Govt revokes concessions given to Pramod, Vinod Mittal-promoted company. Nigeria on Tuesday revoked the concessions given to Global Infrastructure Holdings, promoted by Pramod and Vinod Mittal, citing 'non-compliance'.
GIHL had won a 10-year concession for the 1.3 million tonne Ajaokuta Steel and Nigerian Iron Ore Mining in 2005, after acquiring control of Delta Steel in 2004.
However, Global Steel Holdings (formerly GIHL) in a statement today said GSHL/Global Infrastructure Nigeria has not been receiving the promised support from the Federal Government of Nigeria (FGN) as contemplated under the share purchase agreement.
GSHL/GINL has already put about $500 million into the Nigerian steel industry over the last three years to revive steel plants that were not working for the last 20 years and pursuant to such investment, the plants were able to commence production.
On February 4, 2008, GSHL/GINL called upon the FGN to settle and resolve the differences in line with the SPA. But this did not elicit any response.
Consequently, GSHL/GINL took up arbitration proceedings before the International Chamber of Commerce on 1st April 2008.
Without any reference to such arbitration, FGN unilaterally rescinded the SPA via its letter dated April 1, 2008 without assigning any reasons. Such purported rescission is not in accordance with the SPA and is the subject matter of the international arbitration. The legality and validity of the rescission is being contested by GSHL/GINL in the pending arbitration.
The company statement further said, "However, efforts are in progress by GSHL/GINL to amicably resolve the dispute in the best interest of all concerned.
This is to clarify that all claims purportedly made in the press to the contrary are untrue, baseless and unfounded. GSHL/GINL employs about 7,000 persons, including those in community service, and all legal procedures have been duly followed and complied with".
The deals under former President Olusegun Obasanjo were meant to revamp Nigeria's steel sector. But after much criticism, the new administration of President Umaru Yar'Adua set up a panel in October to probe the transactions.
The panel's report adopted by the government on Tuesday noted that the deals 'were largely skewed in favour of the concessionaire to the detriment of the Federal government of Nigeria', a statement from the President's office said.
The panel pointed out that GIHL breached the agreements by failing to submit a workable business plan within a specified timeframe, did not pay the concession fees and cannibalized plants and equipment, which it shipped abroad.
"Instead of investing external funds on the completion of both projects as expected, GIHL embarked on massive borrowing from local commercial banks, pledging the assets of Delta Steel as collateral," the statement said.
GIHL owes Nigerian banks $192 million. "President Yar'Adua has ordered the criminal prosecution of indicated officials . and promoters of GIHL for asset stripping," the statement added.
The concession for the Ajaokuta plant was first given to Solgas Energy. Nigeria terminated the $3.6 billion deal after some weeks citing the UK-registered company's failure to come up with the money within the stipulated time.
The revocation of the concession deals came after the House of Representatives called on the government to cancel the sale of 81 per cent of the 960,000 tonne-a-year Delta Steel to GIHL for $30 million.
The Delta deal was challenged by BUA, which had offered $31 million for the plant and was initially named preferred bidder at a public auction in the capital of Abuja.
The deal was revoked weeks later by Bureau for Public Enterprises and the mill was handed over to GIHL, which was not part of the bidding process.
