Home Finance ISPAT comes to the rescue of Ajaokuta steel plant as Solgas bows out

ISPAT comes to the rescue of Ajaokuta steel plant as Solgas bows out

by Business News Report

By Omoh Gabriel,Business Editor
Last week the Minister of Power and Steel announced the former termination of the concession agreement the ministry entered into with Solgas Energy on behalf of Ajeakuta Steel Plant. The concession had required that Solgas undertake the completion of the plant by sourcing for funds and running the plant for ten years. Solgas signed the agreement with government on 30th March, 2003 with a fanfare. The minister Senator, Lyle Imoke stating reasons for the termination said that the government had given Solgas all the needed support but the company could not perform. Solgas had thought that it could raise the needed financing from the international capital market to jump start the plant. The company soon discovered it could not muster the needed international influence to raise the required huge capital from the international finance market, as no body is ready to lend to projects in a high risk country like Nigeria. Besides, Solgas had no previous experience in steel making and thus under estimated the volume of work required at the mills. In fact, it is doubtful if Solgas had the expertise to conduct the needed due diligence on the plant to acertain the level of work needed at the plant.The government could not sack Solgas ealier because of the way the company got the concession in the first instance but the government had to play along with the company when it discovered that Solgas could not deliver on promise, untill the new concessioners showed interest in the company.
The ministry could not
move against the company untill the president gave it the necessary clarance to do so. The president it was gathered gave the ministry the mandate to terminate the contract. As a result, the contract had to be terminated. He said that the decision to terminate the contract was mutually agreed upon by the ministry and the management of Solgas. The minister further disclosed that an audit panel has been set up to look into the operations of Solgas at the plant to determine the level of liability and who is to take responsibility for it. The minister further said that as far as the government was concerned their was it is bearing no liability. It was clear from the position of the minister, that Solgas right from the unset of the agreement had no technical capability to revitalise the ailing plant. The company has expertise in Energy and gas development a fact that is well known to those who contracted Solgas to manage the plant. Ajaokuta was thus removed from Solgas and a new company contracted to revive the ever elusive dream of producing steel in Nigeria, ISPATGroup.The plant is about 98 per cent completed. But the question is was any due diligence done on Solgas before it was selected for the concessioning of the project? The failure of Solgas is a direct indictment on government and has called to question its emphasis on due process. If due process was strictly followed, the kind of thing that happened in the Solgas salga would not have happened. Elsewere, where public private partnership works, the process of selecting Private sector patners to execute public sector project is through competitive bidding. Several operators are passed through pre- bidding process and the right partner with requisite knowledge and financial capability is selected. In that case the government and the populace at large get value for money.
Painfully, this is not the case with Nigeria where the first consideration is self interest. Were Nigeria a discipline country some body would have to answer for the woeful failure of Solgas to deliver on promise at a time the country is talking about transparency and due process. But Senator Imoke would want Nigerians to believe that Solgas was appointed to run Ajaokuta before he became a minister. That is plausable, but the ministry has records, permanet secretary, director of steel who are suppose to brief him on all issues relating to the ministry. The mishandling of Ajaokuta since its inceptionhas led the World Bank group and other multilateral agencies to call for the scrapping of the plant.

