The government has found a deep-pocketed buyer for a 30 percent stake in East African Portland Cement Company (EAPCC) for Sh15 billion in a deal that is likely to trigger a fresh fight for control of the cement firm facing insolvency.
Industry Principal Secretary (PS) Juma Mukhwana told the National Assembly that the Ministry of Investment, Industry and Trade had approved a turnaround plan that will see the strategic investor buy 30 percent shareholding in the company.
The PS said the deal is now only awaiting President William Ruto’s approval.
“We were to meet the President yesterday (Wednesday) but the meeting has been rescheduled to next week. We have approved a proposal between the National Treasury, the National Social Security Fund (NSSF) and Lafarge that we get a strategic investor to buy 30 percent shareholding at EAPCC,” Dr Mukhwana said.
“A strategic partner will also bring money, new blood and management style as we move to turn around the company.”
Dr Mukhwana, who did not disclose who the new buyer is, said the proposal will see the Treasury, the NSSF and French firm Lafarge cede part of their shares to create a 30 percent stake for the new investor.
The government, through the Treasury, holds 25 percent shareholding, the NSSF controls 27 percent, Lafarge 42 percent and other Kenyans six percent of the Nairobi bourse-listed cement manufacturer.
But Lafarge, whose representative attended the same meeting, expressed surprise at the government proposal requiring it to cede part of its stake to the new investor.
“We are not aware that we will be ceding shares,” Geoffrey Ndugwa, a representative of Lafarge who arrived in the country on Thursday for the tripartite meeting convened by the National Assembly’s Public Investments Committee on Commercial and Energy Affairs, said.
The committee chaired by Pokot South MP David Pkosing asked the government to resolve the conflict with other shareholders before presenting a final proposal.
“I agree we need to put our house in order. We all agree core business is to produce cement. EAPCC has idle land and as a government, we are keen to give life back to Portland,” Dr Mukhwana said.
The PS said the government would go back to the drawing board and come up with a comprehensive plan on how to dispose of idle assets, pay debt and revive the company.
“We propose you give us time out. We will have a workshop to bring our members together and return on August 17 with a comprehensive plan and an agreed draft Cabinet memo on the EAPCC business plan,” Dr Mukhwana said.
Mr Pkosing asked Dr Mukhwana to coordinate the meeting that will bring together the Treasury, the NSSF and Lafarge.
“You will take the lead and coordinate all shareholders. We want a final decision on August 17, either EAPCC sells its land, a Treasury bailout or we liquidate the company,” Mr Pkosing said.
The parliamentary committee had invited the Treasury, the State Department for Industry, the NSSF and Lafarge to discuss the future of the cash-strapped EAPCC.
“We invited you here to this round table to get a permanent solution because EAPCC is dead and only exists on paper. This company is partly owned by the government but it is dying,” Mr Pkosing said.
The meeting followed a report by Auditor-General Nancy Gathungu that revealed that EAPCC’s current liabilities exceeded the current assets by Sh13.8 billion in the year to June 2022.
EAPCC has been looking to dispose of some of its expansive land holdings in Athi River to fund a restructuring of its balance sheet, mainly to pay debt and bridge a working capital deficit.
EAPCC Managing Director Oliver Kirubai told the committee that it was seeking Sh20 billion to pay off a debt of Sh13 billion and use the balance to revive the operations of the once profitable company.
Dr Mukhwana said a six-point plan for solving the problems facing EAPCC had been approved by the State Department for Industry and will be presented to President Ruto next week.
He said the surveying and titling for regularisation of properties already occupied by squatters will commence following the lifting of the suspension that the new administration imposed.
Dr Mukhwana said another proposal to be tabled before the President next week is the regularisation of the sale of 907 acres that has been illegally encroached on and which is estimated to be worth Sh5 billion.
“We have approved the sale of 4,272 acres. The EAPCC management said they have talked to the Ministry of Housing which has a ready investor for affordable housing,” Dr Mukhwana said.
Mr Kirubai told MPs that the 4,272 acres earmarked for affordable housing is valued at Sh25 billion.
A further 1,000 acres will be gazetted as an export promotion zone (EPZ) where an investor is already willing to put up industrial sheds.
A further 1,000 acres have been proposed for Ujenzi Park — a one-stop shop for construction materials such as paints, nails, and Iron sheets — with 400 sheds.
The remainder of the land will be used for the construction of a clinker factory and the mining of raw materials.
A South African firm has already done a feasibility study while the Treasury is working on a Public Private Partnership (PPP) for the new factory to be co-owned with EAPCC.
The NSSF CEO, David Koros, and Lafarge’s Mr Ndugwa agreed with the proposal to dispose of part of EAPCC land to turn around the company.
“We are aligned to the proposal. Ultimately, the board and management of the company will make their decision. It is important and we propose that the proposal is initiated by management and the board will be aligned to that,” Mr Ndugwa said.
For his part, Mr Koros said the NSSF wanted a solution that will give value to its members.
“We agree that idle assets be disposed of,” he said.
EAPCC in April told Parliament that it needs cash to retire Sh4.5 billion in government debt, Sh2 billion in union and employees’ dues, Sh1.3 billion in tax arrears, Sh1.2 billion for plant refurbishment, Sh1,195 billion to retire a JICA loan and Sh450 million cement levy that is due to the government.
Credit: Source link