Universal Metals & Minerals Plc (UMM) is claiming nearly 14.7 million Br from the Privatisation and Public Enterprises Supervising Agency (PPESA) and the Ministry of Finance and Economic Development (MoFED), following the cancellation of a tender for the sale of Ethiopian Iron & Steel Factory.

The PPESA floated an international tender for the sale of the Ethiopian Iron & Steel Factory with an indicative price of 90 million Br in 2008. UMM, an Indian company with an investment in Ethiopia since November 2007 and one of the international companies that participated in the tender, was declared the winner in July 2008 at 125.3 million Br.

However, the alternative proposal that it presented to the PPESA on February 27, 2009, which requested more time to prepare the business plan and to pay the remaining 70pc, was not accepted. It also invited the PPESA to be a 20pc shareholder in the company, which was rejected too.

The bid was cancelled in March 2009. Following the cancellation, UMM filed a suit against the PPESA and the MoFED on June 8, 2010.

UMM transferred four million dollars, which was the 30pc advance payment, to the account of the PPESA at the National Bank of Ethiopia (NBE) in addition to a bid bond of nearly 187,000 dollars, it claims. However, only 2.7 million dollars was returned to it after the cancellation of the bid, which came as a result of a 10pc penalty of the total value of the tender, it claims.

There should not be a 10pc penalty, as the bid was cancelled before the contract of sale was signed with the PPESA, argued the plaintiff and the money to be forfeited should only be the bid bond.

The remaining amount should be returned to it in dollars with interest, as the original payment was in dollars and the bid was an international one, UMM argued. It should also be paid 850,000 dollars, which was deducted when the money was paid in the local currency, it claimed.

However, it was the Indian company that requested the bid to be cancelled, the PPESA argued, citing a force majeure. An agreement had been reached, as indicated by the fact that the company had paid the 30pc advance, argued the PPESA, which resulted in penalising the company 10pc of the total value of the bid as agreed in the sale contract. The money was deposited directly in the account of the government as the agency does not keep an account of its own, the PPESA claimed.

The defendant does not have any relation with the MoFED and the claim does not clearly indicate how the MoFED could be liable, the ministry objected. Every state institution has its own legal personality and account, and the ministry does not intervene in that, it argued.

Ethiopian Iron & Steel Factory, which was established in 1959 and restructured in 1993 with a registered capital of 4.4 million Br, was recently sold to Rose Ethiopia Plc for 144 million Br, an increase of 18.7 million Br from the price that it was awarded to Universal Minerals for. The bid defeated those of four other bidders, including Hadid Plc; Ethiopia Steel Plc; and two individuals, Sandy Sukela and Asmen Kame.