Steelworks asks to defer €2.7m payment to state

Take note – story published 8 years ago

With the current electricity prices, the Liepāja steelworks company KVV Liepājas Metalurgs could operate with losses of €8m, and the company is asking to defer the payment of €2.7m - to be made to the State Treasury - for two years, member of the company's board Ivor Talanov told BNS Monday in a press conference of the company.

Talanov said that the company cannot be competitive with the current electricity prices.

"If a competitive price for electricity isn't provided, the company will not be able to use its manufacture potential," he said.

He noted that the company asks the government to defer a €2.7m payment to the State Treasury for two years. 

The company wants to negotiate lower energy prices with the state so that it can become profitable again. It is estimated that by freeing the company from the mandatory purchase component [MPC or a component of the electricity price supporting production of renewable energy] and driving down the electricity price to €25 per mWh it could become profitable again.

As it's possible only during the night the company intends to work only night shifts next year. The daytime electricity price is €46 per mWh, which, if the MPC is removed, could allow the company to operate without losses 

The former owner of the company Kirovs Lipmans - whose bid to purchase the steelworks was turned down in August 2014 - attended the conference too, saying that the sale of the steelworks to Ukrainian entrepreneurs had been a corrupt deal. 

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. 

On October 2, 2014 the steelworks were sold to Ukrainian KVV Group. At one point the company employed 960 people. The company cut down production on May, citing 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, where only 400 work now. 

A supplier of the company, Elme Messer Metalurgs filed an insolvency request for the steelworks on December 16. 

The insolvency request by Elme Messer Metalurgs will be reviewed by Liepāja court on December 29. 

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