Venezuela and Ternium Reach Final Compensation Agreement for SIDOR Steel Plant
Mérida, May 8th 2009 (Venezuelanalysis.com) — Venezuela will compensate the Argentine-controlled steel company Ternium $1.97 billion for its 60% share of one of Latin America's largest steel plants, SIDOR, according to a Ternium company statement released on Thursday.
The Venezuelan state nationalized SIDOR last year following a 16-month collective contract dispute between the company and its workforce, more than 70% of which had been pushed into non-unionized contract labor.
Government authorities and representatives of the United Steel Industry Workers Union (SUTISS) signed a collective contract shortly after the nationalization.
Ternium initially asked for $3.6 billion in compensation for SIDOR, which included the cost of acquiring assets of a similar value elsewhere. The government initially offered $800 million, arguing that environmental damages, outstanding company debts, and the long overdue collective labor contract that sparked the nationalization lowered the value of the company's share.
SIDOR was originally state-owned, but the Venezuelan government previous to the current Chavez government, privatized the plant in 1997, selling a 60% share to Ternium for $1.5 billion. The government maintained a 20% share, and the workers controlled 20%.
At one point during the compensation negotiations, Ternium nearly agreed to sell 50% of SIDOR to the government for $1.65 billion, retaining a 10% share for Ternium.
Venezuela made an initial payment of $400 million on Thursday. It will now make quarterly payments for six quarters, and pay the remaining balance in October of 2010.
Ternium, which has its headquarters in Luxembourg, is the largest steelmaker in Latin America, with its principal operations in Argentina and Mexico. The company reported a nearly $350 million drop in profits in the fourth quarter of 2008, and $117 million in losses in the first quarter of 2009.