Indorama: a privatisation success story Featured

Indorama: a privatisation success story

Indorama Eleme Petrochemicals plant in Port Harcourt is a privatisation success story and boon to the economy

By 2005, the Eleme Petrochemicals plant in Port Harcourt owned by the state oil giant, Nigerian National Petroleum Corporation (NNPC), was almost acquiring the toga of a white elephant. The near moribund state of the plant was a disservice to its capability. Built by a consortium of some of the world’s best contractors from Japan, Italy and France, at enormous foreign exchange cost, the complex includes an olefins plant using technology licensed by MW Kellog of America, a polyethylene plant from Nova Chemicals of Canada and a polypropylene plant licensed by Basell of Italy. Sitting on 400 acres of land, it also has a captive power plant, utilities, effluent treatment plant storage tanks, bagging area and warehouses. The Nigerian government had intended to achieve self sufficiency in petrochemicals to provide the raw materials for sundry industries. However, poor facilities maintenance and political interference which led to indefensible management changes literally brought the plant to its knees.

The Olusegun Obasanjo government decided the only way to stop the petrochemicals complex from going the way of the four refineries owned by NNPC was to privatise the plant. After a competitive bidding process, Indorama, an Indonesian chemicals conglomerate, emerged the core investor with a 65 per cent stake (the Nigerian government still owns 15 per cent, the Rivers State government, 10 per cent, the host community of Eleme, 7.5 per cent and the workers, 2.5 per cent.) Indorama took over the company by May 2006.

Fast forward eleven years later and the company, now renamed Indorama Eleme Petrochemicals Limited (IEPL) is an uncommon success story of Nigeria’s privatization exercise. It is also one of the industrial icons in Rivers State, the hub of Nigeria’s oil economy.

Immediately it took over the company, Indorama carried out a Turn Around Maintenance (TAM) and restarted the plant five months later. Within the first five years, it invested $575 million to get the plant to operate at 100 per cent capacity producing ethylene, polyethylene and polypropylene.  The company also added a polyethylene terephthalate (PET) plant to produce the raw materials needed by the plastic bottling companies.

Indorama went beyond what it met on ground to launch an ambitious expansion programme. Its success story had spread like wild fire in the African harmattan so it had no difficulty in getting stakeholders, from the Nigerian government to international lending agencies, to buy into its vision to make Nigeria the petrochemicals and fertilizer hub of Africa by the year 2020. To achieve this, Indorama would invest $4.2 billion in the complex by that date.

The core of the expansion programme was the building of the largest single urea plant in the world with a capacity for 1. 5 million metric tonnes of fertilizer a year. The project also includes a jetty at nearby Onne port and an 83 kilometre gas pipeline to supply the feedstock. Work started in 2013 and was completed within 36 months.   The project cost of $1.5 billion was financed through equity and loans in a 1:2 ratio. It is a testimonial to the success of the company that those who lined up to finance the plant included the International Finance Corporation (IFC), the African Development Bank (AfDB), the Africa Export Import Bank (AFREXIM), the Bank of India and two Nigerian banks (Standard Chartered and Stanbic IBTC). Carsten Mueller, senior manager at IFC said the lender was wooed by Indorama’s pedigree in massive largescale manufacturing and its commitment to Nigeria’s development.

The completion of the plant has made Nigeria self sufficient in fertilizer production. Apart from supplying the granular urea directly to farmers nationwide, the company also supplies urea to 11 blending plants that produce NPK fertilizer. More than 90 trucks (made carrying 600 bags each) transport the urea daily to different parts of the country.

Manish Mundra, the managing director of Indorama Nigeria says the plant has enabled the company meet the needs of farmers all across the country. During a recent visit to the company, the minister of agriculture, Audu Ogbeh and minister of state, Heineken Lokpobri, said Indorama was helping the government reach its goal of greater food security in the country.

As much as 70 per cent of the plant’s output is exported to countries in Europe, Asia, US and other African countries.  As Amit Lohia, Group Managing Director of Indorama predicted in 2013, the fertilizer plant has made ‘Africa stand out in the agricultural landscape’.

