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Slovakia could pay U.S. Steel €260mBusiness in short
16 Sep 2013 Compiled by Spectator staff Business
THE ARBITRATION proceeding against Slovakia initiated by the Dutch shareholder of U.S. Steel Košice (USSK) could cost the state €260 million. U.S. Steel Global Holdings is seeking this sum, which is included in the draft state budget of the Finance Ministry, as compensation for losses caused by an increase in fees paid to the operator of the national grid, the Slovak Electricity Transmission System (SEPS).
The arbitration is continuing despite the signing of a memorandum of understanding by representatives of the Slovak government and the U.S. Steel Corporation in late March in Košice, in which the cabinet promised to reduce USSK’s energy bills by nearly €15 million per year, the Sme daily reported on September 6.
However, the memorandum does not state that this reduction will halt the arbitration.
“This memorandum of understanding shall not affect in any way the pending UNCITRAL [United Nations Commission on International Trade Law] arbitration proceedings initiated by U.S. Steel Global Holdings I B.V. against the Slovak Republic,” the document reads.
In 2012, U.S. Steel Corporation, through its Dutch subsidiary U.S. Steel Global Holdings, sued the Slovak Republic for setting new, higher tariff fees on electricity production which is self-generated for the company’s internal use, the US Department of State wrote on its website.
Prior to January 1, 2012 the affected companies had only paid one third of the sum, they have since had to pay the full amount. The reason for the change was a new law on supporting the production of electricity from renewable resources passed in 2009, the head of ÚRSO Jozef Holenčík told the Hospodárske Noviny daily back in January 2012.
As the arbitration is in its initial phase, the ministry and U.S. Steel Global Holdings could still agree to an out-of-court settlement, Sme wrote.
The increased fees were allegedly one of the reasons that provoked the steelmaker to contemplate selling the firm. The company announced in November 2012 that it was considering offers for USSK, one of the flagship United States investments in Slovakia, that were interesting enough to explore. The firm confirmed that there had been talks about a potential sale, but remained tight-lipped about the identity of potential buyers. Since then the Slovak cabinet has been negotiating with the steelmaker. The memorandum of understanding was signed upon the return of Slovak Prime Minister Robert Fico from a whirlwind two-day trip to the headquarters of U.S. Steel in Pittsburgh, USA.
In addition to reduced energy bills, the memorandum also guarantees that as of January 1, 2014 some laws, such as the law on renewable energy sources, will be changed to allow the company to receive state support for reconstructing the boilers in its on-site power station.
U.S. Steel agreed in return to preserve employment and not enact mass layoffs at its Košice subsidiary.
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