NTERVIEW-Kazakh metals boss says TWG cannot return
09:24 a.m. Mar 26, 1999 Eastern
By Mike Collett-White
ALMATY, March 26 (Reuters) - The head of Kazakhstan's most powerful metals empire, which is locked in a legal tussle with London-based trading giant Trans-World Group (TWG), said the British firm was unlikely ever to return to the republic.
Alexander Mashkiyevich, who is in charge of strategy at Kazakhstan Mineral Resources Corp (KMRC) and chairs the Eurasian Bank, which has close shareholding links with KMRC, also told Reuters in an interview late on Thursday the government was right to oust TWG from Kazakhstan.
''In Kazakhstan, TWG does not exist as an owner and I do not see any legal possibility for it to return at any time,'' the influential businessman said.
''Within Kazakhstan it is all over -- the highest court has made its decision.''
TWG on Friday refuted Mashkiyevich's comments and did not rule out a return to the former Soviet state.
''Our input has been positive in Kazakhstan. Kazakhstan and countries like it need investors like us,'' TWG managing director Alan Bekhor told Reuters in London.
The case is key not only because TWG said it spent $750 million in Kazakhstan before pulling out over the tussle early in 1998, but also because it will be followed closely by potential investors in the vast, resource-rich state.
Kazakhstan has little cash of its own, and will rely heavily on Western companies to develop its metal and oil sectors.
The Supreme Court ruled in July 1998 that TWG's assets held jointly with KMRC in major metal enterprises be reallocated, paving the way for the return of those shares to the plants -- a process now completed, according to Mashkiyevich.
''We (KMRC) own around 30 percent of shares, the government owns 30 percent, 10 percent are owned by the workforce and 30 percent have gone to the companies themselves,'' he said.
The 30 percent formerly controlled by TWG were non-voting shares and shareholders would decide what to do with them.
While TWG has been rejected by Kazakhstan, the group is continuing its legal battle against the decisions in courts in London and the British Virgin Islands. KMRC and TWG subsidiaries involved in the plants from 1994-1997 are registered in the BVI.
Mashkiyevich said the London case would probably end this year, which Bekhor confirmed.
Mashkiyevich said the case involved TWG trying to prove that it had paid $200 million to plants not as payment for production, as KMRC maintains, but as creditswhich it now wanted back.
The BVI-based case threatened to drag on much longer, possibly for several years, Mashkiyevich said.
TWG said last year it had an injunction from the BVI court prohibiting KMRC from continuing its action against the group -- an injunction Kazakhstan declined to recognise.
The sides continue to offer diametrically-opposed interpretations of the row.
Mashkiyevich said a special government commission found the plants where TWG had operated made total losses of $370 million as a result of poor management by the group.
The findings had been supported by an independent audit made by Deloitte & Touche, he said. He did not have a copy available.
TWG's Bekhor denied this, saying that under TWG's control from 1995 to 1997 the plants were making money and KMRC was taking half the substantial profits.
''We not only increased production, the plant was profitable and the debt ratio was reduced,'' he said. Any debts incurred came from capital spent on upgrading the plants.
''The suggestion that the period 1995-1997 brought about losses to the Kazakh industry is complete nonsense,'' Bekhor said.
Mashkiyevich said claims by TWG that it had invested $750 million in Kazakhstan before halting operations were incorrect.
''This is pure bluff,'' he said. ''Pre-payment for production is not investment.'' He added that TWG paid below market prices for production at the plants, reducing the amount of money the government earned from its involvement.
In reponse, Bekhor said significant investment had been made by TWG in long-term plant renovation and the company had committed itself to buying Kazakh metals output at what equated to long-term market rates.
Putting a brave face on the slump in metal prices and increased competition from Russia, Mashkiyevich said the KMRC group would be profitable this year and keepproduction of key metals stable.
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