Hwange coal gasification negotiations ongoing

27 Apr, 2018 - 00:04 0 Views
Hwange coal gasification negotiations ongoing

eBusiness Weekly

Tawanda Musarurwa
Hwange Colliery Company Limited (HCCL) says negotiations for the takeover of the Hwange Coal Gasification Company are ongoing, despite the withdrawal of a cautionary on the issue.

HCCL had entered into negotiations with a Chinese partner for the takeover of HCGC on a build-own-operate-transfer (BOOT) arrangement after the company failed to construct a new coke oven battery due to cash constraints.

This was after a feasibility study by Indian firm, Water and Power Services Consultants (WAPCOS) assessed that the cost of a complete refurbishment of the old plant and the construction of a new coke oven battery would be $50 million.

HCCL managing director Thomas Makore told the Business Weekly that talks had not stalled.

“Negotiations are still ongoing between HCGC and Hwange Colliery. The targeted performance of the company will not be affected because this transaction will only be factored in after it is concluded,” he said.

Makore said the cautionary was not cancelled, but was withdrawn “in order not to violate stock exchange guidelines, a cautionary must not stand for a long time.”

The company had published three cautionary statements over the last three months, indicating that it was involved in “negotiations”.

Hwange Colliery is listed on the Zimbabwe Stock Exchange, the Johannesburg Stock Exchange and the London Stock Exchange.

Last week HCCL announced the suspension of negotiations.
“The shareholders of Hwange Colliery Company Limited and members of the public are advised that the company has suspended negotiations concerning a material transaction with an undisclosed party,” said Hwange company secretary Allen Masiya in a statement last Monday.

But in the coal-miner’s financial year results for the year to December 31, 2017, management said the “intended takeover of the Hwange Coal Gasification Company (HCGC) Coke Oven Battery pursuant to a BOOT agreement with its Chinese partners in HCGC was delayed,” although “engagements remain in place to ensure this is achieved given the importance to focus on high value products that enhance the company’s profitability.”

The move to revive the coke oven battery is part of broader initiatives by the group to expand and beneficiate its coal.

Part of these ‘broader plans’ included the signing, last year, of a 25-year coal-supply agreement with an independent power producer (IPP), with the IPP due to construct a coal-fired power station that would initially consume 200 000 tonnes a month of coal in three years’ time.

The coke oven battery was shut down in mid-2014 in a controlled manner in order to prevent damage to the oven furnaces.

And despite numerous interventions over many years to implement a rolling rebuild, the plant was antiquated and beyond its economic life. Therefore, the company has invited bidders to tender for the full rebuild of the coke oven battery, by-products plant and ancillary plants or the supply of a completely new coke oven battery of the same capacity together with the by-products and ancillary plant.

For the year just ended, HCCL narrowed its losses by 51 percent to $43, 8 million in the year to December 31, 2017, from $89, 9 million in the prior period on the back of improved output.

Revenue increased by 37 percent to $54,5 million from $39,9 million, which management attributed to an increase in sales volumes, which were up to 1,2 million tonnes from 921 000 tonnes in the prior comparable period.

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