Posted by The Ethiopia Observatory (TEO)
Tekleberhan Ambaye Construction Plc (TACON for Tekleberhan Ambaye Construction Plc (TACON) resumed the construction of Yayu Fertilizer Factory building after settling the problem it had with the Metal & Engineering Corporation (MetEC) three weeks ago.
TACON was subcontracted by the MetEC for two billion Birr in 2012 for the construction of the civil work of Yayu Fertilizer Factory. MetEC was awarded the project the same year from the Ministry of Industry (MoI) after revising the cost of the project to 540 million dollars from the initial price of 730 million dollars that was given by the a Chinese firm called China National Complete Plant Import & Export Corporation (COMPLANT).
Yayu is a multi-complex of industries that will have two Urea and one DAP fertilizer manufacturing plants, a coal mining plant and a chemical manufacturing plant that will manufacture chemical inputs for the fertilizer factories.
The subcontractor finalized the site clearing for the power plant terminal, gas disposal plant and ammonia and Urea units and a place for the installation of six machineries. It made a 20pc progress on the construction of the basement and column for the structure of the factory, which is located at Yayu Wereda, Illubabor zone in Oromia Regional State, 600Km West of Addis Ababa.
But 10 months prior, the construction was quit by TACON following the disagreement with MetEC because MetEC did not pay the total down payment for TACON, which is 30pc of the two billion Br, according to sources. But Michael Desta, head of public and foreign relations at MetEC said the construction was halted because of heavy rain at the area.
“MetEC did not make the down payment to TACON not because of financial problem but rather due to bureaucracy at the financial department of the corporation,’’ a source close to the case told to Fortune.
The negotiation for the resumption of the contract started two months ago following the initiation that came from the director general of MetEC, Kinfe Dagnew (B. Gen) and Siefu Ambaye chief executive officer (CEO) of TACON. They had a discussion on the issue, which was finalized with the agreement that TACON would resume construction with a promise from the officials of MetEC it will get the payment in shorter period of time, according to sources.
About 14 years ago, the government set up a Coal Phosphate Fertilizer Complex Project Office to study the potential of a fertilizer factory at Yayu and the office conducted feasibility studies including socioeconomic impacts, geological and environmental studies with Chinese companies such as Ging Sion Explorer and China National Complete Plant Import and Export Corporation (COMPLANT), which resulted with finding of 100 million tons of coal is saturated at Yayu area.
The coal mine has the potential to produce 300,000tns of Urea, 250,000tns of DAP fertilizer, 20,000tns of ethanol and 90MW of electric power annually with 730 million dollar project cost. But MetEC revised the study and offered 540 million dollars for the project, which led it to sign a deal with the Ministry of Industry (MoI) in 2012.
Yayu will lie on 54,000sqm plot and its Part One of the project of Urea manufacturing plant will have a production capacity of 300,000tns of Urea annually using 9.2 million tonnes of coal with 35,000 workers. The factory will have 75,000tn of solid waste product that can be used as an input for the production of construction input materials such as brick and cement.
The civil works to be constructed by TACON includes the structure of the building and MetEC will work on the mechanical part including the machineries that will be made by Hibret Manufacturing & Machine Building Industry (HMMBI), one of the MetEC companies engaged with manufacturing industrial machinery and spare parts. Some parts of the machineries will be imported from South Korea as the design of mechanical parts was conducted with the collaboration of the Korean government. Addis Abeba Institute of Technology (AAiT) is a consultant of the project.
The factory that was expected to be completed by the end of the current fiscal year of 2014/15 only has a 20pc progress and it was set out to minimize the import of fertilizer to the country as one of the five companies the government plans to construct with 2.8 billion dollars. Three of them are at Yayu, and two at Bale Melka Arba one single phosphate fertilizer factory and one triple super phosphate manufacturing factories.
In Ethiopia, an agrarian country, a total of 16 million hectares of land are used for agricultural purposes. An estimated 12 million hectares of the total area are used for growing food grains. The government imported 552,000tns of fertilizer in 2010/11 and 560,000tn the following year. Its imports in 2012/13 were down to 477,000tns. For the current fiscal year, the government is importing 900,000ql of fertilizer with a total cost of 431.9 million dollars from five companies.