Skip to comments.Jindal Steel to drop $2.1bn Bolivia plan [after $100 M invested]
Posted on 05/27/2012 7:16:16 PM PDT by DeaconBenjamin
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.
LOL. Whoever dealt with the commies was hoping for a quick (state-controlled) profits, but karma bites back.
We're swimming in gas over here. Is Red Evo so hostile to the U.S. that he'd let his country sink rather than include us in the deal?
What am I missing?
It’s always the same story when dealing with communists - It isn’t about the deal, it isn’t about gas, it’s always about how many perks the more equal animals get in their trough. The company wasn’t interested in funding communist campaigns, nor did they support skipping elections, and therefore, they are no longer favored.
That said, the Chinese are more than willing to play the game, and give loads of freebies to those in power, and therefore, they are now the ‘other investors’ that the government favors.
It will be a really bad deal for all but those who are in power, which is precisely why the present government is interested. And the Chinese aren’t so picky as to election schedules, or even if elections take place. Plus they have shiny guns to feed to the communist government to keep it in power.
Bolivia was a gas exporter to Brazil and Argentina, and was set to become a major exporter to the world when Evo launched his revolution. He told his followers that hydrocarbons were evil, and that selling gas to the world would enslave them.
He also said that hydrocarbons were a betrayal of their culture, that coca was authentically Bolivian.
I remember Evo’s ally Chavez telling Bolivians that they should stay out of the hydrocarbons business, that it would only enslave them. I also remember Evo shipping coca to him for whatever thats worth.
Once in power Evo seized the gas facilities from the companies that built them. Now no one in their right mind will invest there. Except, as kingu points out, the Chinese. No one messes with them.
Venezuela’s nationalized oil industry is going the same way.
Sulks? Seems to me the availability of gas was crucial to the project. If the government isn't providing the access to the gas, they're not living up to their part of the agreement.
If another investor Bolivia likes better comes along, I wonder if the government will 'find' the gas it needs.
The ChiComs will move in to fill the void. No doubt about it.