Sable pins hope on electricity subsidy renewal

Published: 14 April 2014

Operations at ammonium nitrate producer Sable Chemicals hang in the balance as the Government is yet to renew a power subsidy agreement that it entered with the company to enable it sustain production of the commodity.

According to the New Ziana, the Government granted Sable a subsidy to continue producing using the electrolysis method which demands heavy electricity usage.

A subsidiary of the Industrial Development Corporation (IDC) which holds a 35 percent stake, Sable has over the past decade been undertaking studies to produce using a new method called coal gasification, which requires a $750 million investment.

The company is currently being supplied with electricity at $0.03 per kWh against the commercial rate of $0.14 per kWh to ensure it continues production.

IDC managing director Mike Ndudzo said the Government was yet to renew its commitment to continuing with the subsidy.

"It is on that arrangement that Sable continues to produce but up to end of December last year and as we are talking now, that agreement is yet to be reaffirmed, so we are hanging on our toes," he said.

"If we cannot be assured of further subsidisation of power, we have to close the electrolysis and revert full time to importation of ammonium nitrate."

Ndudzo said the Sable Chemicals was struggling to raise the $750 million to invest in coal gasification.

"We have been to China Development Bank, China Exim Bank, we have scouted all over the world," he said, adding investors required a number of guarantees on the ability of the company to service the loan and that there was a ready market for the fertilizer.

Ndudzo said the shareholders in Sable, who include TA Holdings, had at one time agreed to close the company for viability reasons but the Government had ordered them to re-open it due to its strategic importance in the agriculture sector.

The condition for re-opening was that power would continue to be provided at a subsidised rate.

- New Ziana