A picture of Workers carrying packets of sugar at the Mumias Sugar factory in Western Kenya/ The standard
NAIROBI, Kenya Dec 15- French development financier Ecobank and Pan-African lender Ecobank have taken hold of Mumias Sugar Company’s prime assets from KCB Group.
On November 29, 2021, Ecobank filed a notice with the Attorney General’s office stating that the lender had onboarded Harveen Gadhoke as its receiver manager in a bid to takeover Mumias Sugar’s ethanol plant.
The forcible takeover sets the stage for a vicious court battle that could throw the planned leasing of the struggling sugar miller into chaos.
Proparco also filed a similar notice on the same day, claiming rights to the sugar miller’s power generation plant.
The two plants together with Mumias Sugar’s milling unit have been under KCB’s appointed receiver manager- Pongangipalli Venkata Ramana Rao- since the miller was placed under receivership in September 2019 to protect its assets and maintain operations.
On November 22, 2021, KCB lost full control of Mumias after the High Court directed the lender to involve other creditors in the operations and planned leasing of the ailing miller.
Justice Alfred Mabeya directed the KCB appointed receiver manager to involve and seek the nod of other creditors, including Ecobank Kenya and French development finance institution Proparco on the miller’s operations.
Other creditors protested KCB’s sole right over the miller, arguing that Rao was running the plant without their input despite the Kenyan bank being owed Sh545 million by Mumias Sugar.
Justice Mabeya ruled that Rao would be answerable to all the parties owed by Mumias Sugar through a creditors committee. The miller’s loans stood at Sh12.5 billion at the end of June 2018.
Mumias also owes Ecobank Kenya (Sh2 billion), Proparco (Sh1.9 billion), which financed the construction of the power plant at Mumias and NCBA (Sh401 million).
With the two notices issued to the AG, Mumias now has three receiver managers in a new turn that may derail leasing of the sugar miller.
The sugar miller has received revival bids from a number of investors, including businessman Julius Mwale, steel tycoon Narendra Raval and billionaire Rai family.
“Pursuant to Ecobank Kenya Ltd’s notice of appointment dated 29th November 2021, Mr Harveen Gadhoke has been appointed Receiver over the ethanol plant in respect of Mumias Sugar Company Limited (in receivership),” the notice stated.
The ethanol plant has been generating money for Mumias Sugar, particularly at the height of the Covid-19 pandemic when the product was in demand for the production of hand sanitizer.
The power plant, which uses sugar by-products to generate electricity through a process called co-generation, has been dormant.
In March 2019, Lawyer Jackline Kimeto moved to court seeking liquidation of Mumias, arguing that the miller was insolvent as it could not pay her debt of Sh76 million.
The court ruling and asset takeover is likely to affect the planned leasing of Mumias Sugar, which must now receive the backing of the top creditors.
Under the initial leasing deal, the successful firm was to run the plant on behalf of KCB for up to 25 years and pay the lender monthly leasing fees.
Mwale placed the highest bid of Sh27.6 billion for the leasing. Raval, through his Devki Group, offered Sh8.4 billion while Rai, under his West Kenya Sugar, offered Sh3.5 billion.
According to the receiver manager, a total of eight entities submitted their bids to lease the troubled sugar miller.
Unlike the other State-owned sugar firms where the bidding was through public tendering, the receiver-manager said the Mumias Sugar issue was handled through a private treaty between the investor and the bidders.
“Receiver was of the opinion that a private treaty is a much better option than public tendering. In addition, the private treaty will be less expensive, much faster and the receiver would be able to conclude the technical and financial assessments of the bidders in the shortest period,” Rao said.
KCB has been barred from auctioning the plant to secure assets used as security for other loans, prompting it to opt for leasing instead.