More trouble brewing at Liepaja steelworks

Take note – story published 8 years ago

Current and former employees of the troubled KVV Liepajas Metalurgs steelwork have written an open letter to the Economics and Finance Ministries expressig their doubts about their new owners ability to run the plant.

The employees said that in 2013 and 2014 mass media had actively reported on all events in the insolvent metalworking plant -- the insolvency procedure and sell-off of its assets, but now the interest has exhausted. The employees claim that what is happening at present in the plant is worse than the events a couple of years ago when the company was declared insolvent.

The employees said in the letter that the selection of the investor had been a "fatal mistake", and, according to them, Economics Minister Dana Reizniece-Ozola has also admitted as much.

The letter noted that the Latvian security services, the government and consultants from Prudentia company had not paid attention or chose to ignore question marks over the winning bidder, Ukrainian scrap metal company KVV.

On May 18, 2015, the last hopes for full renewal of the plant's operation were extinguished and investors announced that it will cut production at the steel melting shop and lay off some of the freshly hired staff .

"It was done in a couple of days. People who had trusted promises of the new owners, had left the new jobs they had found after the plant had been closed earlier, returned to the plant and were again pushed out of the company," employees said in the letter, adding that in the coming months the new steel smelting equipment will be destroyed.

The employees said in the letter that it is still possible to save the plant. The plant with investments and lead by experienced investors can still operate and ensure profits.

The employees in the letter are asking why the government is not represented in the company's technical and financial issues. "Currently 80 percent of the company still belongs to the state because the investor has paid for 20 percent of its assets," the employees said, adding that there had been other candidates for the investor who had performed audit in the company and had come up with proposals on the plant's operations, but they had been excluded from the list.

The steel plant based in the Liepaja town in south-western Latvia was officially re-opened in a ceremony on March 6, 2015. The agreement about selling the production plant of the insolvent Liepajas Metalurgs to Ukraine’s KVV Group was signed on October 2, 2014. The Ukrainian company is to pay 107 million euros for Liepajas Metalurgs in several installments over the next 10 years.

The rolling mill re-opened at KVV LM in early March this year, and the steel melting shop was re-launched in the first half of May. At the time the steel maker's staff had been increased to 960.

KVV LM announced on May 19 that it felt forced to cut production at the steel melting shop and lay off some of the freshly hired staff because the cost price was too high to make its products competitive on the global market.  The company explained the high cost price with the high cost of electricity, in particular the large amounts payable for the mandatory purchase component (MPC or a component of the electricity price supporting production of renewable energy). This left some 600 workers in the company.

On November 12, 2013, the court declared Liepajas Metalurgs insolvent. The company ran into financial troubles and had to cease production in spring 2013 due to a shortage of working capital. Liepajas Metalurgs could not repay a state-guaranteed loan it had taken from an Italian bank, and the loan was repaid by the Latvian state. Liepajas Metalurgs was placed under legal protection but all negotiations about rescuing the company and bringing in a new investor failed and the company’s administrator filed for insolvency.

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