Ukraine steel plant sale terms to hit Tisco

The terms of privatisation of Krivorizhstal, Ukraine's largest steel mill, has put foreign participants, including Tata Steel which had shown interest, in a tight spot.

The condition, which discriminates against foreign companies, stipulates that the bidder must have produced steel using Ukranian coke in the volume of at least one million tonne.

A number of foreign companies "" LNM group, Severstal (which was bidding with Arcelor) and Tata Steel "" were understood to have evinced interest in Krivorizhstal. Investment Metallurgical Union, formed by System Capital Management, Interpipe and UkrSibBank was also one of the interested parties.

Tata Steel had announced in the beginning of the year that it was likely to go in for a major acquisition in the current financial year and was looking at Ukraine, China and Singapore for possible targets.

The company's vision was to become a 15 million tonne entity by 2010, of which half would be at Jamshedpur. The balance would be at various locations in India and abroad.

There were also reports in the international media that Tata Steel planned to invest $1 billion in the Ukrainian metallurgical sector.

Analysts said foreign bidders could still participate in the tendering process if they entered into an alliance with local companies. The tender would close by June 9.

The State Property Fund of Ukraine had announced plans to offload 93.02 per cent of shares in the Krivorizhstal ore mining and metallurgical plant at a reserve price of $714 million.

The company reported pre-tax profits of $302 million last year and has a capacity of million tonne of rolled steel, 7 million tonne of steel and 7.8 million tonne of pig iron. Krivorizhstal was currently producing 20 per cent of Ukraine's steel.

Industry sources said, some of the foreign companies had already initiated search for a local partner, in a bid to satisfy the conditions of the tender.

Reports indicated that the clause in the tender was not only discriminatory for foreign companies, but many Ukrainian companies would not be able to participate in the privatisation process.