Larco General Mining and Metallurgical Company is under threat of closure and resolution, as it’s planned privatizations has hit a number of insurmountable obstacles.
TAIPED holds the state’s 55.2 percent stake in the company; the other 33.4 percent belongs to National Bank and 11.4 percent to Public Power Corporation. The 55.2-percent stake was transferred to TAIPED so it could include Larco in its privatization program, though the fund has recently realized that this will not be possible. Instead it has proposed liquidation of the company and the piece-by-piece sale of its properties.
The final blow to the otherwise complicated affair of privatizing the mining industry came in early March from an investigation by the European Commission into state subsidies. Brussels began an in-depth monitoring process in order to establish to what extent state support measures offered by Greece to Larco – exceeding 105 million euros – were compatible with European Union regulations.
The Commission has yet to be convinced that the measures taken by Athens complied with EU rules, particularly those pertaining to state subsidies for the bailout and restructuring of troubled enterprises. The measures that the Commission says constitute state subsidies include a share capital increase of 2009, several state guarantees for loans in the period from 2008 to 2010, the possible failure by the state to collect a debt dating from 2004 and its forfeiting on the collection of a tax fine deposit in 2010.
Sources say that the Commission also considers as state help the unpaid debts Larco has to its minor stakeholder PPC, which is also state-owned, which exceed 160 million euros and continue to grow every month by 6.5 million.
From recent contacts with Brussels, TAIPED’s management firmly believes that the Commission will insist on the issue of state subsidies. It has also taken into account other factors prohibiting the company’s privatization, such as the overall problematic state of the industry, with accumulated losses of more than 220 million euros, its negative net worth and its obligations to third parties as well as the unsolved environmental issues it faces that investors in Larco would have to pay about 50 million euros to resolve.
Another issue considered as negative for attracting investment interest was the cost of electricity, which accounts for 30 percent of the total operating costs of the company, and is almost twice as big as what Larco’s rivals in the international market pay.
The government is said to sympathize with TAIPED’s concerns, though shutting down a company that employs 1,500 people directly and another 4,000 indirectly, is seen as a political hot potato.