Maputo, Mozambique — The Mozambican government and the US corporation Enron have signed an implementation agreement for the Maputo Iron and Steel Project (MISP).
MISP is a project for a factory on the outskirts of Maputo that will produce two million tonnes of steel slabs a year, involving an investment of 1.1 billion US dollars.
The original plan was to use iron ore (magnetite) from Phalaborwa in South Africa - but Enron officials now say they are also considering sourcing the ore from elsewhere.
Natural gas from the Pande and Temane fields in the southern Mozambican province of Inhambane will be used in the iron reduction process.
The Friday agreement was signed by the Minister of Industry and Trade, Carlos Morgado, and the general director of MISP, Timothy Rebhorn, who both stressed the importance of the implementation accord for the future of the project.
The agreement includes the terms of authorisation for MISP, approved by the government in February, and starts to lay down time limits - although neither side would reveal what these are.
It also contains provisions for the use of Maputo port, defines the project site, and sets out the fiscal regime applicable to MISP.
The rules for Industrial Free Zones will apply to MISP, just as they do to the nearby MOZAL aluminium smelter. (The fiscal benefits include, for example, exemption from income tax for foreign workers at the factory, and a 40 percent reduction in income tax for Mozambican w orkers. The profits made by the company will be free of corporate tax.)
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Morgado told reporters after the signing that whereas the earlier "framework agreement" on MISP was a very general document, this went into some detail and would allow Enron to seek out further investors for the project.
The Enron manager for international marketing and public relations, Johan Zaayman, regarded the agreement as a guarantee of government support, which would allow Enron to attract further equity investors.
Enron's original partner in MISP was the South African Industrial Development Corporation (IDC). Enron and the IDC were each to hold 50 percent of the equity. But the IDC dropped out of the project in 1999.
Last year Enron announced that it had found five new partners to take over the IDC's 50 percent. They were the Swiss steel company Duferco, Kobe Steel of Japan, Midrex of the United States, VAI of Australia and Techint of Italy.
But all five have now dropped their interest in MISP, apparently because of doubts about the market for steel. Enron is once again left alone in the project. Without partners, the project cannot go ahead.
An Enron release on MISP states categorically: "The next step before proceeding with the project is subscribing the remaining equity, which will include an operating company experienced in steel making."