 Indorama has recorded many milestones in its vision of building Africa's largest petrochemicals and fertiliser hub. Currently, it operates at 100 per cent capacity, thereby fully meeting the needs of the country's plastics and fertiliser industries. Various Nigerian government agencies like the Bureau of Public Enterprise (BPE) and the Raw Material Research and Development Council (RMRDC) have lauded Indorama's transformation of the plant.    Before Indorama's arrival, Nigeria's plastics industry had been hit by both the lack of raw materials domestically and the cost of having to import them. Companies had to keep inventory of up to six months to sustain continuous production. The company’s operations have seen to the revival of the sector and a growth of more than 300 per cent in the past 10 years.

‘Since 2006, IEPL has been supplying highly needed petrochemicals – polyethylene, polypropylene and PET (also called polymer resins), of different grades and variants to over 450 Nigerian companies’, says Mundra. ‘These companies use Indorama resins to manufacture items such as water tanks; automobile dashboards, bumpers and fenders; helmets, waste disposal bins, carpets, artificial hairs, containers for healthcare products, bottles for water and beverages, plastic chairs and tables, sacks, shopping bags, industrial pipes,  bread wrappers and other packaging products used in the beverage, bottling, pharmaceuticals, paints, textiles and allied industries.’

RMRDC agrees. The agency says Indorama is the live wire of 450 companies in plastics, pharmaceutials, foam, bottling, breverages, paints and breweries. As a patriotic duty, the company meets local demands for its petrochemical products before consideration of export orders despite the financial rewards of the latter.

 Indorama's presence has had a multiplier effect on the economy, not least the number of jobs it has created. Indorama Eleme Petrochemicals and its sister companies employ more than  3,000 Nigerians, while around 4,700 more work in the value chain in Port Harcourt, Lagos, Kaduna,  Kano and the capital Abuja. It  has also had a positive impact on its six host communities in Rivers State, comprising Akpajo Njuru/Akpakpan, Okerewa, Aleto, Agbonchia and Elelenwo.   When it comes to its corporate social responsibility commitments, the company has an impressive track record.  According to Kendrick Oluka, Indorama's  community relations and development chief,  since 2012 it has awarded more than N14bn to the six communities, as well executing a number of projects, including  the construction of 12 classrooms,  a library, laboratory and sick-bay at the Community Secondary School in Aleto. It has also  awarded scholarships to poor students from the six communities and beyond.  Meanwhile, it has renovated Eleme General Hospital,  donated medical equipment worth more than N80m, installed 33KVA power sub-station at Akpajo as part of its rural electrification programme,  and built   a police station at Elelenwo.  When Nyesom Wike, the governor of Rivers State, assumed office in 2015, one of his priority attentions was how to fix the dilapidated Eleme-Onne Federal Highway which was a commercial route to the country's Onne Sea Port, Indorama Petrochemicals and NNPC’s refinery. Indorama provided N530m in counterpart funds to fix the road.  Also, in November 2016, as part of its contribution to the training of armed forces personnel, the company made a  donation of solid high quality table seats to the Nigeria Navy Basic Training School, Onne.

  While on a tour of Indorama facilities in November 2016, Ben Murray Bruce, the chair of the Senate Committee on Privatisation and Commercialisation, said: ‘We have gone round to see most of the privatised enterprises and Indorama is the success story, especially in providing base raw materials for Nigerian industries and fertilisers for Nigerian farmers, as well as paying huge tax revenue of over N1bn to the government in the last 10 years.’ The company has also paid dividend shares to both the federal and Rivers State governments, who own 15 and 10 percent shares, respectively.

Wike holds up Indorama as a model enterprise in Rivers State. During a visit to the plant, he called on other investors to emulate Indorama by investing in the state. “Rivers State is safe for investors’, he added. In recognition of Indorama’s contribution to the Rivers State economy, Mundra was conferred with the Distinguished Service Star of Rivers State (DSSRS) to mark its golden jubilee celebrations.

BPE says Indorama achievements at Eleme include attracting the highest foreign direct investment in the downstream non oil and gas sector, conversion of dead assets through world class technical support and the commitment to build the largest petrochemical hub in Africa. Vincent Akpotaire, the immediate past director general of the agency says the take over of Eleme Petrochemicals by Indorama is one of the success stories of the government’s privatisation programme. Almost everyone agrees.

Last modified onTuesday, 01 August 2017 11:33
back to top