Essar acquires Zimbabwe steel firm for Rs 3,300 cr

Essar today said it had completed the acquisition of Zimbabwe Iron and Steel Company (ZISCO) with a commitment of $750 million (over Rs 3,300 crore) and would take over all liabilities of the company and Zimbabwe government.

As per the agreement, ZISCO will be divided into two new entities -- NewZim Steel Private Limited and NewZim Minerals Private Limited.

Essar Africa Holdings, the African arm of Essar Group, will own 60% in the steel joint venture and 80% in the mining company, it said in a statement, adding that rest of the stake will be held by the government of Zimbabwe (GoZ).

 

"This closes the transaction process that started in August 2010 with a public tender for a majority stake of GoZ shareholding in ZISCO. The launch begins a new chapter in the economic growth of Zimbabwe, for all Zimbabweans and particularly for the communities in and around Redcliff and Chivhu," the statement said.

Essar Group has committed an investment of $750 million in the ailing steelmaker, which includes relieving all liabilities of the Zimbabwe government and ZISCO.

Terming the deal as a win-win situation for both the parties, Essar Group's Vice Chairman Ravi Ruia said, "We are committed to reviving Zimbabwe's steel industry, adding value to both its natural and human resources and also improving the infrastructure of the country so as to make a significant contribution to the national economy."

Industry and Commerce Minister of Zimbabwe Prof Welshman Ncube said, "While this deal is a signal that serious players are investing in Zimbabwe, it can also be a catalyst for attracting further FDI."

He added that the partnership "seeks to achieve many objectives of the Medium Term Plan, among other things infrastructure development, employment creation and resource utilisation."

As per the plan, NewZim Steel - the new company for steel production, will revive and expand ZISCO's capacity in two phases.

Of this, $115 million will be invested in first phase for achieving production of 0.5 million tonne per annum capacity in 12 to 18 months, while in the second phase it will be expanded to 1.2 million tonne capacity, including a power plant of 50 MW.

The second phase will entail an investment of $275 million and will be completed within three years, the statement said, adding that in the long-term, the capacity will be increased up to 2.5 million tonne.