Nikopol Ferroalloy (NFER) Conflict Goes To The Top

Viktor Pinchuk, Interpipe’s key owner, said he will seek a meeting with Prime Minister Yuliya Tymoshenko to clarify the conflict surrounding the Nikopol Ferroalloy plant. The dispute is over a 50%+1 stake Interpipe purchased in the plant at privatization tenders in 2003, in two blocks. Interpipe Group now holds a 73% stake in NFER, while a blocking stake of 27% is held by Privat Group.Concorde Capital:On May 2005, two NFER shareholder meetings were scheduled to be held, one sponsored by Interpipe and another by Privat Group. The one initiated by Interpipe was conducted successfully, although minority shareholders and state officials were barred from participating. In fact, two state bailiffs with court orders declaring the AGM invalid were forbidden from entering. Privat Group ? which hopes to gain control over NFER via re-privatizing the plant ? failed to hold a concurrent AGM in Ordzhonikidze, due to the absence of state representatives. The registration date for the Privat-sponsored AGM has been extended until Friday, May 6.

Prime Minister Tymoshenko is known for her firm stance that she will not re-privatize companies which were sold at unfair or non transparent auctions. Rather, she insists that current owners pay the balance on the privatized assets fair value. On the other hand, Privat Group already controls Zaporizhhya Ferroalloy (ZFER), Stakhanov Ferroalloy (SFER) and two manganese ore extractors, Marganets GOK and Ordzhonikidze GOK. Allowing it to also establish control over NFER would give it an absolute monopoly over Ukraine’s manganese alloy industry. We do not think the state will allow this. In our view, the most likely scenario is that NFER will retain control over Interpipe, on the grounds that it pay some compensation for its 50%+1 stake.