31 Jan 2002

Enron bankruptcy likely to kill steel project

The Mozambican government has admitted that, with the bankruptcy of the US energy company Enron, there is a serious risk that the projected Maputo Iron and Steel Project (MISP) will not be built.

MISP was to have been a factory on the outskirts of Maputo producing two million tonnes of steel slabs a year. It would have used iron ore (magnetite) from South Africa, and natural gas from the southern Mozambican province of Inhambane. For Mozambique the great advantage of MISP was that it provided a market inside Mozambique for the vast quantities of natural gas in the Inhambane fields of Pande and Temane. Without MISP, most of the gas will simply be exported to South Africa, for use in the chemical plants of the South African company SASOL.

MISP was Enron's project, and Enron was the only confirmed shareholder. Enron intended to hold 50 per cent of the equity in MISP, and recruit other companies to subscribe the other 50 per cent. After Enron went bankrupt in December, no other company has expressed an interest in MISP.

A spokesman for the Ministry of Mineral Resources and Energy told AIM "Enron's bankruptcy compromises the government's hopes that another large scale industry would be set up in the country, which would, among other things, have made possible the creation of more jobs".

No doubt Enron is in breach of its agreements with the Mozambican government, but it is hard to see what compensation the government can expect, now that Enron shares are virtually worthless, its debts are far in excess of its assets, and the company's unorthodox, and possibly criminal behaviour, is under US congressional scrutiny. (AIM)

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