Four suitors so far for Pula Steel
Mbongeni Mguni | Friday December 14, 2018 13:27
Pula Steel was placed under liquidation in October 2017, owing creditors, including BCL Mine, an estimated P100 million. The plant opened in 2015 amid much excitement as the country’s first steel plant, using scrap metal to produce steel billets.
Built at a cost of P130 million, the company operated in fits and starts due to financial and technical challenges, including shortage of its raw materials.
The company was majority owned by BCL Mine with shareholding from CEDA and founders, the Verma family. Pula Steel liquidator, John Hinchliffe told BusinessWeek the sale of the plant was receiving investor interest. “I can share that we have four interested parties that we consider extremely serious,” Hinchliffe said. “The process before you can be considered for the tender involves paying a deposit and we have received three bidders thus far who have done that, but four parties in total that we consider extremely serious. “Another two have expressed interest also, but we are yet to meet with them. “I’m very hopeful that we will produce a result from this tender that will help Pula Steel restart production.” According to the specifications of the auction, bidders are expected to demonstrate their business plans for the plant, proof of funding and statement confirming they will pay 20% of the winning bid, if selected, within 30 days of the award.
Earlier this year, Hinchliffe disposed of movable items from the plant, ranging from vehicles to desks, chairs and mattresses.
The proceeds from the sale were used to help finance the liquidation process and reduce storage costs.
The liquidator told BusinessWeek that the tender period for the sale had been extended from December 7, 2018 to January 31, 2019.
“This is just to resolve issues during the tender that we need sorted out so that we can maximise the benefits of the auction,” Hinchliffe said, without elaborating. Due to the new deadline, Pula Steel’s next owner will only be known on March 31, 2019, the liquidator said. Pula is being auctioned as a going concern with assets including 4,710 hectares of land, four furnaces, pumps and generators as well as associated equipment.
Buyers will also gain access to Pula Steel’s scrap metal stockpile of about 2,000 tonnes, to kickstart production. BusinessWeek is informed that another 2,000 tonnes of scrap metal is available at BCL Mine, which was also Pula Steel’s biggest source and single largest creditor.
The winning bidder for Pula Steel will be expected to secure an arrangement for the scrap metal at BCL Mine. At one point producing 100 tonnes daily, Pula Steel was amongst BCL Mine’s Polaris II projects, which were designed to extend the mine’s life through diversified investments. BCL injected a total of P111.2 million into Pula Steel, prior to also shutting down in October 2016.
CEDA is believed to be Pula Steel’s second largest creditor with outstanding dues of about P15 million, followed by the Botswana Power Corporation with P10 million.
Pula Steel is estimated to have at least 100 creditors on its books waiting for recovery of their dues.