Ukraine’s youngest billionaire, Konstyantin Zhevago, announced he is committed to investing up to $720 million in Kremikovtzi, Bulagria’s largest steel mill.
Ukraine’s youngest billionaire, Konstyantin Zhevago, announced he is committed to investing up to $720 million in Kremikovtzi, Bulagria’s largest steel mill. Zhevago and ArcelorMittal, the world’s biggest steelmaker, are the leading bidders for the financially ailing mill.
Zhevago, owner of Ferrexpo a Ukrainian ore mining company and majority shareholder of Vorskla Steel, said in a recent press statement he will invest between $500-$650 million in technology and $60-$120 million in environmental upgrades over the next five years, ensuring the mill would meet EU environmental standards.
The mill is 25 percent owned by the Bulgarian government and majority owned by Pramod Mittal, younger brother of Lakshmi Mittal, owner of ArcelorMittal. The mill declared a $1.34 billion debt at the end of 2007.
Vorksla Steel proposed a strategic emergency program for the revival of the steel mill on May 22 at a meeting with representatives of the Bulgarian Trade Union just two days after ArcelorMittal announced a $47 million emergency fund.
“We would be happy to buy the mill, but we currently cannot do this because the mill is being used as a pawn,” said Maxim Prasolov, head of corporate communications for Zhevago’s Finance and Credit Group, which owns Vorkskla.
Zhevago’s Vorksla Steel has stepped up acquisition efforts with a viability plan that promises to improve the mill’s balance sheets by delivering raw materials from Ferrexpo’s iron ore pit in Ukraine and renew contracts with state suppliers of gas, electricity and rail transportation, according to Bulgarian media reports. Vorksla Steel has plans to deliver Ukrainian steel to Kremikovtzi and save on import fees, according to a May 25 Vorksla Steel press release.
Media reports in recent weeks have indicated that the Bulgarian government fears that the buyer could declare the mill bankrupt after acquiring Kremikovtzi. The government is seeking a strategic investor because of the significance of the mill in its economy. The mill employs over 8,000 people and indirectly provides income to 100,000 people.
“We are interested in developing the enterprise. We don’t want to close it,” Prasolov stressed. “We are going to stay in Bulgaria for the long term. The Bulgarian government supports us.”
Now, Kremikovtzi buys its iron ore from Brazil. The price for iron ore from Ukraine is the same, but the cost of delivery is cheaper, said Prasolov, adding that Vorksla plans to cut out mediators to save money.
“In the past, the enterprise had many mediators who put the profit in their pockets,” he said. “We are going to sell production directly and 30 percent of steel will be sold to Bulgarian consumers. The profit we get we’ll use for employees’ salaries and environmental measures.”
ArcelorMittal would not provide any specific information about the negotiations for Kremikovtzi, but Haroon Hassan, the company’s corporate communications representative, confirmed their interest in the mill.
“This is part of our growth strategy. We look for opportunities continuously and if they fit the interest of our company then we are interested in it. This is certainly a project of interest,” he said.
