New Delhi: Naveen Jindal-led Jindal Steel and Power's (JSPL) ambitious $2.1-billion investment plan in Bolivia is all but over as the company has said it is "not hopeful of continuing" with the project,which was touted as the biggest foreign investment plan in the Latin American country.
Through its subsidiary Jindal Steel Bolivia (JSB),the company had in 2007 secured 40-year development rights to the El-Mutun iron ore mine,which holds reserves of around 20 billion tonnes, considered to be one of the largest untapped iron ore deposits in the world. However,with no commitment from the Bolivian government over supply of natural gas - which is critical for the project - it seems to be headed for a failure.
"I see no progress in the project.We are not very hopeful of continuing," Sushil Maroo, company CFO and a director on JSPL's board, told TOI here.
For the project,the gas requirement is estimated at 0.5 million metric standard cubic metres a day (mmscmd) in 2014.By 2016,it will increase to 6 mmscmd and in 2017, the project will require a daily supply of 10 mmscmd of gas. However, the company is yet to get any firm commitment on gas allocation for the project.
The company's agreement with the Bolivian government also included setting up of an integrated 1.7-million-tonne-per annum (mtpa) steel plant, 6-MTPA sponge iron and a 10-MTPA iron ore pellet plant.
Maroo said JSPL's Bolivian subsidiary has invested $100 million over the last few years for production of iron ore, development of infrastructure and CSR (corporate social responsibilities ). However,without any firm commitment on gas availability, the investments are not of much use.
"We also understand that the Bolivian government does not have gas," he said.
Adding fire to the already sore relations between JSB and the Evo Morales-led Bolivian government is encashment of two bank guarantees ($18 million each) by the Latin American country. The Bolivian government has done so after accusing JSB of not honouring contractual obligations with regard to the progress of the project. While the first bank guarantee was encashed in 2010, the second one has been done this month.
"This causes a rift with the Bolivian government," Maroo said. JSB has sought the intervention of the International Court of Arbitration over enchashment of the first bank guarantee. "We will be doing so for the second one soon."
Just as JSB sulks over non-availability of gas, the Bolivian government has also taken an equally rigid stance.Bolivian mining minister Mario Virreira was quoted earlier this month as saying that it would be best if Jindal quits the project so the country can find another investor.
A BUSINESS MINE-FIELD
Naveen Jindal-led JSPL had, through its subsidiary Jindal Steel Bolivia (JSB), secured 40-yr development rights to El-Mutun iron ore mine in 2007. With reserves of about 20 billion tonnes, the Bolivian mine is considered to be one of the largest untapped iron ore deposits in the world. In the absence of a govt commitment for supplying natural gas - critical for the project - JSPL is 'not hopeful of continuing' with the same. JSB has already pumped in $100m over the years for production of iron ore, infrastructure building and CSR. Bolivian govt has encashed two bank guarantees ($18m each), for which JSB has moved international arbitration court
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