Czech Minister of Industry and Trade Jozef Sikela has sent a strong letter to UK-based steelmaker Liberty Steel urging it to rescue its Liberty Ostrava steelmill, which asked local courts for protection from creditors last November.

Most of the 6,000 Liberty Ostrava employees have remained at home since December, as its energy supplier, Tameh Czech,  declared insolvency because of unpaid bills from Liberty Ostrava.

“The main theme of the letter is the government’s interest in maintaining production and employment at Liberty Ostrava, but also a repeated note that most of the liabilities of  Liberty Ostrava originated within the Liberty Steel group,” the head of the ministry’s press department, Marek Vosahlik, was quoted as saying by the Czech Press Agency (CTK).  

“The minister again urged the speedy return of a significant portion of this money back to the Liberty Ostrava company,” Vosahlik said, adding that  “Czech legislation requires the members of company bodies to act with economic care, which is key for due and responsible management, especially in the case of financial difficulties such as those Liberty Ostrava faces.”

Vosahlik also stated that “the minister is pointing to possible legal repercussions for breaching of these duties, including financial responsibility in case of bankruptcy”.

Sikela met with Libery Ostrava representatives in December and Minister of Finance Zbynek Stanjura (ODS) said last week during his visit to Ostrava that the cabinet has not seen a company's restructuring plan. Liberty Ostrava was required to submit one to the local court following its request for protection from creditors.   

Sanjeev Gupta, Liberty Steel's owner, has been battling to hold together his empire since the collapse of its main lender, Greensill Capital in 2021. Many of its GFG Alliance operations, including Liberty Steel's operations in Romania, Liberty Galati, are struggling with the economic downturn in Europe and soaring energy prices, and are facing legal suits from unpaid creditors and suppliers .

Galați and Liberty Ostrava  are two of the main assets securing a more than €2bn loan from Greensill Bank, which collapsed in March 2021 in large part due to its substantial exposure to GFG Alliance.

Liberty Ostrava is an integrated steel business with an annual production capacity of approximately 3.6mn tonnes. It supplies more than 40 countries around the world.

On Monday, January 29, the labour union boss at OS KOVO Liberty CR, Petr Slanina, told CTK that most employees were told to stay home until early February. 

"We are still being assured that talks between Liberty Ostrava and Tameh Czech are continuing," Slanina said after meeting with Liberty Ostrava management. 

Liberty Ostrava’s spokesperson, Katerina Zajickova, stated that the oven no. 3 cannot be restarted without resolving the situation with Tameh. 

"The success of our restructuring plan depends on the restart of Tameh Czech's electricity power plant," Zajickova was quoted as saying by CTK, adding that negotiations are slow, "but we believe we will find a solution, which will be acceptable to both parties". 

Previously, Zajickova stated that the company is in talks with strategic partners, including Tameh and its insolvency administrator.

Earlier, Liberty Ostrava objected to the court order requiring Liberty Ostrava to pay CZK500mn (€20mn) to Tameh, effectively halting the court order. Liberty Ostrava is protected against creditors by a court moratorium.   

CTK stated that Liberty Ostrava’s liabilities towards Tameh amount to approximately CZK1.8bn, referring to the insolvency administrator Dominik Hart.  

Tameh’s spokesperson, Partrik Schober, told CTK that Liberty Ostrava is passive in the talks and that these are not progressing.   

"Liberty did not pay any of its debt and did not negotiate to solve the situation, so Tameh Czech cannot resume energy production," Schober said on January 29.  

Both companies were originally integrated – Tameh (then Energetika) was part of Nova hut (now Liberty Ostrava) – and both entities supply each other. Tameh supplies Liberty Ostrava with electricity, steam and other gases, while Liberty Ostrava supplies Tameh with oven and coke gases on which Tameh is dependent.

The former Energetika became a separate company when Nova hut was taken over by ArcelorMittal, the world’s second-largest steelmaker. In 2019, Liberty Steel Group from GFG Alliance, owned by Sanjeev Gupta and his family, acquired the mill, but Tameh remained in the ownership of a joint venture between ArcelorMittal and Polish holding Tauron.

Liberty Ostrava and Tameh have been in rows over the supply prices and payments since the Liberty Steel Group acquisition, CTK noted, recalling that Tameh was on the verge of curtailing energy supplies already in the spring of last year.  

ArcellorMittal has been suing two of Gupta’s companies for €140mn in deferred compensation for the sale of the steel plants in Romania, Czechia and several other European countries to Liberty Steel.

Despite its financial crisis, Liberty Steel last year bought Hungary's largest steelmill Dunaferr out of liquidation and recently restarted operations there.