Investment for A brighter Future!

Annual Report of 2015

1.Introduction

The Board of Directors of Habesha Cement Share Company presents its Annual Report for the 2007 Budget Year as follows.

As per the power vested in it, the Board has been busy planning, supervising and evaluating the project progress for the last budget year. It has convened four Board and 12 Committee meetings.

It would be recalled that, due to huge effort of the Board and the support secured from the government, the project execution of the Holeta Greenfield project was started in May 2014 after lengthy delay.

Design and Revised Project Implementation Schedule was submitted by the contractor and it was reviewed by the company engineers, the Implementation Consultants and final version of the Project Schedule was agreed upon. As per the new schedule, the project is expected to be completed in September this year and the kiln will be fired on 1st October 2016.

The Board also reviewed the revised project cost submitted by the management and approved it after thoroughly assessing causes for the price increase. The company secured additional debt financing from PTA Bank and applied for the same to DBE. It also decides to increase the company’s capital by 46 % and issued new shares as per the mandate given to it by the shareholders annual meeting.

2.Overall Company’s Activity

2.1. Project Financing

The Total Project Cost of then 3,000 tcpd and 1.4 Mtpy capacity cement plant Habesha Cement is building is estimated to have to total project cost of 155 million USD. The summarized Project Cost and Financing Scheme is shown below.

No.

Description

Amount in

USD

1

Factory Machinery, Erection and Consultancy

84,131,142.00

2

Marine and Inland Transport

20,182,184.83

3

Site Development, Civil Construction, Goro Road and Fencing

13,393,284.26

4

Value Added Tax, Withholding Tax and Contingency

9,313,780.80

5

Pre-Production Interest and Bank Service Charge

7,846,094.12

6

Working Capital

6,293,601.11

7

Local Project Management

6,100,841.35

8

Quarry Machinery Equipment and Compensation for Quarry sites

3,074,996.11

9

Electric System and Water Well

2,644,614.08

10

Project Feasibility Study and ERP system

863,566.59

11

Vehicles

546,738.94

12

Office Furniture and Equipment

124,989.01

Total

154,515,833.21

Total Project budget is 3,167,574,580.73 (USD 154,515,833.21). This budget expected to be financed as presented below:

  • Bank Loan from PTA USD 50.50 million (Birr 1,059,349,000.00)
  • Loan from DBE Birr 660,330,384.00
  • Financed from Equity Birr 755,467,000.00
  • Out the total project budget, the remaining Birr 692,428,196.73 is expected to be financed from an additional loan of PTA and DBE as well as by raising additional equity.

2.2. Project Management

The project management scope is basically divided between the owner’s scope and the contractor’s scope. The activities’ undertaken under each scope are presented below:

2.2.1. Owner’s Scope

The major activities under its scope of activities for HC are listed below.

2.2.1.1. Supervision and Control of the Contractor

The company assigned competent personnel to supervise the contractor’s activities together with the implementation consultants. The majority of which were;

  • Finalizing the overall design work
  • Supervising the Civil Work
  • Supervising the equipment fabrication and monitoring the quality
  • Supervising the equipment supply
  • Supervising Raw Material Shade Erection work

2.2.1.2. Construction Inputs Supply

The following construction inputs were supplied for the civil construction.

  • 8,340 tons of Reinforcement Steel Bar
  • 3,993 ton of cement
  • 27,470 m3coarse aggregate
  • 24,000 m3 fine aggregate
  • 1,300 m3 of masonry stone
  • 30,000 pcs of bricks

2.2.1.3. Securing Mining Licenses

Mining Licenses for all cement raw materials is secured.

2.2.1.4. Electric Power Supply

Electric Power for construction period was supposed to be from the mains. However due to frequent interruption and quality of the power even when it is available, 1.25 MVA own gen set and 1.6 MVA rented gen sets were employed to supply the power required for various activities at site.

Installation of 2.0 MW power line for the Limestone Quarry supply was to be started at the end of the 2003 budget year and all the necessary payment was made to the then EEPCo. However the line is not still ready at the end of the last budget year. We are trying our best to get the line completed as quickly as possible.

