OKU-IBOKU NEWSPRINT MILL 'LL START PRODUCTION IN 2013- MD

 Slucky
In early 2008, Negris acquired the Nigerian Newsprint Manufacturing Company Limited, Akwa Ibom State. Renamed Oku-Iboku Pulp and Paper Limited, the Managing Director of the company, Mr. Ron Slucky, in an interview with Martin Ayankola and Nnodim Okechukwu, says the paper mill will start production by 2013.

How did Negris win the bid for the paper mill?
There was a public advert in 2008 by the Bureau of Public Enterprises and Negris applied as every other company which did at the time and I think five other companies were short-listed. And of course they opened up a financial bid of which Negris came second and the first company was disqualified on the basis of having submitted a bank cheque instead of a bank draft that was requested by the BPE. So Negris was named as the first bidder and that was how we got it, in fact it was a transparent bid.

Between 2008 and now, the company has not been operating, why?

We can summarise that by saying that when Negris acquired the former liquidated assets of NNMC, which was officially in August 2008 and following the handover by the BPE, Negris had already put in place all the financing required to rehabilitate the building and bring the assets back into full use. That was in August 2008 and that was when the project began. However, in October 2008, the financial crises broke and Lehman Brothers among others collapsed, while the Nigerian banking crisis also started. What that meant for us was that the money that was already being committed to facilitate the project evaporated and just wasn't available within the banking system anymore.

That wasn't Negris' caused problem, it wasn't the banks direct faults or problem, but was a global problem and it meant that Negris suddenly didn't have the funds to carry on rehabilitating existing assets to bring them back into production as it would have wished. And so to its credit, what it had to do was use its own resources to keep the momentum going, while we set about recovering from the effects of the global banking crisis. And in effect, what we had to do was to start again with raising the project's finance; you will appreciate that we are not talking about a small amount of project finance.

The total value of the project is very close to N23bn but in the new environment every financial institution who's looked at the project has seen the value of the project, however, they are now hyper cautious, hyper sensitive about wanting to minimise, evaluate and eliminate every possible risk that may or may not be associated with the project. And all that takes a great deal of time, a great deal of due diligence and a great deal of money and as a consequence, it has taken us long from recovering from the after effect of the global and Nigerian banking crisis. So, now at this point we really have to start again with the banks to be able to start the project proper, by rehabilitating the assets.

During that time, a lot of rehabilitation took place; we've had all the equipment manufacturers come to the site and we've had the technical teams here and we are going to replace all the items that are obsolete and we are going to properly maintain all of those that are not obsolete so that it makes good sense to people. So when the mill starts up, it will be as good as a new mill and it will be one of the most competitive newsprint mills anywhere in the world. We have some specific advantages of our own, which very few other mills enjoy; which is another reason all the banks want to be with us. They want to be part of the project, because they have looked at the project and they have recognised what a good project it is and what a profitable business it would become and they want to be part of it. But they also want to minimise any perceived exposure to risks and that has taken a long process to satisfy them, but the risks are well defined, well controlled, well mitigated and done with, and that is why we are now at a point where the rehabilitation project is about to start.

Once it starts, we then have about more than 12 months of works to do before we can be able to begin production; not because the mill is in a bad shape, no it is not; every single equipment manufacturer that has been there has been truly amazed by the good quality and standards of the assets. But the reason for that long time is because we do have some assets that are obsolete and they have to be replaced so that we can make an internationally competitive grade paper.

The bottom line is that we have to buy some new technology and that is on long deliveries and some of these deliveries stretch from nine to ten months before they even arrive in Nigeria. So that's the prime reason it will take more than 12 months by the time we've installed these new equipment before we can start running. But once it starts, it will be competitive with the best newsprint companies worldwide.

So during all this time, Negris has carried the burden of keeping all these works going on, all of these due diligence, all of the initial rehabilitation, the staff, the security of the site, all of that still in place at Okipp, so it's true to say that not much has been happening for the past 12 months. But that is so because we need a vast amount of capital to actually get on with that work for it will be wrong to start it in a haphazard manner. So what we want to do is to start the work and complete it smoothly.

Are you getting support from the banks?
We have pledges by banks to support us and new investors who are coming in alongside Negris. So Negris will be in control, but we are bringing institutional investors and we are bringing the rest of the funding through conventional commercial banks.

When do you plan to achieve this?
We are hoping to conclude that within the next one to two months. In terms of external investors, I have to be cautious here because we have a confidentiality agreement.

What is the projected capacity of the company when it comes on stream?

We know from lots of past experience, I mean I've been in this industry for 35 years and worked in many companies so I know what makes a paper mill tick; and we know that no paper mill is able to start up maybe the way a power plant might, for example where it comes up to full capacity quickly. Paper mills are much complex than that and so we know for a fact that this will take some time before we get to full production. We think it's going to take three years to get to full output and that full output based on newsprints alone initially is going to be over 100,000 tonnes a year, but we also have plans to make a whole family of papers not just newsprints and in that respect we are going to drive the capacity to almost double that. Considering the wide range of papers we intend to produce, that should drive our capacity to about 200,000 tonnes.

When are you likely to start production?
We are estimating from about 15 months from the first drawing of funds from the project financiers. And it is going to be early 2013.

Any known competitors in Nigeria?
Not at all, our only competition is from imports; there is no indigenous newsprint manufacturer in West or Central Africa. In fact you have to go all the way to Egypt, Ethiopia or South Africa on the African continent before you will find other newsprint mills. There is no one in this region that can make our kind of product.

How is your relationship with the community where the mill is located?

It has been very cordial and we have received the support of the locals and leaders of the communities for they have known that this would boost their economy tremendously when it commences operation.