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Ethiopia - New sugar factory

03 Jun 2009

The Tendaho Sugar Factory Project Office made an advance payment of 16.6 million dollars to Overseas Infrastructure Alliance Private Limited (OIA) to commence the construction of the factory as disclosed by officials at the project office.

The Ethiopian government signed an Engineering Procurement Construction (EPC) contract with the Indian-based OIA. The contract was for the construction of the Tendaho Sugar Factory and the expansion of Fincha and Wenji Sugar factories, after it won a 345 million dollars tender on January 10, 2008.

Uttam Sucrotech, a Delhi based sugar plant machinery manufacturer that has signed an EPC contract for Wenji Sugar Factory, won the processing house lot for Tendaho. IJAC, another Indian company, won the steam generation, and Overseas took juice and power house extraction lots.

Uttam was one of the contenders for the construction of Tendaho Sugar Factory.

However, the project was delayed from its scheduled date of starting because Uttam dragged the Ethiopian government and the Export-Import (Exim) Bank of India [a state bank through which the Indian government disburses its financing to overseas projects] to the Bombay High Court in mid 2008 over the awarding of the construction contract to OIA.

The dispute arose because OIA requested a 15pc administration cost from the subcontract winners and wanted to receive all the incentives the Indian government provides to its export companies.

The plaintiff had alleged that the awarding of the EPC to OIA was done in questionable ways.

The subsequent legal battle delayed the project because it led to the suspension of the 350 million dollar funding for the project by Exim. The decision was communicated by the Bank to the Ethiopian Ministry of Finance and Economic Development (MoFED) in December 2009.

Finally, with the intervention of the Indian government, the conflict between the two companies was resolved.

The project financier wanted the supervision of the project to be awarded to a single company so that the bank would not run into complications from dealing with more than one company.

In addition to bringing financing to Ethiopia's huge sugar sector development programme, the Indian Bank is involved in the energy sector.

India gave Ethiopia a Line of Credit (LOC) of 640 million dollars. This loan dubbed the largest agreement for both countries, has encouraged the Indian private sector to invest since Ethiopia in 2007.

Part of this loan goes to financing the processing plant (factory) of the Tendaho project, which cultivates 64,000hct of land. Out of the total, 10,000hct has been prepared for the Afar pastoralists to develop it for pasture and a sugarcane plantation through irrigation from the dam constructed as part of the project.

"Now that we have made the payment, the work around the erection of the factory and purchasing of machineries will start soon," Belete Alemayehu, general manager of the project office, told Fortune.

His project office has already announced public tender for the supply of construction materials and agricultural machineries two weeks ago.

"These are for the infrastructure development that we are going to undertake for the plantation field," the general manager said. "The land [plantation] development was still underway."

Though the construction of the factory was delayed, the development of the plantation field was not.

The tender for the procurement of the construction materials, which includes motor graders, compactors, front loaders forklifts; and agricultural machineries - sugarcane chopper harvesters, billet sugarcane planter, 10-11 tons capacity cane transfer trailers and land levelling machines, articulated tractors with 15.3 cubic metres weight transfer ejector scraper - are under the part of the project which was not delayed because it was financed by the Ethiopian government.

Apparently determined to get this project up and running, the Ethiopian government has completed preparation of the sugarcane plantation field, construction of the dam and irrigation schemes to develop it. Now, the sugarcane plantation which is already ripe on the field, will be processed by the long awaited factory - once it is installed.

The factory, which will have the capacity to crush 26,000tn of sugarcane per day, has the largest dam constructed by the Water Works Construction Enterprise. The dam has the capacity to hold 1.8 billion cubic metres of water.

OIA, the EPC winner for the Tendaho project, currently handles 750 million dollars worth of projects in Africa. These projects include: power, sugar, electric and water works and railway sector development. OIA are working on a project in Ethiopia.

One agreement is a 78 million dollar agreement with the Ethiopian Electric Power Corporation for the installation of a 132Kv power transmission line sub-station. This will run from Hagere-Mariam to Mega in the southern part of the country.





Source: Argentine Beef Packers S.A.

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