LSC stands before the wolves?

RIGA – The 44 percent share sale of Latvia's Shipping Company has been predicted by many involved in the process of privatization as a failure. Bids by foreign shipping companies have to be submitted by March 27, and not one overseas company has conducted any thorough investigation of LSC's financial situation.

Andris Klavins, president of LSC, said the privatization of LSC has not been properly organized considering the shipping company is the second largest company in Latvia and is the only one competing solely internationally. With the previously unsuccessful proposals and confidential company information leaked by a Latvian media source, Klavins said that LSC's interests could be sold for a "song."

"LSC is the only large Latvian company that does not have a natural monopoly with a main value market niche," said Klavins. "The bad publicity in the media, with the leaking of confidential information to the public and possible investors, we feel like a naked young lady standing in front of a group of oglers."

Figures released by LSC on March 10 showed that the shipping company has recovered from financial losses in previous years and now is operating at a slight profit. Klavins said that profits could have been better without the external pressures concerning the sale of shares being offered by the LPA.

"There's been too much external pressure placed on myself and LSC on a day-to-day basis for us to implement future projects," said Klavins. "We're losing business and LSC is not flexible enough to compete internationally with the proposed privatization of the company."

LSC is in need of new tankers for its fleet. With privatization around the corner, the LPA has blocked LSC's purchase of new tankers. International tanker standards have become very stringent with the tanker disaster in the Bay of Biscay in France late last year. Klavins assures that the LSC fleet conforms to international standards but the renewal of the fleet is imperative.

The LPA spokesman, Edgars Zellins, did not offer too much information on the LSC sale, but said the LPA has organized a positive opportunity for overseas shipping companys to buy LSC shares. Janis Naglis, the general director of the LPA, along with experts from the LPA, visited Norway on March 15 to discuss privatization of LSC with Norwegian investors.

Naglis has stated his confidence there will be bidders for the privatization of the Latvian Shipping Company. Shipping companies Anders Wilhelmsen & Co, AS and Anglo Asian were given all necessary information by the LPA in Norway, but no firm offer from either of the two companies was received by the LPA members. Naglis said Anders Wilhelmsen and Anglo Asian had shown great interest in the possibility of buying shares in LSC.

This view of a positive outcome is not shared by Klavins or the Latvian Ministry of Economy. Romands Melnieks, ministry spokesman, said that after the three presentations by the LPA for the sale of LSC shares, the agency has not worked hard enough to have the privatization of the company succeed.

"We [the Ministry of Economy] do hope that there will be offers to purchase shares in the company, but the sale of these shares has not been organized in the same successful manner as the sale of Latvia's Gas shares," said Melnieks. "There has not been one international shipping company that has investigated LSC and no one is going to buy a cat in a bag."

The LPA's rule of a golden share is also of concern to overseas investors according to both the Ministry of Economics and Klavins. The golden share rule gives the government the power of legislation concerning the future company operations of LSC. The government will have the right to sell assets, overrule company policies and to vote the company bankrupt if such a situation arises. If an overseas investor buys the shares on offer, the company has no rights in such decisions decreed by the government.

PriceWaterhouseCoopers advised the minimum price of a LSC share be sold at 44 santims ($0.73), and the Ministry of Economy will not reduce the share price to entice international buyers. If there are no submissions to privatize LSC by the bid cut off date March 27, the Ministry of Economy wants to sell the company through overseas stockbrokers.

"We truly hope the sale happens, but realistically a sale of LSC in two to three years time through international stockbrokers will be a better proposition," said Melnieks. "If such a proposal is submitted it will be a decision that needs to be made by the government."

The Ministry of Economy wants better financial reports from LSC in the future concerning the company's financial situation. Melnieks said that the lacking information about the goings on at LSC and the two previous failed presentations by the LPA are the reasons behind the no show of interested investors in the shipping company.

"Information is needed on what is happening in the company," said Melnieks. "It is positive that LSC is in the black, but unfortunately the company does not report back to the government its status and this is of no good to the state."

March 10, Klavins was re-elected to the presidency of LSC after his work contract expired but only until April 4. The decision is connected to LSC's annual report submitted by auditors, on the company's yearly fiscal figures to the company's board members March 25. The report is then handed to the LSC council and its shareholders. The shareholders will then vote on whether they want Klavins to continue as the president of LSC.

Klavins said that with the pressures surrounding LSC from external forces, the shareholders did not vote to extend his contract on a longer basis.

"It is a curiosity but understandable that the shareholders did not extend my contract longer, no one wants to make waves," said Klavins. "Personally I am not confident of my future here, but at the last meeting there was only one out of 12 voting shareholders who were not happy with my performance as president."

The main issue surrounding the future of LSC is the company's own goal of modernizing the LSC fleet of tankers to compete effectively internationally. It can not proceed with these implementations until the company's future is clarified by the government's auction of LSC shares. Klavins said LSC can not develop future plans and can operate only one day at a time.

The unstable political situation in Latvia and the golden share rule has left possible investors feeling uncertain of their input in the company. Whatever the outcome, politically there will be a spade of comments thrown around on who has either botched the sale of LSC or who has succeeded in the privatization of the company.