22 July 2017

Ethiopia: Two Foreign Companies Run Front to Supply Coal

Photo: Daily Nation
(file photo).

Two international coal suppliers, Riftcot Limited and HC Trading Plc, gave the lowest offers for the supply of 700,000 tonnes of coal to the Ethiopian Petroleum Supply Enterprise (EPSE). The procurement is estimated to cost close to 60 million Br.

The two companies offered a profit margin of 0.19 dollars and 2.74 dollars to supply 600,000 and 100,000 tonnes of coal, respectively, which is going to be used by 20 cement and three other factories, correspondingly.

Riftcot, based in Kenya, is known for supplying coal, Bitume Electricity Generation, and Off Grid Lighting items in East Africa. Last year, the company won a bid to supply 700,000 tonnes of coal to cement and other factories in the country.

HC Trading is known for supplying cement and coal globally, providing over six million tonnes of petroleum coke and steam coal for the global cement industry in a year.

Although the Enterprise has not awarded any of these companies yet, the selected supplier will be paid based on the international price of the coal, adding to the profit margin it offered. Currently, the international price of coal is 86.8 dollars per tonne.

The international competitive bid, which was announced two months ago, initially attracted five local suppliers and four international suppliers although the former did not make it to the technical evaluation for failing to submit a fully-fledged certificate.

The two lowest bidders competed with Glencore Plc and Huyton Inc during the technical evaluation.

A committee comprising of five experts from the Enterprise assessed whether these companies are technically fit to supply the coal for the coming 12 months.

During the evaluation, all of the companies were technically eligible to supply 600,000 tonnes of coal whereas Glencore Plc failed to pass the technical stage for the remaining 100,000 tonnes of coal.

Then a week later, the financial offer of the bidders was opened on July 21, 2017, at the premises of the Enterprise. Huyton Inc, whose chance of winning the bid is significantly low, gave the highest profit margin comparing with the other three bidders. It offered 2.28 dollars and 54.4 dollars a tonne for the supply of 600,000 and 100,000 tonnes of coal, respectively.

"The Enterprise bought the coal in bulk with the aim of saving foreign currency," said Abayneh Awol, manager of the petroleum supply & sales department at the Enterprise.

Mesfin Abi, chief executive officer of Habesha Cement Factory, one of the companies that buy coal through the Enterprise, believes that procuring the item for a single company will result in a price hike.

"Our demand is not more than 10,000 tonnes of coal monthly, so buying such a small amount of coal will lead to high costs," he said. "The greater the amount of the coal, the lower the cost will be."

EPSE was established in 2012 with a mandate of procuring petroleum products, then a year later, it started to procure coal by the request of cement and other factories.

In Ethiopia, cement factories contribute the lion's share to imports of coal in the country, accounting for more than 50pc of the country's coal imports, amounting to over 750,000 tonnes annually.

Despite the fact that the country can extract 197.6 metric tonnes of coal annually, the local consumption of coal in Ethiopia mainly comes from abroad.

"It is beneficial for cement factories to use coal instead of fuel," said Abebe Dinku (Prof), a civil engineer with over three decades of experience in the construction industry. "It is also cheaper than other means of energy."

Mesfin suggests investments which specialise in coal extraction should be encouraged in the country to minimise the cost spent to import coal.

"The country needs an investor who has a capacity to invest high capital in extracting coal," he said. "This is beneficial for any company as the country's demand for coal is soaring year on year."

The Enterprise will announce the winner in the coming week. Upon that, the awarded company will supply the coal for the cement factories on a monthly basis while the remaining factories will get the coal for the next four quarters of the current fiscal year.

Ethiopia

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