Ending months of speculation, curtains were finally drawn on Jindal Steel & Power’s (JSPL’s) showcase $2.1-billion Bolivian venture, the largest proposed investment by an Indian company in South America. The mining and infrastructure project was also the largest proposed by a foreign company at a single location in that nation.
“Jindal Steel Bolivia Ltd (JSB), a subsidiary of JSPL, on July 16 terminated the contract signed with the Bolivian government for an investment of $2.1 billion for the El Mutun mines,” JSPL said in a statement. The company cited “non-fulfilment of contract conditions by the Bolivian government” for the action.
The flagship entity of industrialist and Parliamentarian Naveen Jindal had, in 2007, won the rights of development for half of the 40-billion tonne reserves in El Mutun, the world’s largest iron ore deposit, for a period of 40 years. The project had soon run into rough weather as the two sides fought over gas allocation to the venture and the Bolivian government encashing the $13-million bank guarantee for the project.
JSPL had served its intent to terminate the contract last month, giving the government of Bolivia a 30-day window to resolve issues. The company was willing to consider staying on the project if the Bolivian government had informed as to how much gas could be supplied for operating the project. That, however, did not happen.
Apart from iron ore mining, JSPL was also to set up a 10 million tonne per annum (mtpa) pelletisation plant, a six-mtpa sponge iron plant, a 1.7-mtpa capacity steel plant and a 450-megawatt (Mw) power plant through its overseas subsidiary, JIndal Bolivia Ltd, as part of the contract.
The company has already made an investment exceeding $90 million on the project apart from making investment commitments of over $600 million for purchase of technology and machinery and making advance payments to vendors. A company official, however, said it would not be proper to say the investment already made had gone down the drain, as JSPL still intended to pursue international arbitration relating to the contract.
The Bolivian government was to sign an agreement for supply of 10 million standard cubic metre per day (mmscmd) of natural gas for the project within 180 days of signing of the contract. That agreement has not been signed so far. The government of Bolivia was willing to commit 2.5 mmscmd of gas supply citing shortage.
JSPL had also blamed the Bolivian government for not providing substantial land for the project which led to the delay in starting work. “The Bolivian government wants billions of dollars of investment in the country but they have encashed the bank guarantee of $18 million twice. This shows the government of Bolivia wants to kill the goose which lays the golden eggs,” JSPL had said in June. The dispute over the Bolivian government’s move to encash bank guarantee is already pending in the International Court of Justice.
The Bolivian government had also threatened to cancel the contract in 2010, alleging delays in the development of the project. JSPL was expected to invest $300 million for the first five years and $200 million for the next three in the venture.
