RIGA – Failure to find a strategic investor for the Latvian Shipping Company may put off the company's privatization until the end of the year.
According to the government-approved privatization plan, investors willing to buy the Latvian Shipping Company's shares were to submit their bids by June 15.
By the deadline the LPA received confirmation from two international companies, but the next day it was announced that their bids were invalid. The LPA said Tufton Oceanic Investments and Eastwind Maritime S.A. did not submit all the necessary documents.
Both companies had been interested in the shipping company's privatization earlier. The international shipping company Tufton Oceanic Investments was chosen as a potential investor at the end of 1997. Eastwind Maritime S.A. was chosen then as reserve.
LPA Director General Janis Naglis said the government-approved privatization terms are now also invalid, and the agency will be working on the new ones.
"It will take at least month and a half before the new terms are prepared," said Naglis. The terms will later have to be approved by the Cabinet.
This may postpone the Latvian Shipping Company's privatization until the end of the year.
"Now that the long and carefully prepared privatization terms are invalid, we basically return to the starting point," said Andris Klavins, the company's president.
But the Latvian Shipping Company is not desperate since it has managed to turn from a loss-incurring to a profit-making enterprise in the last three years.
"Four years ago attracting a strategic investor was important in order for the Latvian Shipping Company to survive, but now we are an independent, stable company that can modernize its fleet by its own means," Klavins said.
But he admitted that the unresolved privatization question impedes modernization of the fleet.
When the government approved the shipping company's privatization plan, it set the share price at 2 lats ($3.39) per share, double its face value.
Naglis explained the low interest in the shipping company's privatization on the "extremely high price," which will now have to be lowered.
Klavins also doubted that there are companies that could afford to pay such a price.
"It's well-known that the shipping market has considerably fallen, and reached the lowest level in the last 10 years. It's hard to say whether there are many shipping companies that could afford to invest in another enterprise, taking into account that they have to think about surviving themselves."
The earlier privatization plan foresaw a public offering for privatization vouchers if the company fails to find a strategic investor, but the government did not approve it. The new privatization terms are unlikely to sell shares to residents before an investor is found, since the government was hoping to get 40 million lats the deal could have brought to the budget.
Klavins, however, sees a public offering as a good alternative.
"In order for the state to get maximum profit from the sale of the Latvian Shipping Company, one would need to wait until the situation on the shipping market improves and the share prices increased," he said. "But a public offering for privatization vouchers could be a compromise variant."
