“We have been working aggressively to find a buyer and to get all the approvals, so that whenever we do an exit, we do an exit properly as well because the worst thing we can do is we leave an asset behind which could be used for human rights violation purposes,” Karan Adani, CEO, APSEZ, said during a 7 February earnings call.
Adani Ports and Special Economic Zone Ltd (APSEZ) is yet to find a buyer for the under-construction container terminal in Myanmar after announcing a “binding” deal with an unnamed entity in May last year to sell the facility in which it has spent some $150 million, prolonging the agony over a project which has become a sore point for the company’s environmental, social and governance (ESG) credentials, multiple sources said.
Karan Adani, Chief Executive Officer, APSEZ, dropped hints on the firm’s predicament in exiting the terminal, during a 7 February earnings call for the third quarter.
Responding to a question on the impact of a much longer delay in completing the deal that is a sticking point for the company’s ESG profile, Karan Adani said: “Hundred percent agree with you, and we are cognizant of the fact that it is a sticking point in our ESG ratings. Looking at the overall situation we had taken a call one year back that we have to exit, and we have been working aggressively to find a buyer and to get all the approvals. So that whenever we do an exit, we do an exit properly as well because the worst thing we can do is we leave an asset behind which could be used for human rights violation purposes. So that is where we are cognizant of the fact that it is taking 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 it is not used for any other purpose”.
APSEZ was forced to exit the terminal coming up in the Yangon region after it drew flak following the sanctions imposed by the United States on serving and former Burmese military officials responsible for the 1 February 2021 coup that dislodged Burma’s democratically elected government and the repression of the Burmese people.
“The Company, on 22 May 2022 entered into a binding share purchase agreement (SHA) for sale of its investments in Coastal International Terminals Pte Ltd, which has investments in the Myanmar project,” APSEZ said while announcing the fourth quarter and annual results for FY22 in May 2022, without disclosing the name of the buyer.
Coastal International Terminals was formerly known as Adani International Terminals Pte Ltd, a Singapore-based unit set up by APSEZ in July 2017 to pursue port and related business in the ASEAN region.
“The SPA is signed on a completed project basis, which ensures full recovery of its investments, loans given and cost to complete the project. The deal will be concluded after receipt of proceeds, in line with the agreed conditions precedent. Management has concluded that the net realisable value is higher than the carrying value,” the company said in May last year.
While announcing the third quarter results for FY23 on 7 February, the company said in an update that “as the project is yet to be operationalised, during the previous quarter, both the parties mutually agreed to extend the long stop date for further six months”.
Referring to the Myanmar divestment during the 7 February earnings call, Karan Adani stated: “We are just waiting for certain conditions precedent (CP’s) which are government approvals. Once those approvals are through, we should be able complete the transaction”.
This, he said, would be either this quarter (ending March) or maximum by next quarter. “Ideally, we are pushing for this quarter, but max it would go to next quarter, if for whatever reasons we are not able to get approvals in agreed timelines”.
Multiple sources, though, told ET Infra that APSEZ hasn’t succeeded in finding a buyer for the terminal, which was a part of the company’s strategy to string together a ‘subcontinental ports necklace’ through organic/inorganic initiatives, extending from India to Colombo and Myanmar, with the objective to provide a South Asian logistical solution.
“APSEZ is looking for a buyer for the Yangon terminal,” said a person with knowledge of the matter, “It hasn’t found anybody so far,” he said, noting that finalising a buyer has become difficult in view of the sanctions.
A second source, an industry executive, said that the “work on the terminal is going on” and workers employed by APSEZ were “still at the site”.
“APSEZ, in fact, berthed the first ship at the terminal a few days ago which was handled by the company’s staff stationed there. APSEZ is talking to strategic investors to finalise a deal; the proposal is still in the works,” the second source added.
In May 2019, the Adani Group said it would invest as much as $290 million to build and run a new container terminal along the Yangon River on a 50-year deal.
The Myanmar project is helmed by Adani Yangon International Terminal Co Ltd (Adani), a unit of Coastal International Terminals Pte Ltd.
The Ahlone International Port Terminal 2 (AIPT 2) is being developed on 54 acres of land leased from the Myanmar Economic Corporation Ltd (MEC), an entity sanctioned by the U.S. following the February 1 military coup against the democratically elected civilian government of Myanmar.
ITD Cementation India Ltd is undertaking the EPC work for the project.
The first phase of the terminal was expected to start operations by the end of 2020 with a capacity to handle 150,000 twenty-foot equivalent units (TEUs) but has been delayed.
In the second phase, the capacity of the terminal was planned to be expanded to 800,000 TEUs.
The Yangon deal also included setting up a maritime university to upgrade skills of the local people and build infrastructure such as waterways and other transport facilities to bring efficiencies and drive economic development in the region.
The AIPT 2 will be part of the Yangon Port Cluster, which currently includes Asia World Port Terminal and Myanmar Industrial Port. Along with Myanmar International Terminals Thilawa, to the south of Yangon, the Yangon cluster handles 90 per cent of Myanmar’s exports and imports.
The expansion of Myanmar’s river ports is part of that 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 biggest corporations, is controlled by its military’s Directorate of Defence Procurement.
The MEC mobilises revenue for the Myanmar military, known as the Tatmadaw.