Kenya’s Pan Paper factory located in Webuye has reached another milestone through a sale and purchase agreement between its joint receivers and Tarlochan ltd who are investing $60 million for its revival.
The company, a subsidiary of Rai Group of companies will take over the running of the defunct paper manufacturing plant.
The Chairman, Rai Group, Mr. Jaswant Rai said, “Our long term plan is to rehabilitate the main plant to ensure restoration of its full capacity. We plan to invest USD 60 million in the next 5- 10years.”
“We have the requisite capacity to undertake this investment as demonstrated by a similar operation in neighboring Tanzania and turned it round successfully,” he added.
Jaswant said the plants core function will be paper production.
“I can assure you there is no such intention of converting the mill into something else. This Company will run to manufacture paper. We shall not even make ply wood,” he said.
The opening of the factory will lead to the re-birth of an asset on the brink of a significant deterioration according to the Receiver Manager.
Bungoma County that hosts the factory never made a bid to it according to the Receiver. “Bungoma County was supportive to have the paper mill not anything else.”
“This is a groundbreaking receivership process that started with a global search for an investor with capability to restore and grow the local paper milling capacity as well as free the business from mounting debts,” said Mr. Kuria Muchiru, the Joint Receiver.
“Whereas, the lenders may not have actualized the full recovery of their debt, a greater gain with potential positive long term prospects for the region has been actualized,” he added.
However, despite the extensive marketing process, the assets have not generated substantial interest, with the only offer obtained being Ksh 0.9 billion from Rai Group.
The group was among the five bidders that had sought to buy the plant.
“The Kenyan government is not a shareholder to the plant, but it is a lender. 90per cent of the assets are being held by the long term lenders and they are the ones who will decide on the selling of them not the shareholders,” said Muchiru.
Speaking during the media briefing on Friday, Cabinet Secretary, Ministry of Industry, Investment and Trade, Adan Mohammed said,”The revival and mordernisation of the plant by private sector coupled with related economic activities is poised to have a tremendous positive multiplier effect on the local economy in Western region and Kenya.”
Once rehabilitated, Jaswant says they will be able to manufacture 25,000 tonnes of paper annually and gradually increase the production. He indicated that the investment will hinge on a much needed technological upgrade of the factory, application paper manufacturing efficiencies to bring down manufacturing cost and bolster competitiveness.
“We have developed a business plan that takes into consideration the environmental impact of paper production, conservation of forests and safe treatment of waste material.”
The Pan Paper East Africa was incorporated in 169 with Orient Paper Industries ltd, Government of Kenya and the International Finance Corporation was put under receivership on 20th March 2009 due to its inability to pay debts. The lenders who had security for the loans appointed a receiver manager in a bid to recover their money that was estimated at Ksh 6 Billion – International Finance Corporation, which is owed Sh2.5 billion, PTA Bank (Sh682 million), Deutsche Bank (Sh1.8 billion), and the East Africa Development Bank (Sh317 million.
The government owned a 25 per cent shareholding in the firm with an Indian conglomerate Orient Paper Ltd controlling 34 per cent.
The long term lenders are East Africa Development Bank, Kenya Commercial Bank, East and Southern Development Bank, Development Bank of Kenya, Noon Day Asset Management Asia PTE Limited.
Raiply is a multi-billion shilling business empire involved in the production of wood products such as blockboards, plywood and propylene bags. The company is said to have started operations in the 1970s under the leadership of Tarlochan Singh Rai and his four sons.