Shipping company finds third time is not the charm

  • 2000-04-06
  • Valters Medenis
RIGA – No green light is foreseen for the auction of the Latvian Shipping Company. That is the result after only one bidder applied for the auction of LSC shares before the deadline of 2 pm, March 27. The bid from an unnamed Norwegian shipping company fell through after a security deposit of $3.9 million did not accompany the prospective bid.

The security deposit was one of the provisions decided by the Latvian Privatization Agency for the right to participate in the auction of 44 percent of LSC shares with the minimum share price placed at $0.74.

The Economics Ministry has said that the LPA has not worked diligently enough to maximize the selling of LSC shares. Economics Minister Vladimirs Makarovs, said that maybe it is not advantageous to privatize LSC for the time being.

"The LPA is to blame for the failure in the LSC privatization and has not done sufficient work to make the auction happen," said Romans Melniks, the Economics Ministry's press secretary.

A Parliament cabinet meeting April 4, will decide how the government will proceed after the third failed bid to privatize the LSC. There are three options that the Economics Ministry sees as viable and the options will be voted on at the ministers cabinet meeting.

The first is to extend the period of time for the bidder to make good his payment for the security deposit. The second is to get experts from the World Bank to privatize the LSC internationally and the final option is to retain the LSC under the economics ministry. This would effectively mean that the shipping company will stay in the hands of the state.

Andris Klavins, the president of LSC, said the company can only wait and see what will be decided at the cabinet meeting.

"I do not think the LPA is to be blamed for the lack of prospective bidders for the company," said Klavins. "We are not in the same position as Latvia's Gas shares auction because Latvia's Gas survives as a monopoly in Latvia and we on the other hand have to compete solely on the international stage."

Uldis Cerps, the president of the Riga Stock Exchange, said March 27 there is a marked difference in the way Latvia's Gas shares were sold and how the LSC shares were offered to potential bidders.

"Professional financial advisors need to be put in place. There are no professional financial advisors in place at the LSC for the disposal of their 44 percent of shares," said Cerps.

There is a stark contrast between the two state owned ventures that were to be privatized at around the same time. If the LSC auction was to take place April 6, the minimum share value one LSC share was to be $0.74 and as reported earlier only one unsuccessful bidder applied.

Melniks said that the LSC should have followed in the footsteps of Latvia's Gas and the LPA needed to have international presentations on the privatization of the shipping company.

The LSC now has to wait for a decision to be reached by the Latvian Parliament and have to see the outcome from its shareholders meeting to be held this week.

The shipping company revealed its last year's trading figures and it turned over a net profit of $1.15 million and $1.9 million in profit before tax.

At the shareholders meeting it will be decided if Klavins will get an extention to his presidency and see out his future plans for the LSC. Klavins has already put forward the necessity for the company to purchase new tankers to meet tighter international standards needed in the industry.

Last year the shipping company sold off approximately half its reefer fleet. This is one reason why the company showed a profit last year. Klavins said that this year the LSC should also be in the black with a solid first quarter to the year.

The LPA and the state trustees have stated that they want Klavins to stay in charge of the company. Klavins however does not know if he will be re-elected at the meeting.

"One can never be confident when you are working for the government," said Klavins.