Iraq picks 3 firms for cement joint ventures

AMMAN, Jan 11 (Reuters) - Iraq awarded production sharing deals to renovate three of its largest state-owned cement firms in the first such joint venture deals with private and foreign investors, a senior industry official said on Friday.
Three Iraqi-led consortiums -- out of 8 that bid -- backed by Romanian Uzein Export-Import, Lebanon's Seament and Germany's KHD won the 15-year contract to upgrade the cement factories in Samawa in the southern Muthanna region, Kirkuk in the north and al-Qaim near the Syrian border in western Anbar province.
Adel Karem, deputy minister of Industry and Minerals, said the three firms had accepted production sharing terms of 30 to 45 percent of their plant's output free of charge to the government after a 3-year rehabilitation plan to brings back capacity to 1.8 million tonnes annually for each plant.
Karem estimated that every firm would be investing around $150 million to revamp their factories, working at 20 percent capacity due to to lack of parts and electricity shortages.
France's Lafarge bid for the fourth plant near the city of Kerbala was rejected after its 12 percent production sharing offer was considered far too low, officials said
"The offers were below expectations so we will again offer Kerbala to get the best offer," Karem told Reuters in Amman.
Iraq had been working for the past three years to bring foreign investors to invest as much as $2 billion in its cement factories but political interference and instability has delayed the effort, Karem said.
The current Iraqi cement industry's total production, that includes 17 factories, is between 4-5 million tonnes annually, a fraction of its capacity of 25 million tonnes annually, the head of the Iraqi Cement State Company, Salam Ibrahim, told Reuters.
Before the 2003 invasion, Iraq produced around 10 million tonnes annually of cement, also well below capacity due to decade long economic sanctions.
Sanctions, which brought industries from petrochemicals to construction set up under Iraq's former command economy to a standstill, worsened after the war by electricity shortages and rampant corruption, officials privately say.
Currently Iraq imports around 6 million tonnes annually of cement from neighbouring Syria and Lebanon to cover consumption, Ibrahim added.
The joint venture scheme is a reversal of an earlier U.S. backed policy to pursue an aggressive privatisation that would have offered the 240 public enterprises for sale to foreign investors. These businesses operate with a subsidy and investors would have to keep on a bloated workforce.
Karem said the three cement deals would help jumpstart an ambitious multi-billion dollar plan to open the other state-owned enterprises to joint ventures with international investors in 2008.
"This will allow us to proceed ahead with the other cement firms and then move to other industries to allow us to rehabilitate our chemical and fertiliser industries to accelerate reconstruction efforts," Karem added.
This includes renovating and expanding a chemical plant in Basra in which preliminary talks had begun with Royal Dutch Shell Plc and Dow Chemical Co, he added.
For decades before the 2003 invasion, oil-rich Iraq had invested billions of dollars to set up a massive industrial base that once made it a major regional economic powerhouse.
Guardian