Sierra Leone Telegraph: 6 July 2015
The Sierra Leone Telegraph has tonight learnt that Addax – one of the handful of foreign companies to answer to president Koroma’s call for foreign direct investment in 2008, is now unable to meet its financial obligations, due to costs overrun and drop in production output.
According to sources in Freetown, the company had shut down its operations until further notice, while it keeps the business under review.
“Addax Bioenergy Company has officially announced at a meeting held at Mara community that they will shut down operations for the next six months starting from 1st July, 2015. This has come as a result of the fact that the company can no longer financially support its operations as they are faced with huge financial constrains.
“In an earlier engagement with the company during our monitoring visits, a senior company official disclosed that they have a financial deficit close to Euro 150,000,000 (one hundred and fifty million Euros).
“He also stated that the company was not able to reach its threshold of producing 19,000,000 (Nineteen million) liters ethanol as they were only able to produce 7,000,000 (seven million) liters and this has negatively impacted on the profitability of the company.
“Also, as a result of low yield of the sugarcanes the company has not been able to meet their promise of supplying 13Mega Watt of electricity to the national grid.
“At the moment, close to 80 percent of expatriate staff and casual workers have been laid off and it is feared that close to 2,000 jobs will be lost during this six months period.
“At the Mara meeting today, the company encouraged the local communities to support them in looking after their properties so that they will not be vandalized,” an unofficial report stated yesterday.
Last week the company hinted in a published statement that all was not well with its operations.
On the 24th June 2015, the company announced that: “Over the next six months, AOG, as main shareholder and Addax Bioenergy SA, have decided to downscale their sugarcane bioethanol operation in Makeni, Sierra Leone, and to conduct a review of all options for the future.”
It went on to state that: “Since its inception in 2008, this Greenfield project, run by AOG subsidiary Addax Bioenergy, has had to overcome a number of unforeseeable events. These have had a significant impact on the timeframe, costs and revenues initially planned.
“They include the Ebola outbreak in May 2014, which not only has had a terrible human toll on the country, but has also led to substantial delays as most of Addax Bioenergy’s contractors declared “force majeure” and left the site.”
And in order to mitigate the continuing risk of serious financial losses, the company said that it was: “Taking advantage of the naturally-low level of activity during the rainy season when no revenues are earned, costs will be reduced and operations downscaled. The number of expatriate consultants will be reduced. At the same time, most local employees will be maintained and assets kept in good working order.”
“The review process will explore all options for the operation’s future. AOG and Addax Bioenergy intend to work closely with H.E. President of Sierra Leone and his government to find the right way forward for the operation and for the country.”
The Addax operation is a massive 10,000 hectares (ha) sugar cane plantation and processing plant, employing about 3,600 people. It is located approximately 15km west of Makeni in the Bombali District and in the Chiefdom of Malal Mara in the Tonkolili District in the Northern Province of Sierra Leone.
The factory and related infrastructure, fields developed for rice farming and ecological conservation areas cover another 4,300 ha, bringing the effective project area to around 14,300 ha.
The company’s plan was to produce about 85,000m3 of ethanol per annum and approximately 100,000 MWh of renewable power per annum. The refinery and the irrigation system for the sugarcane estates is said to be powered by the biomass plant, fuelled by sugarcane fibre residues.
It is understood that failure by the company to meet its promised 15 MW of power supply to the national grid has been disappointing, though construction of the distillery and power plant was completed in 2014, with production planned to become fully operational in 2017, according to Addax.
Early this year, African Minerals was declared bankrupt after failing to meet its financial obligations to creditors, and was then bought out by the Chinese majority shareholder – Shandong Ltd., and there are suspicions the Chinese may well be lining up their cash waiting to pick the pieces of Addax at next to nothing.
Last week, four large oil companies decided to pull out of the oil exploration business in Sierra Leone, stating that the country’s oil sector is not commercially viable. Also, there are suspicions the Chinese may be keeping an eye on those abandoned oil exploration rights.