ArcelorMittal signs investment agreement with Italian government

ArcelorMittal announced late Dec. 10 that it has signed a binding agreement with Invitalia, Italy’s agency for investment promotion and enterprise development, forming a public-private partnership for the former Ilva steel operations.

The Investment Agreement will result in a recapitalization of AM InvestCo, an ArcelorMittal’s subsidiary that signed the lease and obligation to purchase agreement for Ilva’s business back in 2018.

Invitalia will invest in AM InvestCo in two tranches: the first investment of Eur400 million will be made by Jan. 31, 2021 (subject to EU antitrust authorization), providing Invitalia with joint control of AM InvestCo. The second tranche of up to Eur680 million is payable on closing of AM InvestCo’s purchase of Ilva’s business by May 2022, at which point Invitalia’s shareholding in AM InvestCo would reach 60%.

ArcelorMittal will also invest up to Eur70 million, to the extent necessary to retain a 40% shareholding and joint control over the company, according to a company press release.

AM InvestCo and Invitalia agreed to invest in lower CO2 steelmaking technologies, including the construction of a 2.5 million mt/year electric arc furnace. The industrial plan, which is similar to the one planned in March targets reaching 8 million mt/year of production in 2025.

According to the press note, AM InvestCo’s governance would be based on the principle of joint control starting with Invitalia’s first investment. Sources close to the deal told Platts that the governance of the new company will have a board with six members, three per partner, with the chairman chosen by the Italian government and the CEO by ArcelorMittal. Current CEO Lucia Morselli is expected stay in her position.

It is understood that this is the first time a government will have a stake in an ArcelorMittal holding, at least in Europe.

The current steelmaking operation, AM Italia, will close this year with production of around 3.3 million-3.2 million mt of crude steel, union sources told Platts. As the sheet steel market has improved since the end of October, AM Italia is planning to restart a third blast furnace in January with around 2 million mt/year of design capacity. The restarted furnace, BF2, will partially offset the one-week BF4 maintenance outage at the end of this year.

AM Italia employs around 10,700 workers, the key reason the Italian government wants to keep the company in operation. ArcelorMittal agreed to buy Ilva in 2018 under a lease-and-purchase agreement for Eur1.8 billion and to invest another Eur2.4 billion to clean up and modernize the plant, which has been dogged by environmental issues.

Following legal issues with the Italian state, ArcelorMittal in early March reached an agreement with Italian authorities over the future of the former Ilva group, amending the existing lease and purchase agreement. The agreement left ArcelorMittal with the right to withdraw from its Ilva purchase by the end of November 2020, which was extended to Dec. 11.

— Annalisa Villa