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BusinessYayu Fertilizer transferring reaches 85% after years of delay

Yayu Fertilizer transferring reaches 85% after years of delay

Retrieving the Yayu fertilizer complex from the defunct former contractor Metal and Engineering Corporation (MetEC) reaches 85 percent after five years of delay. Auditing is underway but challenges remain, including retrieving 25 containers and compensating farmers, while outstanding payments and auditing demand attention.

Originally awarded to MetEC in 2012 under a Build, Operate and Transfer (BOT) contract, the fate of the Yayu project underwent a significant change in April 2018 with the transition of political power in the country. Alongside other major projects like the Grand Ethiopian Renaissance Dam and multiple sugar factories, Yayu was taken from the state-military conglomerate, leading to the division of MetEC into two separate entities: a commercial wing and a military wing.

The responsibility of overseeing the transferring of MetEC’s canceled commercial project, was entrusted to Ethio-Engineering Group (EEG), the new business arm birthed from the remnants of MetEC. However, the Group faced difficulties in transferring the project to the Chemical Industry Corporation (CIC), another state-owned enterprise that owns Yayu. MetEC contracted the project from CIC, and EEG now has to give it back as it is, without completion, since the contract was terminated.

EEG was supposed to handover the Yayu project to CIC immediately after the BOT contract between CIC and the former MetEC was terminated. However, EEG was unable to complete the transfer due to lingering issues it also inherited from MetEC.

But in the past few months, EEG has successfully completed 85 percent of the project’s transfer to CIC. To ensure a smooth handover, experts from both EEG and CIC visited the Yayu woreda in west Oromia last month.

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While most aspects of the project have been successfully transferred, there remains a pending matter concerning 25 containers filled with structural steel. Retrieving these containers from the state property caretaker department at the Ministry of Justice requires adherence to legal protocols.

Originally procured for a proposed steam energy plant in Yayu, these structural steels were intended to harness the area’s coal waste and generate 90 MW of electricity. However, due to financial difficulties, the initial importer, Yibel Industrial, faced closure after failing to repay a loan from Commercial Bank of Ethiopia (CBE).

Yibel Industrial is the sister company of Teklebirhan Ambaye Construction (TACON), a subcontractor of MetEC in the Yayu project.

Consequently, the Ministry of Justice took custody of the 25 containers, eventually entrusting them to the Ethiopian Construction Works Corporation.

“We are currently in the process of receiving the 25 containers from the corporation and compensating them for the warehousing expenses incurred thus far. Once completed, we will proceed with transferring the containers to CIC,” stated Bayulign Chane, the project implementation team coordinator at EEG.

As handover of the fertilizer project nears completion, the auditing process and the retrieval of payments made for the former contractors without tangible progress construction, continue to demand attention. Despite a decade passing since the project’s inception, progress has primarily been confined to the civil works stage. Additionally, the matter of compensating farmers who were relocated to make way for the Yayu project remains unresolved, warranting swift resolutions.

Originally envisioned as a groundbreaking venture, the Yayu fertilizer complex aimed to establish a state-of-the-art fertilizer factory capable of producing an annual output of 300,000 tons of urea, among others. It sought to generate 60,000 cubic meters of methanol alcohol, a vital component in the automotive industry. The project aimed to harness valuable by-products such as ammonia, DAP fertilizer, sulfuric acid, asphalt road construction inputs, and carbon dioxide.

Spanning an expansive 54-hectare plot of land in Yayu woreda of west Oromia, the project was initially estimated to cost USD 542 million, equivalent to 11 billion birr at the time. However, over the course of a decade, the investment cost has more than doubled.

MetEC’s sub subcontracting arrangement with TACON, shows it has reportedly received a significant payment of close to 6 billion birr. Details emerged during recent meetings between the Group and the Corporation, adding further complexity to the project’s narrative.

According to Bayulign, the transfer of the Yayu project has encountered delays due to various factors. “These include auditing, property evaluations, and the adherence to legal procedures. Nobody is responsible for the financial losses incurred due to the delay in the project’s transfer,” Bayulign says.

Dedicated committees, comprising representatives from EEG, CIC, and other stakeholders, have been working on the projects transfer.

Once the transfer is successfully completed, the Corporation plans to float a tender process to select a competent contractor capable of concluding the project. However, the finalization of the auditing report is deemed critical by Corporation officials, as it will determine the status of the transfer.

The next potential contractor need to redesign the Yayu fertilizer complex, since the design prepared by MetEC is reportedly defective.

Another pressing issue stemming from the Yayu project is the outstanding financial burden inherited by EEG from MetEC. To address this, EEG’s accumulated debts have been effectively transferred to the Liability and Asset Management Company (LAMC), a recently established state-owned entity. This means CIC receives its money from LAMC, instead of EEG.

LAMC’s primary mandate is to alleviate the burden of unpaid debts plaguing various state-owned enterprises, including EEG. The Company has already managed to settle a significant portion of EEG’s debts, amounting to 13.3 billion birr as of last year, out of a total of over 20 billion birr accumulated debt rolled down from MetEC to EEG.

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