The Sanjeev Gupta steelworks in Eastern Europe are under increasing pressure to obtain more than 100 million euros in financing to face a carbon bill and avoid a hefty fine under the rights trading system. issue of the region.
The carbon credit deficit is the latest sign of the financial strains facing the empire of the industrialist GFG Alliance, after the collapse of its main lender, Greensill Capital.
Gupta has run for long-term alternative financing for his empire, a loose set of businesses that risk collapsing after creditors file claims in London Insolvency Court to liquidate them.
The Financial Times revealed in March that factories in Eastern Europe, which are part of its Liberty Steel Group, were assigned a negative equity value of $ 2.6 billion after debts of $ 1. $ 6 billion by GFG advisers in a restructuring plan called “Project Battery”.
The Romanian factory of the industrialist, Freedom Galati, sold an estimated 100 million euros in carbon credits last year after being allocated to them under the EU’s emissions trading scheme, ETS.
Where climate change meets business, markets and politics. Check Out FT Coverage Here
A key policy on climate change, the bloc’s ETS grants large polluters a certain amount of carbon allowances free of charge each year.
Credits are tied to individual factories and issued every February. Companies must surrender enough allowances to cover every tonne of emissions by the end of April of the following year.
Galati sold its allowances for 2020 early last year, but is now scrambling to secure the funds to buy back enough to cover its emissions in the past 12 months, according to two people familiar with the situation.
An additional challenge is that the price of permits in the European carbon market has skyrocketed in recent weeks, increasing the cost to polluters.
Galati is in talks with its sister factory in the Czech Republic, Liberty Ostrava, to see if it might be able to provide additional allowances, a person familiar with the situation said.
The sale of carbon credits is a common practice among European industrial groups. Companies can end up with a larger-than-necessary allowance when emissions are reduced and sell the permits for cash in the carbon market.
Others sell their entire allowance with a view to buying them back after 12 months.
British steel was forced to seek help from the UK government in 2019 after selling carbon credits linked to its operations to Scunthorpe while it was owned by Greybull Capital. The steel group was surprised by the sharp rise in the price of loans.
GFG said that like other large industrial companies, Liberty Steel companies “trade carbon credits in the ordinary course of business.”
He declined to comment on his sites’ “current balances for business reasons”, but said he expected them to all drop “the correct number of credits” by the end of April.
In addition, it also emerged that Romanian prosecutors were investigating allegations of corruption at the Galati factory.
Liberty Steel said it “would cooperate fully with any investigation by the Romanian authorities”. The company, she added, had commissioned an external investigation into the matter. A senior executive has voluntarily stepped down while the investigation is ongoing.
Newsletter twice a week
Energy is the world’s essential business and Energy Source is its newsletter. Every Tuesday and Thursday, straight to your inbox, Energy Source brings you essential news, cutting-edge analysis and insider information. register here.