Running News & Commentary on Iron & Steel in Nigeria
Solgas Drags FG to London Arbitration Panel
By Mike Oduniyi, 01.03.2005
United States energy group, Solgas Energy Limited, has dragged the Federal
Government before a London arbitration panel, seeking relief for alleged
unlawful termination of a contract entered into by both parties for the
management of the Ajaokuta Steel Company.
Solgas in the statement of relief being sought from the International Chamber of
Commerce (ICC), wants the Nigerian government to pay for all the sums it may be
liable for as a result of the government’s breach of contracts totalling some
$2.409 billion, as well as all costs and legal fees expended by the company.
The Federal Government and Solgas entered into a Concession Agreement in June
2003, transfering the management of the Ajaokuta Steel Plant to the US firm for
an initial period of 24 months.
However, in August last year, the Federal Government terminated the contract
alleging under performance by Solgas. It subsequently signed a new concession
agreement with Global Infrasrtucture Nigeria Limited, a subsidiary of ISPAT, an
Indian steel conglomerate.
Solgas in the claims filed by its team attorneys, claimed it had in deed
commenced the discharge of its own side of the agreement while the Federal
Government renege on all aspects of its obligations to the contract.
The firm deposed that following the execution of the agreement, it had set to
work on the rehabilitation of the steel plant and making preparations to comply
with its obligations.
It said it had entered into a $282 million contract with a Russian firm,
Zarubzhstronio (ZSM), to perform rehabilitation of the plant.
Other contracts entered into in the bid to get the black start production
included the supply of $2 billion worth of generators from Caterpilla Company,
Ingresol-Rand and Capstone Microturbine, and with Berry Company, Texas for the
sale and relocation of $127 million iron carbide plant.
The Nigerian government failed to execute its side of the agreement, which
included payment of salaries of the plant workers, authorising visa and work
permits for Solgas management and failure to provide proper security for the
Solgas alleged that the Nigerian government’s decision to terminate rthe
contract was largely due to political interferance and the company’s decision
not to oblige bribe demanded by some government officials.
“The new contract with Global Infrastructure was to rehabilitate and commission
the Ajaokuita Steel Plant, thereby breaching the concession agreement with
notice required under the contract.
The troubled Ajaokuta Steel plant had been under construction for the past 24
years later, and gulping more than $5 billion (N665 billion).
Solgas was contracted on the agreement that it would inject some $3.6 billion to
ensure the plant take off at long last.
The new agreement with Global Infrastructure would see it take full control of
Ajaokuta Steel Company for 10 years, which is renewable for another 10 years.