Polish government to re-launch sale of bankrupt steel mill
rsial sale of a steel mill because of allegations that the UK-based LNM Group acquired it unfairly.
Privatization of Polish Huta Stali Czestochowa, a company that controls the production assets of the bankrupt Huta Czestochowa steel mill, began last year.
It was cancelled in April after a row between Donetsk-based Donbas Industrial Union and LNM Group, the world’s second largest steel producer, escalated into a scandal of international proportions.
Oleksandr Pilipenko, director of corporate rights and investments at Donetsk-based Donbas Industrial Union, said the Polish government informally informed his company that the sale would begin again – from scratch – later this year.
Pilipenko said Polish officials are working out the legal details of restarting the sale on preferential terms, which would allow only DIU and LNM Group to bid.
Both companies entered final talks in the previous sale.
“These discussions are underway and the Polish government is trying to work out a legal framework for this to happen,” Pilipenko said.
“While we have not received official notice of the tender being restarted, we expect it to happen in a month or two,” Pilipenko said, adding that an ongoing lawsuit by his company against the Polish government has complicated this process.
“The Polish side is preparing a three-party agreement to withdraw all pending lawsuits,” he added.
The Polish government outraged DIU and Ukrainian government officials earlier this year when its selected LNM’s bid for the mill, despite an overwhelming vote by a Polish privatization tender commission in favor of a bid from DIU.
Earlier this year, Ukraine’s First Deputy Foreign Minister Oleksandr Chaly questioned Poland’s decision to choose LNM over DIU. DIU accused LNM Group of pressuring Polish authorities into favoring its offer. LNM Group has denied all accusations of wrongdoing.
Polish officials had claimed the sale was cancelled in response to concerns that plans for restructuring the mill may violate European Union rules regulating state aid to enterprises. However, a court ruling in favor of DIU from this year stated that DIU’s rights were violated in the tender and called upon Poland to launch privileged sale negotiations with the company. DIU would have to waive its right to pursue this lawsuit, if it accepts the offer by the government to begin the privatization tender process anew, Pilipenko added.
LNM Group spokesperson Nicole Davidson told Ukrainian News on Oct. 4 that she anticipated her company would also win a second tender.
“We do not believe that DIU has the predominant right to purchase Huta Czestochowa and we are confident that the government [of Poland] will hold an honest and open tender,” she said.
LNM Group has more than a dozen production facilities and a strong presence in Eastern Europe, with steel mills in Romania and the Czech Republic. The group has an annual production capacity of about 35 million tons and posted a turnover last year of $12 billion. Its newest addition in the region came last year, when it acquired Poland’s PHS steel mill, which has a capacity of more than six million tons per year.
With several steel mills in Ukraine and abroad, DIU has a capacity to produce more than 5 million tons of steel. The Ukrainian company posted revenues of about $1.5 billion last year.
Pilipenko added that his company completed the acquisition of its first steel mill abroad, Hungary’s Dunaferr, just last month. In addition to bidding for the Polish mill, the company also plans on bidding for Czech steel mill VITOL Steel.
