Baltic States – CIS, Financial Services, Latvia, Legislation, Markets and Companies, Metals Market

The government heard the Privatization Agency’s report on the situation with KVV Liepajas Metalurgs and decided to revisit the issue next Tuesday, May 24.

The whole loan granted by the Latvian government to struggling steelmaker KVV Liepajas Metalurgs could be recovered if the plant resumed its operations, Prime Minister Maris Kucinskis (Greens/Farmers) told journalists following Tuesday’s government meeting.

The prime minister indicated that the government still has not received acceptable proposals from the company's Ukrainian shareholders regarding the company's restructuring.

Kucinskis said that FeLM, a company established by the Latvian Privatization Agency for dealing with KVV Metalurgs’ issues, will have to report to the government on the current situation in the company. Latvia is not interested in injecting more money in KVV Liepajas Metalurgs. Instead, it has to recover as much money from the company as possible.

Kucinskis believes that all EUR 60 million loaned to KVV Liepajas Metalurgs could be recovered if the steelmaker resumed operations in a long term.

If the situation results in an international investment dispute with the KVV Liepajas Metalurgs shareholders, the government will be able to prove that it has done everything it had promised to the investors, Kucinskis said.

Economics Minister Arvils Aseradens said that KVV Liepajas Metalurgs is showing signs of insolvency. The Privatization Agency will have to choose the best scenario for further steps and propose it to the government next week, so that the Latvian state can recover the loan granted to KVV Liepajas Metalurgs.

Ukraine's KVV Group announced in late March it had been forced to take a decision on the conservation of KVV Liepajas Metalurgs steel plant because the negative factors hampering the company's operations – the crisis in the global metal industry, the company's debts to secured creditors and the Latvian government's reluctance to provide assistance to the industry – were persisting.

KVV Liepajas Metalurgs, based in Liepaja port city in south-western Latvia, has been struggling with financial trouble lately. The company's management has blamed the difficulties on a high electricity price and complicated situation in Europe's metal industry. The company has had difficulties paying its electricity bills and wages to workers. It has also missed the deadline for a payment it was supposed to make to the Latvian state for the Liepaja-based plant.

Ukraine’s KVV Group, which acquired Liepajas Metalurgs under an agreement signed on October 2, 2014, is supposed to pay for the plant EUR 107 million in several installments over the next 10 years.