Bidding for 1.3m tones Steel Factory Sees Nine Interest

Mohammed Al-Alamoudi’s Tossa Steel Factory requires 300mw when complete in three years

The bidding process for what could be the first and biggest steel factory, Tossa, with a capacity of producing 1.3 million tonnes a year is under way with nine international companies having shown interest. Tossa Steel Factory, established by Mohammed Al-Alamoudi (Shiek), invited offers for the factory which is to be built around 30km from Kombolcha, 376km north of the capital in the Amhara Regional State a month ago. The company has already received the go ahead for 300ht of land from the region. However, there are two possible plots the company is looking at, according to Shimelese Shiferaw, head of environmental protection and land administration office of Debub Wollo Zone, where the plots are located. Representatives of the companies - two from Germany, three from China, two from Italy, one from South Korea, and one from France –have shown interest in the factory, even visiting last week to assess the project and financial risks before submitting their bids ahead of the December 16, 2011 deadline. Company representatives also held discussions on power, customs and environmental issues. Around 40 people went to the project site on Tuesday, October 25, 2011, to assess the project. The next day they held a meeting with representatives from the Ethiopian Electric Power Corporation (EEPCo), Environmental Protection Agency (EPA) and the Tax Authority. One of the major issues raised was the availability of power. The factory, which is expected to be completed in three years, will require 300mw of energy when it is completed, according to Haile Assegid, CEO of Tossa Steel Factory. “We have been assured that the power would be made available when the factory is completed,” Haile told Fortune. Ethiopia currently generates 1,875mw of electricity from hydropower. At the current rate, the Tekeze Dam, which generates 300mw, would need to divert all its power to the factory. However, improving power generation in the country is one of the major infrastructure upgrades targeted in the government’s five-year economic plan. The country’s power generation is expected to reach 10,000mw by 2014/15 as hydropower projects such as the Renascence Dam and Gilgel Gibe III, which have outputs of 5,250mw and 1870mw respectively, near completion. Although the first phase of producing steel products including billets, reinforcement bars and hallow sections is to expected to be completed in three years time, the project has a second phase as well, according to Haile. “In the second phase, we plan to produce steel for railway tracks,” he told Fortune. Tossa, which received its investment licence from the Ethiopian Investment Agency (EIA) in July 2011, is not the only company looking to venture in the steel industry. The Endowment Fund for Rehabilitation of Tigray (EFFORT) has plans to establish an ore mine and a steel factory in the region. It had called for offers of a feasibility study for the factory to be erected in Shire, Mentebtab wereda, in Tigray Regional State, 1080km North of Addis Abeba. The financial offers of three out of 18 companies who have shown interest have been opened, but the results are yet to be announced. The venture by these two companies is the first such endeavour in a highly industrialised steel production. The demand for steel in Ethiopia is currently is 1.2 million tonnes per year, which is estimated to reach 3.1 in 2014/15, according to a study conducted by the Japan International Cooperation Agency (JICA).