Czech government probes Liberty Steel Ostrava’s financial conduct

The Czech government has called an extraordinary meeting of steelmaker Liberty Ostrava’s supervisory board for May 5 with a Czech ministry representative on the board tasked with carrying out “financial checks” at the company, Minister for Industry and Trade Karel Havlicek said in a post-Cabinet press conference May 3.

Havlicek’s comments came amid government and union concern that the Czech Republic’s biggest steelmaker will be damaged amid moves by owners Liberty Group and GFG Alliance to resolve the multinational steelmaker’s wider financial problems. Those worries escalated when one million carbon emission allowances owned by Liberty Ostrava were sold to sister Liberty Group mill Galati in Romania on April 30 in spite of Czech Prime Minister Andrej Babis saying he had been promised this would not happen.

Havlicek said his ministry’s representative on the supervisory board will “take responsibility for financial checks” at Ostrava Liberty. In particular, the representative will check that the proceeds from the sale of the carbon emissions are returned to the Ostrava company by the promised deadline of May 6, Havlicek added.

“The proceeds [from the emission sale] should be used only for the development of the Ostrava plant or for increased wages for the Liberty Ostrava workers,” Havlicek explained during the press conference, adding that the government’s opposition to the emissions sale had helped prevent the mill’s owners from fulfilling their original intention of selling 3.0 million carbon allowances.

But Havlicek also admitted that the government has little influence over Liberty Steel and its owners. “It’s a fully commercial company with no state shareholding,” Havlicek said during the press conference. The ministry representative on the supervisory board was a concession made when Liberty Group took over the Ostrava mill in 2019.

Unions at Liberty Steel Ostrava, also represented on the supervisory board, have called a for meeting May 5 to discuss action aimed at “paralyzing the plant.” They have been on strike alert since April 13 with their main fear that the Ostrava mill’s 5.0 million emission allowances, earmarked to be cashed in for plant modernization, will be diverted by mill owners for other purposes. Spokesman for the main KOVO union at the mill, Peter Slanina, told S&P Global Platts April 30 that a strike might be called at the upcoming meeting but other options were preferred.

GFG Alliance said in a statement April 30 confirming the emissions allowance sale that the proceeds would be returned to the Ostrava mill. GFG Alliance said in a further statement May 5 that profits of Eur10.05 million from the allowance sale will be used to give Liberty Ostrava workers a one-time bonus of Eur505 each by the end of this week to mark the steel mill’s 70th birthday. “The remainder of the proceeds will be used on future investment projects at Liberty Ostrava,” the statement added.

Minister Havlicek did not say May 3 whether financial checks will be widened beyond the return of the carbon emission proceeds and their future use.

Unions and some government ministers have suggested wider checks are warranted. Minister of Culture and member of parliament representing Ostrava, Lubomir Zaoralek, said in a statement April 30: “The transactions of the owner of this company [Ostrava Liberty] are the subject of investigations in several countries. We do not know where Koruna 2 billion ($93 million) made available in 2020 to help the [Ostrava] steelworks which was guaranteed by the state through the state export guarantee and insurance company (EGAP) disappeared to,” Zaoralek said, adding that special state financial fraud squads and prosecutors should investigate.

A Liberty Steel spokesman declined to comment May 5 to S&P Global Platts “on statements made by unions and a number of members of parliament in recent days.”

— Chris Johnstone