Gov't steps in to conduct negotiation by proxy
With an eye on making a sale by the end of the month, the Treasury Ministry is due to step in this week to replace farmers in direct talks with Saint Louis Sucre (SLS) over the privatization of Slaska Spolka Cukrowa, the largest of Poland's four sugar holdings.
"Since there is a stalemate in negotiations with farmers, the Treasury Ministry (has decided) to handle all of the negotiations itself," said Leszek Podstawski, director of SLS' representative office in Poland.
For well over a month, the long awaited sell-off of Slaska has been held up due to a deadlock in talks between SLS and the beet growers that supply Slaska's mills. Last April, SLS beat out Germany's Sudzucker for the right to carry out exclusive negotiations to purchase upward of 51% of Slaska, which is headquartered in the Opole voivodship in southern Poland. In its original agreement with the government SLS was supposed to complete negotiations with mill workers, beet growers and the treasury by May 22. When that target date passed, the government granted an extension period that ended early last week.
While the Treasury Ministry has not formally granted SLS a further extension period, Barbara Litak-Zarebska, deputy treasury minister in charge of sugar privatization, decided to break the impasse last week by taking over the beet growers' seat at the negotiating table.
"The treasury is aware that time is passing," Podstawski said. Litak-Zarebska emphasized last week that she wants the Slaska holding to have an owner by the end of June.
If successful in her bid, the sale of Slaska would be a feather in the cap of Litak-Zarebska, who for much of the past year has successfully fended off attempts to keep the nation's sugar industry in Polish hands through the creation of one large cooperative, Polski Cukier.
Faced with debts of more than zl. 2 billion ($488 million), Litak-Zarebska and other government officials have argued that the sugar sector would best be helped through the direct sale of mills to foreign investors. At the same time, foreign investors have been eager to gain a foothold in Poland, the third-largest sugar producer in Europe.
The key sticking point in talks between SLS and beet growers has been over how the French will calculate the price for the sugar beet they contract with Polish farmers. Farmers want SLS to accept a fixed formula for calculating price, while the French sugar producer has been pushing for the purchase price to be renegotiated on an annual basis.
In addition, farmers want guarantees that they will receive some form of compensation for future earnings' losses in the event that during SLS' restructuring of the holding, mills supplied by the farmers are closed, making future farming of sugar beet impossible or unprofitable.
"Of course it would have been better to come to an agreement with farmers directly since we are going to work with them in the future," Podstawski said. "Since that didn't happen, minister Litak-Zarebska took the initiative in her own hands."
Podstawski also said that talks are moving forward despite the bankruptcy of one of 16 of Slaska's mills. Earlier this month, negotiations almost came to a halt after a Wroclaw court declared the bankruptcy of Maloszyn, the largest of Slaska's mills. Maloszyn commands 8% of the holding's total 300,000 tonne government-assigned limit. The government regulates how much each mill, or grouping of mills, can produce to keep sugar prices stable. The prospect of Maloszyn being removed from the privatization process meant that the conditions of the sale of the entire holding would have to be reconsidered.
"Even though this issue is still not solved, it is not at any way blocking negotiations over the privatization of Slaska," Podstawski said.
On Tuesday, SLS, Maloszyn and the treasury will all have their eyes turned toward Wroclaw, where the regional court is due to review the bankruptcy ruling. Two weeks ago Maloszyn management requested that the court revoke the bankruptcy ruling, arguing the mill's privatization would mean that its debts would be paid off or restructured.
"We are counting on (Maloszyn) not only from the point of view of limits. In our plans, Maloszyn has prospects for future development," Podstawski said. "If Maloszyn goes bankrupt, that means we will have to change those plans."
