Latvian steelmaker unhappy with government inaction over promised assistance

Latvian long-steel producer Liepajas Metalurgs has expressed to the Riga Stock Exchange its disappointment that the country’s government has taken no steps to support its attempts to sustain a healthy business.

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The difficult trading conditions in the European steel market prompted the company to seek assistance from the Baltic state earlier this year.

Liepajas Metalurgs rolls rebar and merchant bar from billets produced by a four-strand caster, using crude steel produced in its single electric arc furnace, which has a production capacity of 865,000 tpy.

A meeting of the Latvian cabinet of ministers on March 26 took no decision on assisting the plant, on grounds that “shareholders do not have a business plan”, Liepajas reported in an April 2 statement to the Riga exchange.

However, Sergei Zaharijns, who held the single largest stake in Liepajas at 49% at the end of 2012, did present a crisis management action plan to Latvia’s finance and economy ministers on March 18, the statement claimed.

No comments or questions were received by March 26, and it was thus not proper for the government to claim that a plan does not exist, the statement added.

“It should be emphasised that JSC Liepajas Metalurgs does not require from the government any investment, but rather action, co-ordinated with the company’s plan for finding a way out of the crisis,” the company said.

The plan sets out several courses of action requiring a total investment of 63 million lats ($115 million), Liepajas said.

These include capital procurement from new shareholders, long-term credit, agreements with other creditors, introducing an austerity programme, reducing administrative costs and inaugurating a social programme, as well as increasing production efficiency, it explained.

Zaharijns and Ilja Segals, the latter of whom holds 21% in the company and is a member of the board, have travelled to Istanbul, London and Milan for discussions intended to attract investors to the plant, the statement said.

Liepajas Metalurgs reported a loss of 8.75 million lats ($16 million) for 2012, compared with a net profit of 2.46 million lats ($4.5 million) in 2011.

Outstanding accounts payable at the steelmaker for 2012 totalled almost 156 million lats ($285 million), a 6.1% increase from 147 million lats ($268 million).

Liepajas placed some blame on the Latvian government for its current situation, claiming that it had turned its back on the plant even after an audit by Ernst & Young found that it had not undertaken any illegal activity.

The government had said that it would provide support if the Ernst & Young audit did not find any evidence of illegal activity, the statement said.

Business publications in February quoted Latvian economy minister Daniels Pavluts, on a visit to the plant that month, saying that possible debt refinancing solutions might emerge in the next two weeks, contingent on whether Liepajas Metalurgs opened its books about its financial state and forecasts while it sought a solution to its debt issues.

Latvia’s government is also putting financial burdens on Liepajas Metalurgs via its Obligatory Purchase Component for electricity, the statement said.

The plant may have to pay 10 million lats ($18.2 million) for electricity from green sources in 2013. It has already paid 11 million lats ($20 million) in the previous five years, the statement said.

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