Government of Zimbabwe and Essar Africa Holdings enter into agreement for revival of ZISCO's Assets

Mar 10, 2011, 11:39 ET from Essar Steel Algoma Inc.

HARARE, Zimbabwe and PORT LOUIS, Mauritius, March 10 /PRNewswire/ - The Government of Zimbabwe ("GoZ") and Essar Africa Holdings Limited ("EAHL"), a privately held company of the Essar Group, today confirmed that they had reached an agreement for the revival of the operational assets of Zimbabwe Iron and Steel Company ("ZISCO").  The agreement marks an important milestone in the process which started with the public tender for a majority of GoZ's shareholding in ZISCO and begins a new chapter for the economic growth of Zimbabwe, all Zimbabweans and the community it serves.

EAHL and GoZ will set up two joint venture companies that shall acquire all the steel and mining related assets and liabilities of ZISCO and its subsidiaries, and EAHL will further release GoZ from its guaranteed obligations under the ZISCO debt. The steel JV will be owned 60/40 by Essar and GoZ and the minerals JV will be owned 80/20 by Essar and GoZ, respectively. The transaction will close in due course upon facilitation of various approvals, including approvals from the enabling ministries and an acceptable settlement of the GoZ guaranteed debt obligations of ZISCO. Upon closing, EAHL and GoZ will also finalize and settle liabilities such as unpaid wages and salaries and amounts due to various local creditors, etc.

Prof. Welshman Ncube, Minister of Industry and Commerce said: "The signing of this agreement is the result of due process which commenced with the invitation to tender for a portion of GoZ's shareholding in ZISCO, evaluation and adjudication of bids submitted by several international players in a fair and transparent manner, the approval of His Excellency the President of the Republic of Zimbabwe for the selection of Essar as the preferred bidder, and discussions on the terms, conditions of the transaction. We believe that this transaction will serve as a catalyst for significant future foreign direct investment into Zimbabwe".

ZISCO is an integrated steel company with a rated capacity of one million tonnes for the manufacture of long products. ZISCO has been non-operational for the last few years due to shortage of funds for working capital and maintenance  of plant and equipment, irregular supply of power and other critical raw materials and infrastructure. ZISCO also owns iron ore and limestone mining rights and other claims, which require significant investment in exploration and development.

Firdhose Coovadia, Resident Director, Essar (Middle East & Africa) and Director, EAHL said: "We believe that the new ventures will be well positioned to be a low-cost steel producer that can meet the growing demands of the regional steel market and capitalize on the forecasted growth in sub Saharan Africa. We also recognize ZISCO as a vital and strategic asset for the Zimbabwean economy and Essar looks forward to making a meaningful contribution to the future development of Zimbabwe and its people.The revival of ZISCO represents a challenging task that will require the co-operation of various parties, and entail significant capital expenditure. The Essar Group has the track record of successfully commissioning and operating greenfield and brownfield steel plants in different parts of the world including India, Canada, UK and Indonesia.  The Essar Group will bring in investments and expertise in steelmaking, beneficiation, project management, construction, power generation and logistics."

"As part of our evaluation process, we visited the operations of the various bidders, including Essar's operations in India. We were very impressed by the quality and scale of the steel operations of the Essar Group, and their capabilities in other sectors such as power generation, mining, shipping and logistics. We believe that the Essar Group is a good partner for the revival of ZISCO's assets. With the entry of EAHL as a partner, the various stakeholders of ZISCO, especially the employees will stand to benefit significantly." added Nyasha Makuvise, Chairman of the Board of ZISCO.   

Essar is recognized as a responsible corporate citizen across the countries and communities in which it operates, and supports a wide variety of Corporate Social Responsibility (CSR) initiatives which help address community needs. The Group will endeavour to continue this trend in Zimbabwe to make a meaningful positive impact on the economic and social well-being of the people of Zimbabwe.  EAHL's will endeavour to commit resources to socio-economic initiatives that include small and medium enterprise (SME) development, skills development, job creation and CSR activities in the areas of education, healthcare, sports and cottage industry development. These initiatives help accelerate industrial development, widen the base of growth and develop a new generation of entrepreneurs.  The revival of ZISCO will benefit the local communities in Redcliffe and KewKwe in the immediate future.

V. Ashok, Indian Ambassador in Zimbabwe commented: "This is an important milestone in the long-standing and fruitful relationship between India and Zimbabwe which dates back to the independence movement in Zimbabwe, and we believe that this partnership will further bring the people of India and Zimbabwe closer."

This transaction also represents an expansion of the Essar Group's commitment to Africa and its people. Essar Group's current operations in Africa include oil and gas assets in Nigeria, Kenya and Madagascar, telecom assets in East Africa, BPO operations in South Africa and coal concessions in Mozambique.

About Essar Group
The Essar Group is a multinational conglomerate and a leading player in the sectors of Steel, Oil & Gas, Power, Communications, Shipping Ports & Logistics, Projects and Minerals. In the steel business, Essar is a leading global producer on track to operating 14 MTPA steel capacity. The Group today employs 65,000 people across its operations in more than 20 countries in five continents.  EAHL is a private company incorporated in Mauritius.

The Group continues to expand its global footprint, focusing on markets in Asia, Africa, Europe, the Americas and Australia. Essar invests significantly in the latest technology to drive forward and backward integration in its businesses, and on leveraging synergies between these businesses. It also focuses on in-house research and innovation to be a low-cost manufacturer with high quality products and innovative customer offerings.

SOURCE Essar Steel Algoma Inc.