latest. “Ideally we’re pushing for this quarter, but at most next quarter if for whatever reason we can’t get approvals by the agreed deadlines.”

However, multiple sources told ET Infra that APSEZ failed to find a buyer for the terminal, which was part of the company’s strategy to piece together a “subcontinental necklace of ports” stretching from India to Colombo through organic/inorganic initiatives and Myanmar, aiming to provide a logistical solution for South Asia.

“APSEZ is looking for a buyer for the Yangon terminal,” said a person familiar with the matter, “so far it hasn’t found anyone,” he said, noting that finding a buyer has become difficult given the sanctions find.

A second source, an industry leader, said that “work is continuing at the terminal” and workers employed by APSEZ are “still on site”.

“APSEZ actually docked the first ship at the terminal a few days ago, which was handled by the company’s staff stationed there. APSEZ Talks to Strategic Investors to Close Deal; the proposal is still a work in progress,” the second source added.

In May 2019, Adani Group announced it would invest up to US$290 million to build and operate a new container terminal along the Yangon River under a 50-year deal.

The Myanmar project is managed by Adani Yangon International Terminal Co Ltd (Adani), a unit of Coastal International Terminals Pte Ltd.

Ahlone International Port Terminal 2 (AIPT 2) is being developed on 54 acres of land leased from Myanmar Economic Corporation Ltd (MEC), a corporation created by the US following the February 1 military coup against the democratically elected civilian government of Myanmar was sanctioned.

ITD Cementation India Ltd is undertaking the EPC work for the project.

The first phase of the terminal was due to be operational by the end of 2020 with a capacity to handle 150,000 20-foot units (TEU), but has been delayed.

In the second phase, the capacity of the terminal was to be expanded to 800,000 TEU.

Yangon’s deal also included the establishment of a maritime university to improve the skills of local people and build infrastructure such as waterways and other transportation facilities to increase efficiency and spur economic development in the region.

The AIPT 2 will be part of the Yangon Port Cluster, which currently includes the Asia World Port Terminal and the Myanmar Industrial Port. Together with Myanmar International Terminals Thilawa south of Yangon, the Yangon cluster handles 90 percent of Myanmar’s exports and imports.

The development of Myanmar’s river ports is part of the country’s strategy to rapidly increase exports over the next five years and position itself as a regional trade hub.

MEC, one of Myanmar’s largest companies, is controlled by its military’s Directorate of Defense Procurement.

The MEC mobilizes revenue for the Myanmar military, known as the Tatmadaw.