The cost of the plant is said to be thrice that of similar plants elsewere in the world. As a result of the inability of Solgas to complete the project, the federal government has thus contracted ISPAT, an indian company to manage the affairs of Ajaokuta. The government as well as the new managers are optimistic that at last the plant will function.
Such optimism is based on the fact that the new company has experience in steel manufacturing spanning decades of playing in the global steel market.At a joint press briefing in Abuja on Tuesday with the minister of power and Steel, the Chairman of ISPAT Group, Mr. Pramod Mittal said that within six months of his company taking over Ajaokuta plant, it will start up the light steel mill (LSM) and the wire roll mill (WRM) which will lead to the commercial production in the plant. Mittal said that during that period the power plant will start operating as well as the billet mill. Also in the next six months, the sinter plant will become operational and ISPAT will start heating up of coke ovens in the plant. During the period the chairman of the company said , the management would set in motion the machinery for matching recruitment, training and development of human resource at the Ajaokuta plant. He further said that during the period the company will begin the matching revival of workshops, utilities and auxiliaries and other infrastructure facilities, supplies of iron ore, limestone and dolomite from mines to the plant.
A close look at ISPAT action plan for reviving the Ajeokuta plant, shows that within twelve months the company hopes to start up the blast furnace, steel melting and casting plant, the medium structural mill, matching revival of workshops. Indications are that by 2005, if all goes well with its plan, ISOPAT will be turning out steel products from the Ajaokuta plant. This will be good news for Nigeria considering the long years of waiting. How feasible this is depends on a number of ifs as the company has requested for government’s assistance in the area of infrastructural development which are generally lacking in the Nigeria business environment.
Before the steel will start rolling out from the mills the company is requesting for support from the federal government in the handing over of iron mines at Itape to the company. Apart from this request, the company is asking the federal government to assist its bid to take over Lime stone and dolomite mines. It is also requesting the government to hand over the Warri Port to it for its operation . It further asked the federal government to endorse the sub concession agreement it made with Solgas from which they are taking over, insisting that government consent to the continuation of the sub-concession agreement even as the concession agreement with Solgas ceases. The company is also asking for the right of first refusal in the event the plant is to be privatised. In that case government must first of all give ISPAT the option of buying the plant when ever it is to be privatised before other interested parties. It is also asking the government for an un-interrupted power supply from NEPA at the plant till the company’s power plant starts operation. The ISPAT group is also asking federal assistance in the rehabilitation of the railway linkage with Ajaokuta steel plant and the completion of the second power transmission line from Benin to Ajaokuta NEPA sub-station. Among other request, the Indian company is asking government to dredge the Warri port and the River Niger through which the product of the mill will be transported. The company is further asking government to guarantee the regular supply of Gas from the Nigeria Natural Gas Company (NGC) and the revival and regular maintenance of township and welfare facilities at the plant.
On the provision of these request ISPAT says it will on its part ensure that Nigeria achieve the production of 1.3million metric tonne of iron per annum in one year. This it said the company will endeavour to increase to 1.5million metric tonne per annum. It said it will embark on continuos training programm of Nigeria personnel as well as the development of matching procurement and marketing infrastructure for import, export and domestic sales.
The company also hopes to achieve quality, productivity and efficiency with introduction of modern management technigues and tools like six sigma, TPM, CRM, PMS, SCM and SAP
ISPAT management also pledged that it will provide electricity and water to the township of Ajaokuta when fully operational and would maitain harmonious industrial relations as well as develop and administer safety programmes for all categories of workers at the plant. It also promise to render assistance in time of emergencies and accidents at the plant. It vowed that the management will refrain from acts and ommissions that will conflicts with the concession agreement. It equally said it will cooperate with the monitoring team to be set up by government and maitain insurances in accordance with industry best practices.
ISPAT management said it intends to embark on continuous training to provide skill, knowledge and management skills to local employees as well as creating for 15,000 families through direct and indirect employment. It said the company hopes to achieve a 1.3 million ton of production and a possibility for expanding production to 1.5 million ton about 115.4 per cent of the rated capocity being explored. This it said will conducted under global benchmarking in quality, productivity and cost. This the company said will help conserve Nigeria’s foreign exchange which is being spent on importation of iron based product. It said the company by this will also be contributing to Nigeria‚Äôs Gross Domestic Product and the development of ancillary industries in the country. This also it said will further broaden the scope for Nigeria to further attract foreign direct investment.
Who is ISPAT
The ISPAT group is a global corporation with experience of over five decades in the business of Iron and Steel, Metals, Minerals and infrastructure. According to the company, in the last five decades, ISPAT has emerged as a resilient organisation with its core competence in steel-making, raw material sourcing, trading and logistics internationally. It has a man power base of over 5, 000 engineers, technicians, and management experts from various discipline that form the backbone of the group thus giving it the cutting edge as it were to continue to expand its presence globally by seizing business oppportunities of today and tomorrow, thereby creating wealth for its stakeholders.
In 1952, one Mr. M. L. Mittal founding chairman of ISPAT group, began his foray into Iron and Steeel Business with the take over of an ailing rolling mill in Kolkata, India. The plant was turned around and later sold off. In the following year, 1953, Mittal experimented with an electric arc furnace at a STEEL Plant in Vizag, India. A combination of tecnological vision and management was said to be the key reason for this.
Spotting emerging trends in steel-making technology, he set up nine such Greenfield plants in India. Soon he acquired the license and took over “TOR STEEL”
In 1974 M. L. Mittal entered the international steel arena by setting up PT ISPAT Indo in Indonasia. It was at this point he named the Group as “The ISPAT Group” ISPAT the company says means steel in Hindi language. In the 1980s ISPAT took over the iron and steel company of Trinidad and Tobago, Sidemgical Del Balsar SA, Mexico, and additional units in Canada, Germany and Ireland. In India, the group also set up the first thin gauge galvanised sheet unit, a speciality mini mill, to make rails and structural and a Colld Complex at Nagpur.
From 1990 to 1994 the company set up of a colour coating line at Nagpur, and erection of a major manufacturing facility at Dolvi, India. The DRI unit and the Arc Furnance were said to be essential backward integration moves to consolidate the production base in India. As a result in 1994, the business interests within ISPAT Group were demarcated. While the eldest son Mr. L. N. Mittal continued managing the international operations, Mr. Pramond Mittal and Mr. Vinod Mittal, the younger brothers focussed on steel and other business in India.
ISPAT at the moment manages 10 million tonnes capacity of hot rolled coils, cold rolled coils, colour coated sheets, long products etc. The company is also involved in the production of sponge iron, iron ore concentrates and coke. It transports 10 million tonnes of iron and steel product worldwide with 10 manufacturing facilities spread across five countries. It has investment of over $4 billion. Its India company is the 7th largest India private sector company in terms of fixed assets. The company’s corporate office is in London while its trading and investment offices are in Dubai, Singapore and China. It has an iron ore mines in Azerbaijan, Bosnia and the Philippines. It has an Iron and Steel company in Libya(LISCO) and another in Bulgaria. The Group is headed by MR. Pramond Mittal and Mr. Vinod Mittal, supported by an experienced, cohesive and proven senior management team, with long experience in Russian built integrated steel plants. The group practices globally proven management tecniques with emphasis on process and cost efficiencies benchmarked internationally. With a company of this track record it hoped that Ajaokuta steel plant will be sorted out for once and the huge investment on it may at last be justified.

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