Ajaokuta reclaim: Finest intention, wrong direction (Part 1)
By Our Reporters
LAGOS-ON August 1, 2016, Nigerians were excited over Federal Government bold decision to revitalise the steel sector when it signed a renegotiated concession agreement with an Indian steel company, Global Steel Holdings Limited, GSHL, for the Nigerian Iron Ore Mining Company, NIOMCO, Itakpe.
The new agreement indicates that Ajaokuta Steel Complex now reverted to the Federal Government, while GSHL retains NIOMCO.
The move according to the Minister of Solid Minerals Development, Dr Kayode Fayemi is in line with President Buhari repeated promise to diversify the Nigerian economy and create jobs through agriculture and extraction of solid minerals.
Despite the federal government finest intention to diversify the nation’s economy away from crude oil, apprehension is on red alert that this new agreement might be heading toward the wrong direction, direction of impossible redemption if urgent steps are not taken.
Why Nigerians should be worried
Global Infrastructure Nigeria Limited, GINL, and Global Steel Holding Limited, GSHL is owned by Pramod Mittal. He is the younger brother of Lakshmi Mittal. Lakshmi is a renowned guru in the steel industry with successful tract records in South Africa, England and other countries.
He had a successful relationship with his younger, Pramod until he felt uncomfortable with his younger brother business style. They finally went their different way which promoted Pramod to set up Ispat Steel Company.Ispat started operation in India but got itself into Corporate Debt Restructure, CDR.
CDR is going to places in the guise of reviving industries but processed in collecting loans from banks, selling assets among others without the intension to pay back or revive any industry. In 2003, the Indian government took over Ispat from Pramod Mittal as result of owning 18 Indian banks over 800 million euros.
The take over of Ispat Steel by the Indian government forced Pramod Mittal to establish and registered Global Steel Holding Limited, which later came to Nigeria to do business. As at today, findings revealed that Global Steel Holding Limited has no record of any successful steel business anywhere in the world.
The deal signed by the Federal Government happens to be the biggest deal for Pramod in recent time. The question on the lips of some Nigerians is: What do we expect from a company that has no record of successful mine or steel business anywhere in the world rather than debt incurment and assets stripping?
How Global Steel came to Nigeria
The JUSTIA US Law in case a filed tiled MEMORANDUM OPINION, No. 04-06-00731-CV .SOLGAS ENERGY LIMITED, Appellant v.GLOBAL STEEL HOLDINGS LIMITED f/k/a Global Infrastructure Holdings Limited, Appellee. From the 38th Judicial District Court, Uvalde County, Texas. Trial Court No. 05-09-24,865-CV Honorable Mickey R. Pennington, Judge Presiding; Opinion by: Karen Angelini, Justice; Sitting: Karen Angelini, Justice, Sandee Bryan Marion, Justice, Steven C. Hilbig, Justice; Delivered and Filed: July 3, 2007 obtained by our correspondent gave a detailed background information on how Global Steel Holding Limited came to Nigeria.
The case stated that: “In June of 2003, Solgas Energy Limited, a limited liability company incorporated under the laws of the Isle of Man, entered into an agreement (“Concession”) with the federal government of Nigeria and Ajaokuta Steel Company Limited, a Nigerian company wholly owned by the federal government of Nigeria. The Concession obligated Solgas to complete, refurbish and expand the Ajaokuta Steel Plant in Nigeria and to build a gas processing plant to supply the steel plant with electrical power.
In 2004, Solgas began searching for a subcontractor to assist it in preforming its obligations under the Concession. Solgas asserts that a subcontractor was sought to increase the efficiency and profitability of the steel plant. Global Steel counters that Solgas was primarily a natural gas company and needed the assistance of a steel company to fulfill its commitments.
Solga’s principal business office is located in Uvalde, Texas. Thomas Russell, the chairman and CEO of Solgas, stated that Solgas received e-mail correspondence from numerous representatives of the “Global Steel corporate family” “push[ing] hard for the opportunity to participate in the project.” Russell stated that the representatives identified themselves as working for “Ispat,” “LNM Holdings,” and “the Mittals.”
Russell further stated that “we were consistently told that we were dealing with ‘Ispat,’ a well-known Indian steel conglomerate, recognized for its expertise in revitalizing steel plants in the developing world.” In late 2003 and early 2004, Russell received four telephone calls from different representatives of LNM Holdings originating either in India or the United Kingdom expressing “Ispat’s interest in working with Solgas on the Ajaokuta Project.”
In response to a request for information regarding LNM Holdings, Russell stated that he received information via e-mail “regarding Ispat and Lakshmi Mittal, the President and Chairman of LNM Holdings/Ispat.” During the spring and summer of 2004, Pramod Mittal, president of Global Steel, contacted Russell at least three times by telephone to express thanks for inviting him to Nigeria to view the steel plant facility and to express interest in the project.
Global Steel also is incorporated under the laws of the Isle of Man, and its principal place of business is in Dubai. No representative of Global Steel ever traveled to Texas or the United States in connection with the project or conducted any negotiations or performed any work in Texas. No documents relevant to the project were executed in Texas.
In May of 2004,
Solgas and Global Steel entered into a Confidentiality Agreement. Global Steel was identified in the agreement as “Global Infrastructure Holdings, Ltd. (“GIHL”), their Subsidiaries and Affiliates, hereinafter referred to as (“LNM”).” The purpose of the agreement was to maintain the confidentiality of information exchanged as the parties pursued “discussions specifically regarding the possibility of pursuing a mutually beneficial business venture concerning the production of steel, the generation of power, and an LPG gas processing plant located in or near Ajaokuta, Kogi State, Nigeria.” The Confidentiality Agreement provided that it would be governed by Texas law.
On July 18, 2004, Solgas and Global Steel entered into a memorandum containing the terms pursuant to which the parties intended to pursue the fulfilment of the Concession obligations. The agreement was subject to the consent of the federal government of Nigeria. The memorandum provided that it would be governed by English law, and any dispute was to be resolved by arbitration “under LCIA Rules in London.”
On August 11, 2004, Solgas sent a letter to the federal government of Nigeria stating that Solgas had been unsuccessful in securing the necessary capital required to fulfill its obligations. The letter stated that Solgas sought to dissolve the Concession. On August 12, 2004, Solgas and the federal government of Nigeria entered into an agreement terminating the Concession. After the termination of the Concession with Solgas, Global Steel entered a new concession agreement with the federal government of Nigeria relating to the steel plant.
-To Be Continued