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{
"id": 132891,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/132891/?format=api",
"text_counter": 262,
"type": "speech",
"speaker_name": "Mr. Kosgey",
"speaker_title": "The Minister for Industrialization",
"speaker": {
"id": 177,
"legal_name": "Henry Kiprono Kosgey",
"slug": "henry-kosgey"
},
"content": " Mr. Deputy Speaker, Sir, Mr. Sambu, the hon. Member for Webuye asked for a Ministerial Statement on the current state in Pan Paper Mills and when it is going to be opened and why there is delay in re- opening it. I beg to give the following Statement: Pan African Paper Mills (PPM) in Webuye, under receivership, closed down abruptly on 30th January, 2009, due to power disconnection arising from non-payment of bills to the Kenya Power and Lighting Company (KPLC) estimated at Kshs209 million. At the time of the closure of the factory, the company had incurred a huge debt broken down as follows:- Long-term lenders; IFC, Kshs2,560,000;140; PTA Bank, Kshs622,034,000; EADB, Kshs317,352,000; KCB, Kshs112,148,000; Deutche Bank, Kshs1,898,000,873; DBK, Kshs52,915,000; Proparco, Kshs380,531,000 making a sub-total of slightly over Kshs6 billion. For short-term lenders; the KCB, Kshs689 million, Barclays Bank, Kshs331 million; Bank of Baroda, Kshs200 million; Eco Bank, Kshs47.5 million; DBK, Kshs67 million, a sub-total of Kshs1.2 billion. Subordinate and loans unsecured; IFC, Kshs212 million; the Management Company itself and the owner, Kshs610 million, sub-total, Kshs823 million making a total outstanding loan of slightly over Kshs8,102,837,000. The total debt owed does not include monies owed to the Government for unpaid royalties estimated at Kshs680 million. Key suppliers such as Kobil which is owed Kshs540 million and the KPLC owed Kshs209 million, as I said, IFC and Proparco agreed to write off their loan amounting to Kshs3.3 billion reducing the indebtedness to Kshs5.2 billion. The company’s performance prior to the closure had deteriorated tremendously and was on the verge of collapsing. The poor performance was blamed on the lack of operating licence, failing plants, inadequate wood supplies, high cost of fuel and power and stiff competition from cheap paper and paper products imported into the country. The prevailing circumstances compelled the management of Pan Paper Mills to seek Government intervention to rescue the company from imminent collapse. In an effort to address PPM’s problems, the Government formed a task force of various Ministries. The task force and the PPM management had reached a consensus and were jointly working towards implementation of the turn-around strategy when it closed on 30th January, 2009, abruptly as a result of mainly power bills. However, the PPM management who also doubled as directors of Orient Paper Mills (OPIL), the major shareholders in the company, abandoned the company and returned to India on March 2009 without the Government knowledge. The company was, therefore, left at the disposal of long-term and short-term lenders whose debenture holding gives them a right over the company’s fixed and floating assets, respectively and possible litigation from unsecured lenders aimed at liquidating the company to redeem their debt. In view of the turn of events and the impact of the closure of the factory to the economy of the country, and in particular to the people of western Kenya, the Government’s task force that was working on the turn- around strategy was mandated to work on modalities towards reviving the company since the Government, as a minority shareholder, had no legal rights to commence the revival process directly. The task force had to mobilize all lenders and key suppliers to negotiate"
}