Liepāja steelworks site faces new ownership wrangle

Latvian Television reported April 30 on new developments regarding the future ownership of the former Liepājas metalurgs steelworks in Liepāja, which has already been the subject of numerous legal wrangles and controversies.

According to LTV, an agreement has been signed to sell the plant's electrical steel melting complex and real estate to a Turkish investor ASLANLI Metallurgy for an undisclosed amount, though LTV suggested the sum was around 3 million euros. However, the management of Liepāja City Council and Special Economic Zone (SEZ) is considering using its pre-emption right to purchase the works themselves to prevent the sale.

Public administration agency 'Possessor' said April 30:

On April 30, 2021, SIA “FeLM” (FeLM) has entered into a purchase and sale agreement for movable and immovable property of the electric steel smelting complex located in Liepāja with ASLANLI Metalürji ve Metal Ürünler Sanayi ve Ticaret A.Ş. owner of the company Hamdi Alaedins Ejuboglu SIA "Liepāja Steel". The terms of the agreement concluded between the parties contain a trade secret and are therefore not disclosed.

As previous atempts to auction off the assets had "not yielded the expected result", in December 2020, changes were made to the sales strategy by organizing a tender. Several potential buyers from Europe and Asia participated in the tender and the buyer who offered the highest price was ASLANLI Metalürji ve Metal Ürünleri Sanayi ve Ticaret A.Ş. the administrator said, noting that "The buyer acquires the property rights to the assets after payment of the purchase amount in full and provided that the Liepāja Special Economic Zone Authority does not exercise the pre-emption right to the real estate included in the transaction."

According to LTV the company's planned investment amount in the next 3-5 years is estimated at 200 million euros. Initially, 400 to 450 employees would be needed to restart the company's operations, but when activating the operation, the average number of employees would reach 700 to 1,000. The company's turnover is planned to be 500 to 600 million euros, working at full capacity.

However, all such predictions are likely to be treated with a deal of skepticism in Liepāja after a previous sale of the steelworks to little-known Ukrainian investors turned into a disaster with promised jobs failing to materialize, with the owners and the state eventually heading towards international arbitration which recently found in the state's favor.   

On Thursday, in the closed part of the extraordinary sitting of the Cabinet of Ministers, the issue of the future of Liepājas metalurgs and the adjacent land plot was considered. Planning to create a new street network there and attract environmentally-friendly businesses, Liepāja council asked the government to hand over the kiln area, which has not been used since 2013, free of charge, but in the interests of the state, SIA FeLM announced that a potential buyer had been found.

The management of Liepāja SEZ tried unsuccessfully to find out more about the potential buyer.

"We have not seen any business or investment plans. To date, practically nothing. If the government has more at its disposal, please do not keep it a secret, show us what this company really offers to the privatization agency,” said Uldis Sesks, Liepāja mayor and Chairman of the Board of Liepāja SEZ (Liepāja Party).

"FeLM told how they chose this bidder, this Turkish company - the business plan was not evaluated. I do not think so. It was acknowledged that there are no guarantees for the number of jobs or millions of investments,” said Jānis Vilnītis, Chairman of the Liepāja City Council (Association of Latvian Regions).

But one bizarre twist to the story does not exactly inspire confidence. While the Turkish investor reportedly owns the company named “Liepaja Steel”, the Latvian company register shows that prior to a recent name change the company was known as 'SIA Buljona meistars' ('Broth master Ltd', as in soup). 

Liepāja Steel SIA in company register

The Liepāja side also expressed concerns about the environmental impact of a metallurgical plant owned by the same investors in Georgia.

"It seems from Riga that we need this company in Liepaja. We pointed out the risks to nearby entrepreneurs, Liepaja residents. The local government has no choice but to exercise the right to exercise pre-emption rights and purchase this real estate specified in Article 48 of the LSEZ Law,” said Vilnītis.

Sesks confirmed that the relevant negotiations have already been entered into with the Ministry of Economics. 

CONTEXT:

Due to financial difficulties, Liepājas metalurgs stopped production in the spring of 2013. Later, the company was declared insolvent and in 2014 was sold to Ukrainian investors, who renamed the company "KVV Liepājas metalurgs" and in 2015 temporarily resumed operations. On September 16, 2016, the Liepāja court declared "KVV Liepājas metalurgs" insolvent.

On September 25, 2019, the management of Liepāja Special Economic Zone in Riga signed an agreement with JSC Citadele banka on the acquisition of a part of the territory of the former company Liepājas metalurgs. Thus, 120 hectares in the vicinity of the former electric steel smelting workshop belong to only two owners  - Liepāja municipality and the state. 

In the territory once owned by "Liepājas metalurgs", the Liepāja Special Economic Zone intends to  develop a business park. The largest unsold asset of "KVV Liepājas metalurgs" - electric steel melting furnace - has been taken over by the subsidiary of the Privatization Agency "FeLM". It repeatedly tried to auction the electrical steel smelting complex and real estate, but failed. In the last auction, the starting price was set at 4.3 million euros.

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