The government dismissed Metals & Engineering Corporation (MetEC) from three sugar-factory construction projects that are underway and is considering awarding the work to Chinese firms for completion.
The state owned Sugar Corporation, responsible for the construction of the sugar factories, invited three firms to visit the plants as part of a new bidding process, according to sources close to the case.
About a week ago, Prime Minister Abiy Ahmed (PhD) confirmed that the contract with MetEC has been terminated due to delays that extended the project by four years.
“We are in the process of selecting capable companies,” said Abiy last Saturday in his first meeting with members of the media at his office.
Jiangxi Jianglian International Engineering, China National Complete Plant Import-Export Corporation (COMPLANT), and China CAMC Engineering Co, Ltd. (CAMCE) are being considered by the government to finalise the Omo Kuraz I, Tana Beles I and Tana Beles II sugar factories.
COMPLANT has already delivered the Kessem and Omo-Kuraz II sugar plants with a crushing capacities of 6,000tn and 12,000tn a day, respectively. Additionally, the firm is constructing Omo-Kuraz III, which is expected to be finalised this fiscal year.
Jiangxi Jianglian International Engineering is currently constructing the Omo-Kuraz VI sugar factory with a crushing capacity of 24,000tn of sugarcane a day.
CAMCE has completed Welkait Sugar Factory, located 1,300 from Addis Abeba in Tigray Regional State, which has a sugarcane crushing capacity of 24,000tn a day.
MetEC, the state-owned military-industrial giant, was initially awarded the project in March 2011, and the contract was amended in June 2012 as a result of infrastructure development issues that developed at the factory sites. The three projects removed from MetEC are part of 10 sugar factories the state planned to construct under the first edition of the Growth & Transformation Plan. The initial plan was to build five factories under the Omo-Kuraz sugar project, three at Tana Beles, one at Welkait and one at Kessem. All ten projects were initially awarded to MetEC.
The 10 factories were designed with sugarcane crushing capacities ranging from 6,000tn to 24,000tn of sugarcane a day, cultivated on 320,000ha. The government targeted an annual production rate of 4.07 million tonnes of sugar and 181,604 cubic meters of ethanol fuel, power generation of 101MW and 1.2 billion dollars worth of exports.
The government determined that MetEC could not execute all the projects simultaneously and decided to take seven of the projects away from them, awarding five projects to the three Chinese companies, and discarding two sugar factories, Omo Kuraz IV and Tana Blese III.
MetEC’s remaining three projects have an aggregate project size of 707 million dollars with a completion period of 18 months after contract awards. Each of the three plants has sugarcane crushing capacities of 12,000tn and production of 12,000ql of sugar a day. After six years of construction Omo Kuraz I is 94.42pc completed; Tana Beles I is 78.75pc completed; and Tana Beles II is 25pc completed.
These delays frustrated the Sugar Corporation and members of parliament, which has been criticising the Sugar Corporation for the delay. In turn, officials of the Sugar Corporation have been seeking help from its board of directors, parliament and the Office of the Prime Minister.
Last July, Endaweke Abite, CEO of the Sugar Corporation, told the standing committee of parliament that they have invested more than 77 billion Br on the projects in the last six years, but the factories were not completed on schedule.
“As a result, we’re on the verge of ceasing operations as we are in a critical financial crisis,” Endaweke told members of parliament.
Three weeks years ago, the Prime Minister canceled MetEC’s contract on the projects. Following that decision, three committees from MetEC and the Sugar Corporation, were formed to facilitate the handover process, which is expected to be finalised at the beginning of September.
The committees are tasked with identifying what has been completed so far and what is left to finalise, evaluating the total investment made to date on the factories and facilitating the handover process of the projects, according to a source knowledgeable about the case.
Following the termination of its contracts by the Prime Minister, MetEC has ceased construction on the projects and has demobilized it equipment and personnel from the project sites.
“We ousted close to 1,000 employees,” a source at MetEC told Fortune. “Most of them have been moved to the head office, and we terminated the contracts of the rest of them.”
“In the coming few months, we will finalise at least 50pc of the projects,” said Prime Minister Abiy.
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