Treasury wins key sugar battle with Slaska sale
Having won a key political battle and gained enough support for its plan to sell many sugar mills directly to foreign investors, the Treasury Ministry last week moved forward on the sale of Poland's fourth largest mill, Slaska Spolka Cukrowa, by inviting French giant Saint Louis Sucre (SLS) for exclusive negotiations.
Since February, SLS has been vying with Germany's Sudzucker to purchase upward of 51% in Slaska, which is headquartered in the Opole voivodship. The Treasury Ministry's plan to sell Slaska along with as many as 30 other mills has been mired in political controversy over whether sugar privatization would be best served by direct sales to foreign investors or by the creation of one large, Polish-owned sugar cooperative called Polski Cukier, as many parliamentarians had proposed.
The Council of Ministers and Finance Minister Leszek Balcerowicz last week threw their weight behind the Treasury Ministry's plan of direct sales, seriously deflating the Polski Cukier proposal, as supporters had wanted some key mills to be included in the cooperative. That support made it possible for the ministry to finally choose a winner in the Slaska tender.
"In connection with the difficult economic and financial situation of the mills, their restructuring and privatization cannot be held back," the prime minister's information office said in a written statement.
Now that they have been chosen, the French will have 42 days to hammer out a deal with sugar workers, beet growers and the treasury before a final contract is signed.
"We are very pleased. This is a big success for our company," said Leszek Podstawski, SLS's director in Poland. "This success will be complete when we have signed contracts in hand."
SLS is the second largest sugar company in France and the fourth largest in Europe. The company has been actively investing in Eastern European countries.
Mill management and sugar unions are also likely to be pleased by the Slaska news. Many have said that if parliamentarians and some members of the sugar sector got their way and created Polski Cukier, some key mills would be cut off from capital necessary to restructure and could likely go bankrupt.
The Treasury Ministry has always said that the sugar industry would best be helped through direct sales to foreign investors. Faced with debts reaching upward of zl. 2 billion ($488 million), the ministry has said it would be difficult for the mills themselves, even if grouped together, to find financial backers willing to pay for restructuring. At the same time, foreigners have been eager to gain a foothold in Poland, the third largest sugar producer in Europe.
The tug of war over the fate of Poland's sugar sector came close to paralyzing the present government earlier this year. In January, the dispute over sugar played a key role in bringing about the no-confidence vote against Treasury Minister Emil Wasacz. Wasacz's job was spared when, on the eve of the no-confidence vote, Solidarity Election Action (AWS) deputies received guarantees that talks on Polski Cukier's creation would continue.
Worried by Slaska's heavily indebted state, the mill's management last week cheered the news that the ministry had taken a decisive step forward on the sale. "I am enormously pleased that there is a decision," said Boguslaw Stec, Slaska's vice president. "Most importantly, we will be able to save many mills that are on the verge of collapse."
"The banks will respond positively to such news," Stec added. "They will see that there is progress in privatization and this is the most important element."
Slaska's 1999 losses are expected to reach zl. 800 million ($205 million), Stec said. In addition, 14 out of the 16 mills that make up the larger holding are barely solvent. While Stec declined to give exact figures about the debt size of the rest of the holding, Zygmunt Auguscik, head of the Solidarity union at Slaska, said that figure exceeds zl. 400 million ($100 million).
In backing the Treasury Ministry's plan last week, the Council of Ministers did not kill Polski Cukier outright. The body, which comprises all government ministers and has considerable political weight, said the cooperative could live, but would only include 16 mills.
The council's decision enables the Treasury Ministry to move forward on other bogged-down sales. Under its original privatization plan, the ministry intended to break up Poland's three other large sugar holdings and sell them off in smaller pieces to strategic investors.
"The Council of Ministers' decision settled all conflicts, misunderstandings and guesswork (concerning the sugar sector) and brought to a close a very important issue," Stec said.
Balcerowicz appeared to have played the key role last week in swaying other ministers toward a pro-privatization stance. "Balcerowicz forced his point of view that privatization has to be continued according to plan," said Jan Wyrowinski, a Freedom Union (UW) deputy from Torun who also sits on the Sejm's agriculture committee. "As for the 16 mills, a government adviser is supposed to recommend the best way for them to be privatized. Polski Cukier is just one of the options."
But the fight is not over, as pro-Polski Cukier deputies demonstrated last week. While SLS was gearing up for negotiations, AWS deputies, in an unprecedented move, forced a proposal through the Sejm's agricultural committee that requires the Treasury Ministry to keep the committee updated on all stages of the privatization of the Slaska, Poznanska and Pomorska holdings. "(The treasury) is supposed to present a snapshot on the hour regardless of progress made or the level of confidentiality," Wyrowinski said. "This means that the agriculture committee will become (in essence) the Treasury Ministry."
While the ministry may refuse to adhere to these tenets, the very fact that the recommendations were forced through suggests that the sugar industry battle might not yet be over, Wyrowinski said.
