Slovakian government in talks over US Steel Kosice

The Slovakian Spectator reported that reports about the potential sale of the country’s largest steel works and one of the flagship United States investments in Slovakia to an unspecified buyer not only prompted speculation about who that buyer might be, but also prompted the Slovak government to look at possible ways to convince US Steel, the current owner, to stay put.

Slovakian Economy Minister Mr Tomáš Malatinský confirmed on January 9 that the state is still negotiating with US Steel over its ownership of the Košice steelworks The SITA newswire cited Mr Malatinský as saying that “We are interested in reaching an agreement with US Steel. Some solutions are being sought but please let’s not specify any numbers or specific proposals, as negotiations are still under way.”

The minister thus neither confirmed nor denied reports published in early January by the Hospodárske Noviny daily that the state would offer the steel mill a discount on the service fees it pays to the electricity transmission system operator for electricity it generates in its own facilities.

Two years ago US Steel paid roughly only one third of the full price, but is now required to pay 100% of the fees by Slovakia’s regulatory authority. However, Finance Minister Peter Kažimír said that in order to receive state aid, US Steel would first need to lodge a request for a reduction in its electricity bill with the government but possible discounts in electricity bills for large customers such as US Steel would have to comply with EU legislation.

Earlier in November, Ján Bača, spokesman for US Steel Košice, US Steel’s subsidiary in Slovakia, confirmed to The Slovak Spectator that “We have received expressions of interest in US Steel Košice, likely due to its strong financial performance and strategic position in the region”.

Reports about the potential departure of U.S. Steel prompted speculation in the media over who might purchase the mill, Slovakia’s largest.

USSK, the largest employer in eastern Slovakia, with 11,000 workers, emerged via US Steel’s acquisition of Východoslovenské Železiarne (VSŽ) in 2000. At the time of the acquisition of the ailing VSŽ, which before running into problems had bought various unrelated assets such as newspapers and a football club, USSK agreed to invest at least USD 700 million in the company over a period of 10 years. In return, it was offered tax breaks of up to USD 430 million under the then exchange rate over the same period, and the state promised not to reopen any tax related cases against the firm and to participate in the removal of any unknown ecological burdens which might have emerged by 2004. By 2008, USSK had used up all of its tax breaks under the deal.