Ukrainian “investors” ruin biggest steelmaker in the Baltics

Employees of Liepājas Metalurgs, the biggest metallurgical enterprise in the Baltic states, have sent an open letter to the president, prime minister, ministers of economy and finance, as well as the Latvian Saeima saying that investors from Ukraine who bought the company earlier this year have actually ruined it, an EADaily correspondent reports.

Previously belonging to three big Latvian businessmen, KVV Liepajas Metalurgs has been experiencing serious problems since 2013. The previous owners Sergei Zakharyin, Ilya Segal, and Kirov Lipman appealed to the government of Latvia for assistance. The ministers said then that the government “must not invest in a private company, especially the one with nontransparent financing and permanent discrepancies between its investors.” As a result, the enterprise was declared insolvent in November 2013, and the production was stopped in the spring of the same year. Over 1500 people lost their jobs then.

In a government-organized contest, Ukrainian KVV Group  owned by Valery Krishtal and Yevgeny Kazmin bought Liepajas Metalurgs. KVV Group was chosen instead of several Russian participants, including the ones that, as experts say, offered better bids. KVV Group is engaged in scrap metal procurement and has a lot of metal recycling centers in Sevastopol, Kiev region, Zaporozhye, Chernigiv, and others. The deal totaled 107 million EUR, with KVV Group to be investing the main amount in parts within ten years, by 9 million EUR per year. 

The Ukrainian investors promised to re-launch the plant at full capacity, while the employees say the opposite.  It is known that the sale process of the plant is kept in secrecy, but even Economic Minister Dana Reizniece-Ozola called the selection of “investors” from Ukraine “a fatal mistake”.   In January, the steelworks having one of the most advanced steel-melting complexes in Europe was transferred to the Ukrainian KVV Group that has quite doubtful reputation. The authors of the letter say neither the Latvian security services nor the government paid attention to the criminal and raider scandals connected with the winning bidder. The Ukrainian company KVV doesn’t even has a website. However, as Liepaja mayor said, it was the “Deal of the Century.” Meantime, the new “investors” did not even conduct an elementary audit of the facility they bought. As to the “business plan” they presented at a news conference last autumn, it resembled comics for teens rather than a business plan, the authors of the letter say.

 “On May 18, 2015, the last hopes for full renewal of the plant's operation faded away and the 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, left the new jobs they had found after the plant was closed earlier, returned to the plant and were again pushed out of the company,” the authors of the letter say adding that  in the coming months the new steel melting equipment will be destroyed.

According to the employees, the new leadership of the plant refuses to fund the plant in the winter periods. The employees who are still working at the plant started disconnecting the shops from the electricity to save the funds of the “investors” who complain of huge losses and problems. The employees can no longer bear the clownish behavior of their new leadership. Their salaries and social payments have been curtailed, vacations are not recompensed and the salary is provided in envelops. The employees think the last shop and the staff will face the fate of the steel melting shop and the plant will be closed down soon.

For conclusion, the authors of the letter addressed Prime Minister Laimdota Straujuma asking her to explain her statement that the state will not suffer even if the plant halts operations and is shut down. "Please explain, Ms. Straujuma, to the metallurgical workers who have been laid off and those who continue to work at the plant, and to their families – what does the word "state" mean to you in this particular case?"