Tanker deal will sink shipping company, say critics

  • 2001-10-25
  • Ilze Arklina
RIGA - After the Latvian Shipping Company this week took delivery of the first of three second-hand tankers under a highly controversial deal brokered in July, skeptics warned the $120 million deal could sink the company's privatization plans.

On Oct. 18 in Riga the Latvian Shipping Company and Greek shipping company Tsakos signed a final agreement on the purchase of the first of three Panamax tankers.

The Latvian Shipping Company bought the tanker for $41.6 million after taking a loan from Germany's Hamburgische Landesbank Girozentrale bank.

Druvis Skulte, chairman of the company's supervisory council, said that the purchase was not only positive for the company's operational indicators, but it would also improve its image and competitiveness. "Competitors will now know we're renewing our fleet and don't intend to become scrap metal," said Skulte.

He faced objections from Normunds Lakucs, a member of the council of the state's Privatization Agency, who pointed out that the total cost of the three tankers - $120 million - is more than the 70 million lats ($112.90 million) set as the minimum price to buy a controlling stake in the company at the last sell-off attempt.

He said the company had paid far too much for the tankers, thereby damaging its finances. It would now have to be broken up and sold piecemeal, he said. "With this deal to purchase three tankers the Latvian Shipping Company has become unattractive to strategic investors," Lakucs told the Latvian business newspaper Dienas Bizness on Oct. 23.

Skulte and his two fellow state trustees might lose their jobs at LASCO after the controversial tanker deal is completed, the Privatization Agency has decided.

Because the three failed to inform the agency about the content of shareholders' meetings, the agency and the government only found out about the purchase of the tankers after the protocol of intent was signed and a $1.2 million deposit had been paid to the seller, the agency's press secretary Janis Bunte told The Baltic Times.

The Latvian Shipping Company is the second largest non-financial transnational company in Central and Eastern Europe ranked by foreign assets, according to the United Nations' World Investment Report for 2001. It's total assets were $470 million in 1999, its sales $191 million and it employed 1,748 people, according to the report. The region's largest transnational company is Russian oil giant Lukoil whose total assets amount to $8.42 billion.

The Ministry of Economy is currently discussing four possible approaches to the next attempt to privatize the shipping company, said Evita Timofejeva, the ministry's press secretary. The ruling coalition parties have been unable to agree on the next step since last spring, but a working group is expected to resolve the issue at a meeting on Oct. 25, she said.

Three of the four proposals come from the Privatization Agency and involve selling a stake to a strategic investor, while the fourth, submitted by Riga Stock Exchange President Guntars Kokorevics, is that the company should be sold at a public offering for a combination of privatization vouchers and cash (see table).

The exchange said in its proposal that floating the company on one or more stock exchanges - London or Oslo as well as the Riga exchange for example - was not incompatible with finding a strategic investor to buy a controlling stake in the company.

"We believe that currently the sale of a controlling stake in the Latvian Shipping Company to a strategic investor is hindered by a lack of interest from potential foreign investors. This was evident from the last privatization attempt which ended in failure," read the proposal.

But Privatization Agency Director General Janis Naglis thinks the stock exchange's proposal would "cheat the people."

"The company's attitude to its small shareholders and to the payment of dividends would not be clear until the identity of the owner of the controlling stake was known, " he objected.