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State still in talks over steel mill
14 Jan 2013 Beata Balogová Business
REPORTS last year about the potential sale of the country’s largest steelworks and one of the flagship United States investments in Slovakia to an unspecified buyer not only prompted speculation about who that buyer might be, but also prompted the Slovak government to look at possible ways to convince U.S. Steel, the current owner, to stay put. Economy Minister Tomáš Malatinský confirmed on January 9 that the state is still negotiating with U.S. Steel over its ownership of the Košice steelworks, the SITA newswire reported.
“We are interested in reaching an agreement with U.S. Steel,” Malatinský said, as quoted by SITA, after a cabinet session on January 9, adding that the negotiations were confidential. “Some solutions are being sought but please let’s not specify any numbers or specific proposals, as negotiations are still under way.”
The minister thus neither confirmed nor denied reports published in early January by the Hospodárske Noviny daily that the state would offer the steel mill a discount on the service fees it pays to the electricity transmission system operator for electricity it generates in its own facilities.
Two years ago U.S. Steel paid roughly only one third of the full price, but is now required to pay 100-percent of the fees by Slovakia’s regulatory authority, SITA reported.
However, Finance Minister Peter Kažimír said that in order to receive state aid, U.S. Steel would first need to lodge a request for a reduction in its electricity bill with the government, the TASR newswire wrote. Kažimír added that possible discounts in electricity bills for large customers such as U.S. Steel would have to comply with EU legislation.
“There are state aid rules, issues with conditions vis-a-vis the environment, and this all needs to be taken into consideration,” said Kažimír, as quoted by TASR.
Nevertheless, Kažimír added that such a move would also have an impact on the state budget, as well as the planned public finance deficit.
“Of course, it is a question of what we prefer,” Kažimír said, adding that at the moment the state certainly prefers to preserve jobs.
Earlier in November, Ján Bača, spokesman for U.S. Steel Košice (USSK), U.S. Steel’s subsidiary in Slovakia, confirmed to The Slovak Spectator that “we have received expressions of interest in U.S. Steel Košice, likely due to its strong financial performance and strategic position in the region”.
After meeting the president of USSK, David J. Rintoul, in November, Prime Minister Robert Fico said that the government was ready to negotiate “conditions” for the company’s further operation in Slovakia if the investor chose to stay, but that he got the impression that the firm had decided to sell. He did not specify what “conditions” he had in mind.
Reports about the potential departure of U.S. Steel prompted speculation in the media over who might purchase the mill, Slovakia’s largest.
“We have not bought it,” said a spokesman for Ukrainian steel firm Metinvest, Ivan Šmidník, denying a report in Hospodárske Noviny that a deal had been signed on November 18 in Vienna.
USSK, the largest employer in eastern Slovakia, with 11,000 workers, emerged via U.S. Steel’s acquisition of Východoslovenské Železiarne (VSŽ) in 2000. It is currently one of the largest producers of flat-rolled products in Europe and supplies mainly the automotive, machine and electro-technical industries.
At the time of the acquisition of the ailing VSŽ, which before running into problems had bought various unrelated assets such as newspapers and a football club, USSK agreed to invest at least $700 million in the company over a period of 10 years. In return, it was offered tax breaks of up to $430 million under the then exchange rate over the same period, and the state promised not to reopen any tax-related cases against the firm and to participate in the removal of any unknown ecological burdens which might have emerged by 2004.
By 2008, USSK had used up all of its tax breaks under the deal, the Sme daily reported.
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