East African Portland Cement Company is requesting the government to acquire some of its 16,000 acres of ‘idle’ land so as to save its survival.
The EAPCC, which is now trapped in financial quagmire, says the request is part of a strategy to raise up to Sh15 billion, the money expected to resuscitate the loss-making state corporation.
This request was made at the company’s premises at Athi River on Friday evening by the board of trustees at a meeting that had earlier been expected to be graced by Trade and Industrialisation PS Peter Munya, but cancelled in the last minute.
A battery of journalists, who had camped in wait of the PS after he was said to be preparing to leave the country for China, were invited by EAPCC board to a meeting and given the current status of the affairs in the company.
The Nairobi Securities Exchange-listed firm, acting board chairman Kung’u Gatabaki said, the Treasury stake in the company is impediment as it cannot dispose of its assets for financial gains in a bid to safe Portland.
Gatabaki, while interacting with journalists, said it is fact EAPCC is no more if the government cannot support its bailout, and lamented the amount of money it requires to put the company on its feet is only Sh15 billion, or less.
“This is a meagre amount of money which can give life to this company owing to the fact we have more than 16, 000 acres of idle land that can be sold sliced out and sold. Unfortunately, our hands are tied,” said Gatabaki, who represented the PS.
Gatabaki said the fundraising strategy by way of disposing some of the pieces of land will enable the company raise money will to be used to repay debt and invest in new plants and upgrade the existing factory.
EAPCC has posted the worst financial performance among the listed cement makers, partly due to mismanagement and shareholder wars in recent in the past.
The company’s appeal to the state is not the first one, but second in two years when it first issued one last year.
In a statement at the time, the company wrote; “The government is interested in the non-operational land owned by EAPCC, and EAPCC is interested in extracting value from its idle assets to support implementation of its turnaround plan”.
“In view of this, EAPCC is in structured discussions with the government on a special scheme that will allow the government to secure the land for its future projects and to purchase the land over an agreed period of time at an agreed price,” stated the company on February 7, 2017.
The board of Friday said the government will take possession of the land, put up inland terminals along the SGR line passing through the property in Athi River, and make provisions in the annual budget to pay the company over the years.
“This kind of contract secures the land while the government makes provisions in its annual budget for EAPCC’s drawdown when they need it. The government will have lien over the 16,000 acres in question,” the company had said last year.
The EAPCC has in the past moved to sell part of its land holdings without success and it remains to be seen whether letting the government-led the process will work.
The company’s land is carried in its June 2016 audited accounts at Sh8.4 billion but the board directors say this is a highly conservative figure in light of the prevailing market prices.
LafargeHolcim holds a 41.7 per cent stake in the EAPCC where the interests of the Treasury and the National Social Security Fund (NSSF) stand at 25.3 per cent and 27 per cent respectively.
The government has combined the ownership of NSSF and the Treasury to classify the EAPCC as a parastatal and maintain control over the company against a series of challenges by its managers and LafargeHolcim in the past.
Other members of the board present in the impromptu meeting called at the company’s plant offices in Athi River town included; EAPCC MD, Peter ole Nkeri, company head human resources Rose Karanja, Humphrey Muhu representing CS Treasury, Charles Mulunda represented PS Trade, head of production operations EAPCC Timothy Ruhiu.
Gatabaki explained that cement companies in the country are facing hard economic times and situation at the EAPCC had been aggravated by management issues dating back 10 years ago.
“We have issues that date back to 10 years back which have refused to let us go. They board on bad policies in the management of the company and interference by politicians in the recruitment of staff,” said Gatabaki, who said was picked by PS Munya to chair the board session with journalists.
He went on; “We are in the woods, and cannot make any money to sustain a bloated workforce in this company and the only way out is resuscitation money to keep this company on its knees again.”
“We have all our land titles intact in the bank. They are under lock and key and those claiming share of Portland land assets need to understand this,” said NKeri.
He said the company’s staff trade union won a court case out of collective bargain agreement in 2014 and were awarded Sh1.4 billion, and requires to be paid.
“We have a KCB loan acquired in 1978 and now stand at Sh4.5 billion. The company also owes Japanese International Corporation Agency a debt of Sh1.5 billion which was borrowed 18 years ago,” Nkeri said.
The MD said other creditors owe the bank Sh3.5 billion and require to be paid, while refurbishment of the Athi River company plant requires not less than Sh2 billion to change equipment.
He said that for the company to kick off from its current status, it requires to buy coal which is procured at US$185 per ton while the plant requires 8, 000 tons per month.
“The company also require supplementation of its clinker production, and that means more money,” he said.