Deadline for Smederevo steel mill expires

Deadline for Smederevo steel mill expires

According to the announcements issued by the Serbian government, the identity of the strategic partner for the Serbian steel plant could be established by February 1.

On December 5, 2014, the Privatization Agency issued a public call for the strategic partner with a capital input in the steel plant, wherein the government will preserve a 19.99 percent stake in the ownership structure.

Letters of interest for the privatization of Zelezara Smederevo were previously filed by ten companies and the offer of the U.S.-based Esmark has been assessed as the most serious one.

The founder and chairman of Esmark Steel Group James Bouchard recently told Tanjug that the company would invest USD 400 million in the Serbian steel plant over the next few years if it wins the tender, adding that there would be no dismissals.

He underscored that Esmark would invest USD 28 million in Zelezara Smederevo in 2015 alone, the second blast furnace would be launched once more and investments in the central plant would also be made.

Serbian Prime Minister Aleksandar Vucic stated in late December that he organised 31 meetings concerning the sale of Zelezara Smederevo, and noted that the plant's successful sale would considerably encourage the country's economic growth.

The steel plant brings in a 0.6 percent GDP increase through its operation, while the indirect contribution totals over 1.2 percent, Vucic said and added that after the privatisation, jobs will open for not just the 5,000 workers in the plant itself but also for around 5,000 employees in the plants that do business with the Smederevo plant.

The Zelezara Smederevo financial capital totals RSD 16.74 billion, while the non-financial capital totals around RSD 2.7 billion.

Investors that recorded minimum annual individual revenues of at least USD 300 million over the past three years had the right to take part in the tender.

The buyer of the steel plant will have the obligation to launch production to at least 50 percent of total capacity in the second blast furnace of Zelezara Smederevo by the end of 2016, while preserving the full production in the first blast furnace.

The government decided that the state creditors should write off the debt of Zelezara Smederevo concluding with the total sum recorded on December 31, 2013, on condition that the privatisation process by the method of capital input is successfully finalised.

Zelezara Smederevo was originally sold to U.S. Steel under the name Sartid in March 2003 for USD 23 million, and the Serbian government purchased it in January 2012 for USD 1.

The first tender for the sale of the steel plant was organised in April 2012. The value of current production in Zelezara Smederevo totals EUR 340 million, while the value of production in full capacity would reach EUR 1.5 billion.

The government provides monthly assistance for the plant production to the total value of around USD 10 million. The debt of Zelezara Smederevo to banks adds up to EUR 260 million, the debt to suppliers adds up to EUR 120 million and the debt for raw materials totals EUR 145 million.