Indian-born billionaire Lakshmi Mittal, ranked as one of the world”s three richest people, lost money in Romania last year, as the local operations of his steel group concluded 2005 in the red.
The steel plant in Galati, which belongs to the world”s largest steel producer Mittal Steel, ended 2005 with losses worth 109 million RON (30 million euros), mainly caused by “the making of some payments of over 40 million dollars (33 million euros) to a company as a result of international arbitration,” the company representatives explained yesterday.
The debts had accumulated before the privatisation of Sidex, and were included in the sale-purchase contract signed by the Romanian authorities with the LNM Holdings Group now part of Mittal Steel.
The company that won the international arbitration against Mittal Steel Galati is the Anglo-Romanian trader Sidex International PLC, based in London, market sources say.
Sidex International was established in 1997 to handle a revolving credit worth 100 million dollars taken out from the syndicate comprising of Credit Suisse First Boston – Zurich and BNP Paribas – Geneva for the payment of raw materials. The shareholders of the trader were Sidex SA Galati and Balli Steel, according to information on the market. English businesspeople now control Sidex International, according to the latest available data.
At the time of privatisation, Sidex Galati was left with a balance of some 25 million dollars, with Mittal Steel Galati becoming involved in arbitration procedures with Sidex International over this issue. International arbiters decided that Mittal Galati had to pay over 40 million dollars in debts to Sidex International.
“Had the one-off payments not been taken into account, we would not have posted losses,” explained Hans Ludwig Rosenstock, the plant”s chief operating officer.
The turnover of the plant dropped in RON from 6.68 billion RON in 2004 to 6.35 billion RON (1.7 billion euros) in 2005. Calculated in euros, the turnover of the plant rose by 6.7% due to the depreciation of the single European currency against the RON.
Mittal”s portfolio in Romania, besides the plant in Galati, includes production facilities in Roman, Hunedoara and Iasi, in addition to a harbour operator Romportmet Galati.
Apart from the payments to Sidex International, the plant in Galati repaid 14.5 million dollars (12 million euros) to the authorities, which had been deemed as illegal state aid by the Competition Council.
The company also paid overdue debts in the last quarter of 2005 and the first quarter of 2006, some of them from before privatisation, to the health insurance budget and worth 60 million dollars (50 million euros).
A 15 million-dollar (12.5 million-euro) loan was repaid that had been contracted from the Finance Ministry before 2001.
Mittal Steel Galati posted its best results in 2004, when their net income stood at nearly 345 million euros.