An Austrian consulting company has been hired by Derba Group to bring to reality the largest steel factory in the country. Derba Group (DG) a new umbrella company which overseas three subsidiaries and 12 investment projects signed the agreement on Tuesday, February 21, 2012.
DG will supervise and manage long-term strategic investments by Ethiopian born Saudi billionaire, Sheik Mohammed Hussein Ali al Amoudi; including steel, mining, cement, agriculture, transport, hospitality, and real estate.
HWC Swiss AG won the bid floated by DG last year to consult on the Toussa Steel Factory (TSF) at a cost of about 80 million birr. The company will be paid over three years to oversee the contractors’ proposal, contract preparation, project management and engineering supervision of the factory to be built.
Contractors have submitted their bid proposal for the construction of the new steel plant on January 18, 2012. The evaluation process has already begun while the contact agreement between the selected contractor and the company will be signed in three months. The factory is expected to begin operating three years after the contract begins.
The group has already expanded Dashen Cement which will produce cement for the corporation.
Though the mill is currently producing about 250,000 tons of cement annually, it has an installed capacity of producing 600,000 tons. Its expansion project is aimed at producing 4,000 tons of cement per day. This is half of the daily production capacity of the recently inaugurated cement factory by the group, Derba Midroc Cement. It is targeted to satisfy cement demand in the north eastern part of the country.
The establishment of Derba Group of Companies (DG) with a total investment cost of more than 71 billion birr was made public last month. Though the Ethiopian Commercial Code has no room for the establishment of a holding company, the promoters of the umbrella company are hopeful that the code will be amended.
DG has already made a substantial investment in the construction materials manufacturing sector. This includes Derba Midroc Cement (DMC), Dashen Cement (DC), Derba Transport (DT), and Maya PP Bag.
The group has also made an investment in agricultural development. Saudi Star Agricultural Development (SSAD), one of the largest agricultural investments in Ethiopia is incorporated under the group. It has a plan to grow crops like rice, sugar beets, wheat, barley, and maize.
The total investment cost of seven independently operating factories and projects under the group namely DMC, DT, Maya, Derba Lime and Chemicals, TSF, SSAD and DC are estimated to be around 71 billion birr. Their annual sale turnover is assumed to exceed 41 billion birr while the government revenue from value added tax alone would be over six billion birr per annum. The annual corporate income tax the government would rake in is estimated to one billion birr.
The factory will be built in the vicinity of Kombolcha Town in the Amhara regional state on 324hct of land. According to Capital sources, the new steel mill will consume an investment outlay of more than half a billion dollars. The factory needs 300 mega watts of electric power.
When completed TSF will produce 1.3 million ton of steel every year. The new steel plant with a melting shop and three rolling mills will produce re-bars (800,000 tons), wire- rods (150,000 tons), light sections (400,000 tons), medium sections (300,000 tons) and R 60 rails.
The seven companies are expected to create more than 370,000 permanent and temporary jobs when the factory is fully operational. Collectively DG has the potential to create even more jobs.
HWC Swiss AG has extensive global experience in iron and steel plant projects and engineering supervisory services.