Consultancy Agreement with the Ethiopian Electric Power is signed for the design of 14 km, 132 kV transmission line and the construction will begin the coming budget year. This line will be a 75 MW dedicated line which will supply uninterrupted power for the new cement plant.

2.2.1.5. Procurement and Logistics

6,807 ton of plant equipment, steel structure, steel plates and construction equipment was imported and transported to the site. Major Plant Equipment, such as Kiln, Raw Mill, Coal Mill, Cement Mill, De-dusting Equipment were imported.

2.2.1.6. Human Resource Development

Competent personnel were recruited and assigned as required. The Human Resource Recruitment and Development Strategy is to recruit competent manpower, train and assign as required. This will greatly reduce the cost of labor compared to the completion which is hiring far more expats in the plant operation.

2.2.2. Activities under the EPC Contractor

The EPC contractor has,

  • Finalized the design
  • Manufactured/Procured about 85 % of the plant equipment
  • Started the civil construction and completed 37.5 % of the civil work
  • Deployed 200 Chinese and 110 local workers.

2.3. Project Status

The following are the key mile stones for the project.

  • Start date of Civil Construction : 15 March 2015
  • Completion of Work at site : 28 September 2016
  • Kiln Firing date : 1st October 2016
  • First Bag of Cement : 15 October 2016
  • Commission Completion and handover : 31st December 2016

As at January 31st,

  • 90 % of the equipment is at site
  • 90 % of the Civil Construction is completed
  • 20 % of the Erection work is completed
  • 75 % of the total Project is completed

2.4. Project Schedule

The Project Schedule is presented below:

  • Completion of Civil Construction and Erection …… September 28, 2016
  • Test and Commissioning ………………………………... October 1, 2016
  • First Cement Production ………………………………… October 15, 2016
  • Provisional Acceptance ………………………………….. December 31,2016

3.Financial Report

3.1. Total Asset

Since its establishment, the company owns a total of ETB 1,643,063,167.00 assets as detailed below:

Description

Amount in USD

Fixed Asset (Net)

1,000,401,561.00

Lease Hold Land

10,206,583.00

Raw Material Resources

19,717,948.00

Inventories

89,264,082.00

Prepayments and Other Receivables

282,214,752.00

Cash at Bank

241,258,241.00

Total Assets

1,643,063,167.00

3.2. Liabilities

3.2.1. Payables

These payables are resulted from project implementation of the company and mainly include payables to the contractor, unpaid machinery rentals at the end of the year, unpaid bank interest and other related payables. The total amount of these payables is ETB 104,385,105.00.

From the total loan of ETB 660,330,384.00 approved by the DBE and USD 50,500,000.00 approved by PTA, the company utilized ETB 352,721,095.00 from DBE and USD 20,436,105 from PTA bank. It used for payment to the contractor, to secure raw material resources, to open LCs, to transport machinery and equipment, and to construction input.

3.2.2. Paid Up Capital

Since the establishment of the company, the total paid up capital of the company is ETB 749,810,220.00. In addition to this a total of ETB 5,331,241.00 represent deposits made to the company’s bank account by persons who subscribes shares but they were not yet identified.

3.3. Profit/Loss

The company prepares its financial reports in conformity with the International Financial Reporting Standards (IFRS). As per these standards, costs incurred but not qualified as Property, Plant and Equipment (PPE) shall be reported in the Profit/Loss report of the company. Accordingly, the costs incurred by the company since its establishment and not qualified as PPE are reported on the Profit/Loss report of the company. And hence, a total cumulative loss of ETB 49,796,570.00 was resulted. This loss will carry forward and proportionally offset the profit tax that to be paid by the company in its operational phase.

 

Description Amount in USD
Fixed Asset (Net) 1,000,401,561.00
Lease Hold Land 10,206,583.00
Raw Material Resources 19,717,948.00
Inventories 89,264,082.00
Prepayments and Other Receivables 282,214,752.00
Cash at Bank 241,258,241.00
Total Assets 1,643,063,167.00
 
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