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Reputation of investor in KVV Liepajas Metalurgs questioned by employees

  • 2015-08-04
  • BNS/TBT Staff/RIGA

In an open letter to the Latvian authorities, current and former employees of the KVV Liepajas Metalurgs plant, have claimed the reputation of the plant’s Ukrainian investor, KVV Group, was not properly questioned by the Latvian state. 

The letter states in 2013 and 2014, there were media reports on the plant’s insolvency procedure and the selling of assets. 

However, employees claim the company’s situation is currently worse than it was during its insolvency process. 

In the letter, employees wrote they felt the choice of investor in the plant was “a fatal mistake,” a description they added was confirmed by Latvian Economics Minister Dana Reizniece-Ozola.

The letter also outlined the Latvian security services, government and consultants from the Prudentia investment bank, did not pay attention to the number of criminal scandals related to the KVV Group. 

On May 18, 2015, the final hopes for re-starting the plant's operation ended.

The KVV Group announced it would cut production at the steel melting shop, and lay off its then-newly hired staff.

”It was done in a couple of days,” read the letter. “People who had trusted the promises of the new owners had left their new jobs they had found after the plant had been closed previously.

“They returned to the plant, and then were again pushed out of the company.” 

They added that in the coming months the newly purchased steel melting equipment will be destroyed.

However, the employees still believe the plant could operate and ensure profits with the correct leadership and investments.  

The letter also questioned why the Latvian government is not represented in the company's technical and financial issues. 

"Currently 80 percent of the company still belongs to the state because the investor has paid for 20 percent of its assets," the letter read.

The employees said there had been other candidates for the investor who had performed the company’s audit.

They added the candidates had come up with proposals regarding the plant's future operations, but had been excluded from the list.

The steel plant based in the south-western Latvian town of Liepaja was officially re-opened on March 6, 2015. 

The agreement regarding the sale of the production plant of the insolvent Liepajas Metalurgs to the Ukrainian KVV Group was signed on October 2, 2014. 

The Ukrainian company will pay 107 million euros for Liepajas Metalurgs in several instalments over the next 10 years.

The rolling mill re-opened at the KVV Liepajas Metalurgs plant in early March 2015, with the steel melting shop re-opening in the first half of May.

During the two month period, the steelworks’ staff rose to 960.

On May 19, KVV Liepajas Metalurgs announced it was to cut production at the steel melting shop and make staff cuts because the cost price was too high to make its products competitive on the global market.  

Around 600 employees remain in the company at present. 

On November 12, 2013, the court declared Liepajas Metalurgs insolvent. 

The company then ran into financial difficulties and had to cease production in spring 2013 due to a shortage of working capital. 

Liepajas Metalurgs was unable repay a state-guaranteed loan it had taken from an Italian bank, and the loan had to be repaid by the Latvian state. 

Liepajas Metalurgs was placed under legal protection but all negotiations about rescuing the company and bringing in a new investor failed and the company’s administrator filed for insolvency.

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