Sale to Russian company of last state-owned steelworks finalised

The first major privatisation tender to have been won by a Russian company was finalised last week. Russia's Evraz Holding is now set to take over Vitkovice Steel, one of Europe's biggest producers of heavy plates and a major player in the depressed industrial region of Ostrava.

With the stroke of a pen, the promise of over 7 billion crowns for state coffers and billions more of investment into a region struggling with high rates of unemployment, officials from the Czech Ministry of Industry and Trade on Friday signed over ownership of the last the last steelmaker still in state hands.

The sale of Vitkovice Steel - which employs some 1,600 people and is the largest Czech producer of rolled steel products, steel plate and steel sheets -- also marked the first major privatisation to go to a Russian company. But if there was any lingering anti-Russian sentiment on the Czech side over the nearly half century of Soviet control, the bottom line prevailed. Evraz Holding simply offered a better deal than the eight other companies which made it to the final round of the privatisation.

Two other companies, however, had offered more for the 99 percent stake in Vitkovice Steel for which the Russian coal and steel company paid roughly 284 million dollars, but were frozen out of the privatisation bid.

Mital Steel of India as recently last Monday was hoping the government would choose its bid of 360 million dollars. But Mital was denied a chance to bid within the official tender due to an ongoing dispute involving a Czech subsidiary, although it said it would accept the government's terms in that matter. The Slovak-Czech financial group Penta Group, which had also been eliminated from the tender, continues to quietly lobby for its bid to be considered.

Czech Ministry of Industry and Trade officials have said the privatisation tender was both fair and transparent. They say the Russian company will be held to its promise to modernise the aging Ostrava facility that is home to Vitkovice Steel, invest in the region, and keep the steelworks' employment levels until at least 2008. Despite a recent drop in the price of steel, Vitkovice sales nearly doubled in the first quarter of 2005, during which time the steelworks' net quarterly profit soared to some 37 million dollars.

Sector analysts say that with the regional demand for big ticket infrastructure deals in the new European Union member states, the sale of Vitkovice Steel can only be good news for the Czech economy.