Essar Energy Holdings was chosen ahead of Sino Zimbabwe Ltd, Jindhal Steel of India and Sovereign Capitala, a consortium of local and South African investors.
ArcelorMittal South Africa is said to have pulled out of the bidding race last month.
Sources close to the deal told businessdigest this week that Essar Energy Holdings had won the bid to have a controlling stake in Ziscosteel.
“The three principals (President Robert Mugabe, Prime Minister Morgan Tsvangirai and Arthur Mutambara) have settled for Essar (Energy Holdings). The Mauritian based company is expected to invest more than US$60 million to revive Ziscosteel,” an impeccable source said on Tuesday. “An official announcement should be made next week if all goes according to plans. The company was chosen ahead of Sino Zimbabwe and Jindal Steel.”
Essar Energy Holdings Ltd operates as a holding company which through its subsidiaries engages in exploration and production, refining and retailing of petroleum products. Essar Energy Holdings Ltd operates as a subsidiary of Essar Global Ltd.
The company is reported to have a market capitalisation of US$10 billion and is said to be planning a listing on the London Stock Exchange.
Ziscosteel is the largest steel works in the country. Over the years the company has faced many operational problems and has been dogged by countless corruption scandals.
As of early 2008, the company was producing less than 12 500 tonnes, way below the break-even capacity of 25 000 tonnes. It is wholly owned by government.
Zisco stopped operations after succumbing to serious financial limitations, which had pushed the firm into selling scrap metal accumulated over 40 years to survive before finally going down on its knees.
Last week in parliament, Industry minister Welshman Ncube said the sale of Ziscosteel would be concluded by end of November if the principals –– Mugabe, Tsvangirai and Mutambara — select a partner from among the three potential investors shortlisted by his ministry to buy the 60% stake in the company. Ncube could not be reached for comment yesterday.
Zisco has two major debts, one to a Chinese bank that was due and has been renegotiated to be paid by end of 2011. The other debt involves US$240 million from a German bank.
Any new investor had to make a commitment to liquidate this debt which has caused some government properties in Botswana and South Africa to be attached.
The investor has to put in US$65 million for refurbishment of blast furnaces four and three and the coke oven. In addition to all this, the investor should also be in position to pay for government shares when government divests.
Two weeks ago businessman Philip Chiyangwa was reported to have written to Mugabe asking him to consider his company to buy the Zisco stake but analysts say he has no capacity to get the steel maker running again.