Essar snaps up Zisco, will invest $750 m

After almost four months of negotiations and speculations, Essar Africa Holdings Ltd, a company under the Essar group, has finally signed a definitive agreement with the Zimbabwe government to revive the country’s ailing and debt-laden steel company - Zimbabwe Iron and Steel Company (Zisco).

The total investment of Essar in Zisco would be $750 million.
Under the terms of the agreement, two joint venture companies will be set up — one for taking over the steel operations and related assets and liabilities of the company and the second joint venture will own the mining operations.

The steel plant will be held in a ratio of 60:40 between Essar and Zimbabwe government and the mining operations in the ratio of 80:20.

“This will include paying up the entire $340 million debt of the company and also a capital infusion of $400 million to revive the plant and make it operational,” said Firdhose Coovadia, resident director - Middle East & Africa, Essar Group.

Zisco, which was once the flagship steel company of Zimbabwe with an installed capacity of one million tonne per annum, came to a grinding halt in 2008 after it accumulated huge debts of over $300 million.

The plant had been on the block since 2009 when the African government decided to bring in foreign investment of $10 billion in the country through disinvestment after facing huge losses during
the economic downturn.

Out of all the companies on the government list, Zisco was the first to be put up for sale.

Coovadia said Essar, with its expertise in running fully integrated plants, will not only try to operationalise the plant within 12-18 months, it will also seek for complete backward integration.

“We are likely to sign a deal with the government to invest in energy assets which will directly feed power to the steel plant and make it viable,” he said, adding that discussions are on to also invest in coking coal, limestone and railway assets as well.

Apart from the steel plant, Zisco also controls iron ore mining and beneficiation in Zimbabwe through its 100% subsidiary Buchwa Iron Mining Company.

It currently exploits the Ripple Creek mine, which provides iron ore and limestone as feedstock to Zisco steelworks.

“Zimbabwe is a country rich in natural resources but most of it is largely unexplored. We will bring in our experience in exploring and assessing the potential and quality of iron ore available. First, this will be used in feeding the plant and ensuring its long-term raw material security and for the remaining, we could also look at exports,” Coovadia said.

Lately, Africa has become a major hotbed of opportunities for players worldwide. Despite political instability, companies don’t want to leave a stone unturned to have a piece of the cake. In the case of Zisco, some major players such as ArcelorMittal, Jindal Steel and Power and Essar were in the fray.

The way ahead
Essar to restart the ailing plant within 12 to 18 months
May sign agreement with Govt for setting up power plant
Also looking at picking up stakes in coking coal and rail assets