Identifier
Created
Classification
Origin
09KYIV751
2009-04-30 21:05:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Kyiv
Cable title:  

UKRAINE: RINAT AKHMETHOV BUYS U.S. COAL COMPANY

Tags:  EFIN EREL PINR PGOV PREL ECON EMIN XH UP 
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VZCZCXRO6137
PP RUEHDBU RUEHIK RUEHLN RUEHPOD RUEHSK RUEHVK RUEHYG
DE RUEHKV #0751 1202105
ZNR UUUUU ZZH
P 302105Z APR 09 ZDK
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC PRIORITY 7729
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHZG/NATO EU COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY
UNCLAS KYIV 000751 

SENSITIVE
SIPDIS

DEPT FOR EUR, EUR/UMB, EEB/OMA

E.O. 12958: N/A
TAGS: EFIN EREL PINR PGOV PREL ECON EMIN XH UP
SUBJECT: UKRAINE: RINAT AKHMETHOV BUYS U.S. COAL COMPANY

UNCLAS KYIV 000751

SENSITIVE
SIPDIS

DEPT FOR EUR, EUR/UMB, EEB/OMA

E.O. 12958: N/A
TAGS: EFIN EREL PINR PGOV PREL ECON EMIN XH UP
SUBJECT: UKRAINE: RINAT AKHMETHOV BUYS U.S. COAL COMPANY


1. (SBU) Metinvest, Ukrainian oligarch Rinat Akhmetov's
metallurgical company, confirmed local media reports that it
has purchased West Virginia based United Coal. Metinvest
will announce the purchase later on April 30 in the U.S.,
Jock Mendoza-Wilson, investor relations chief of Akhmetov's
SCM Holding, told us. Mendoza-Wilson said Metinvest would
not disclose the sales price, which Ukrainian media reports
put at roughly $1 to $1.4 billion.


2. (SBU) Mendoza-Wilson said the transaction, which had been
announced previously and received U.S. regulatory permission,
would make Metinvest 100 percent self-sufficient in coking
coal. The lack of metallurgical coal resources had placed
the company at a disadvantage to other, vertically integrated
eastern European steel producers, Mendoza-Wilson told us.
Direct access to coal would help the company in times of
volatile prices, tight liquidity or shortages of adequate
coal supplies on the world market, he added.


3. (SBU) The planned purchase had not been deterred by the
world financial crisis and the severe drop in Ukrainian steel
output, which, Mendoza-Wilson conceded, had hit Metinvest
hard. He indicated that the crisis did put downward pressure
on the purchase price. Metinvest paid outright for the
purchase, he said, through a mixture of company cash and
borrowings, which he said the company was able to acquire on
account of agreements with banks dating from before the
economic crisis began.


4. (SBU) Mendoza-Wilson also said that the purchase was part
of a strategic decision by Akhmetov's SCM group to establish
a significant presence in the U.S. market. SCM hopes to
leverage the purchase to increase its name recognition in the
U.S., and to access more U.S. sources of financing for future
expansion. He also said that the acquisition of a U.S. based
mining company also made sense from a narrower commercial
perspective. Although coal is cheaper elsewhere, United
Coal, with operations in Kentucky, West Virginia and
Virginia, was among the world's most efficient mining
companies. SCM also wanted to invest in an environment with
high corporate governance standards. He mentioned in
particular sanctity of contract, clear title and ownership
rights, and strict health and safety rules for the mines as
factors that made the acquisition of a U.S. coal mining
company particularly attractive for SCM.
TAYLOR