Off the Jinja-Tororo road, about 11 km from Tororo town is the 89 MW Electromaxx thermal power plant.
Recently the deep throbbing chug of the plant’s turbines have
been restricted to a few hours a week, to keep the engines in good order, as
the country has little use for the plant’s power, thanks to an oversupply of
hydroelectric power from our dams on the River Nile.
The plant is reported to have cost $60m (sh200b) to set up.
About a kilometer up the road from the plant is the proposed
site for a 10,000 barrels per day refinery. The thinking is that Electromaxx
can import crude oil, refine it to get the Heavy Fuel Oil (HFO) to run their
thermal power plant – and one other in Arua, and the rest – petrol, diesel,
kerosene and bitumen, they can sell on the open market. It makes economic sense, as it costs almost
the same to land a barrel of HFO as one of crude oil in Tororo, the difference
is the additional fuel products they can distil from the crude oil and sell on
the market.
"It works on paper, but Electromaxx did not factor in Uganda’s officialdom...
The project has gone silent for the last three or so years,
because somebody has decided that this plant will be competition for the much
larger one in western Uganda and has decided to hold on to the license. A
license they were supposed to get long before the 20,000 bpd refinery in
western Uganda. The western Uganda refinery will be fed out of Uganda’s own
crude deposits.
Electromaxx has already committed to $40 million in clearing
the site, initial civil works, some of the plant already at the scene and
signed commitments to import the crude oil from Nigeria. Four years of trooping
from government office to government office has proven futile.
In the meantime, a six-year facility to finance the deal is
being serviced on a monthly basis, straining Electromaxx and its parent
company, Simba Group’s cashflows to breaking point. Simba Group’s founder and
chairman is Ugandan businessman Patrick Bitature.
Electromaxx have been here before.
At the beginning of the century they were frustrated from
getting a license to develop the aforementioned thermal power generation plant,
in one instance told to their faces that such investments can only be managed
by “foreign investors”. After failing to win the Namanve thermal generation
plant, Simba Group sued government for their right to develop the plant. The
Tororo plant was a compromise site they were awarded to drop the suit.
Since then they have not only increased the installed
capacity of the Tororo plant from the initial 20MW to 89 MW but have also
continued to set up an 8MW thermal power plant in Arua that has gone some way
to ease the power situation in the region.
"Aggravating the Group’s cashflow situation is the government holding on to millions of dollars in payments due to the Tororo and Arua plant...
According to people intimately involved with the project,
supplying government has been a nightmare that has held back the growth of the
group, which up to that point was growing at prodigious pace on the back of its
telecom and real estate portfolios.
This single event has led to a bruising battle with South African-based financiers Vantage Capital over the last few weeks, who have resorted to a
public battle to recover a $10m debt to Simba Group they made out in 2014.
Vantage Capital’s attempt to take over Simba Group’s shares, they had held as
collateral for the loan, was frustrated by the Uganda Registration Bureau
Service (URBS), who denied their request on account of them not being legal
entity in Uganda. The court upheld URBS position and sent the two antagonists
to arbitration.
It’s widely known that Bitature and his Simba Group, saw
their fortunes take off with the entrance of MTN into this market. Previously a
night club operator, forex bureau owner and tour and travel agent, his
partnership with MTN, where he was the initial sole dealer of their airtime
allowed the Group to spread its wings in to the region – providing the same
services for Safaricom in Kenya, Vodacom in Tanzania and brief ill-fated foray
into Nigeria. In addition, he got into the hotel business before the Commonwealth
Heads of Government meeting (CHOGM) in 2007.
He is a local investor clearly on the rise.
"His misadventures with the government lend credence to the perception that government is willing to bend over backwards for foreign investors but for local investors not only do they leave them sink or swim but even go further to actively frustrate them....
According to the budget government owes suppliers almost
sh5trillion, some of these debts going back years.
The Simba Group situation is particularly galling because his refinery in Tororo fits in very well with the current flavour of the month – value addition. Is it possible that if Simba Group had had their refinery up and running by now we may not have been suffering the current pump prices that are now dangerously close to sh6,000 a liter?
