Port operator Adani Ports is ready to abandon the Myanmar project if it is stated that the company violates the current sanctions imposed on Myanmar by Office of Foreign Assets Control (OFAC).
The company further stated the company will write down its investments in the Project in full.
The company in its filing said, “In a scenario wherein Myanmar is classified as a sanctioned country under the OFAC or if OFAC opines that we are in violation of the current sanctions, the Company has plans to abandon the project and will write-down its investments in the project in full.” Adani Group has entered into a business partnership with the military-owned conglomerate Myanmar Economic Corporation (MEC) for the construction of a new container port in the city of Yangon.
The company stated that the write down will not materially affect the balance sheet as it is equivalent to about 1.3 per cent of the total assets of APSEZ.
“Further, please note that KLP Fund was holding 1.05 lakh equity shares (0.005% of paid-up capital) as on March 31, 2021. We are unable to comment on the divestment made by the KLP Fund as the Funds decide the investment plans basis their internal policy. At this point in time, there is no event/information that requires disclosure,” the company stated in its filing.
On June 22, there were reports that stated Adani Ports and Special Economic Zone Ltd has been excluded from investment by Norway's largest pension fund, KLP and the KLP Funds with effect from June 2021.
This due diligence-based divestment has been implemented on the grounds that Adani's operations in Myanmar and its business partnership with that country's armed forces constitutes an unacceptable risk of contributing to the violation of KLP's guidelines for responsible investment.
India's largest commercial port operator, Adani manages 12 ports in India, with logistics accounting for an important part of its business activity.
In a statement, KLP said, "When Adani signed the agreement, information about the armed forces' abuses was publicly available. This should have given Adani reasonable grounds to act with particular prudence with respect to the MEC, which owned the land. The company must exercise particular care when it operates in locations where there is war or conflict. Nor has the company adequately performed the necessary human rights due diligence assessments. There are reasonable grounds to suspect that the company puts commercial considerations before the risk to human rights."
The agreement's potential termination was conditional on the financial consequences following from sanctions imposed by the US Department of the Treasury's Office of Foreign Assets Control (OFAC), and not on the behaviour of the armed forces. Even though no further financial transactions are carried out, the agreement is valid for a term of 50 years, which means that the risk of contributing to future violations does exist.