Metinvest seeks new investor for Italy’s landmark steel project

Metinvest Holding is looking for a new investor to provide equity financing for a €3 billion ($3.4 billion) steel plant in Italy as the Ukrainian group tries to downsize its commitment.

An additional partner is being sought for the project at the site of a former steelworks in Piombino on the Tuscan coast, Metinvest said in an emailed statement to Bloomberg. It wants to strengthen the financing “in light of the war-related risks associated with Metinvest’s significant operating footprint in Ukraine,” the mining and steel company added.

Meanwhile, some potential lenders have become more cautious as a result of heightened geopolitical risks, including the recent conflict in the Middle East, according to a person familiar with the matter, who asked not to be identified because the discussions are private.

“In terms of debt capital structure, we have good visibility over it, and we are continuing our dialogue with financial institutions to finalize this stream as well,” Metinvest said.

The initiative has been designated a “national strategic project” by the Italian government and touted as “the rebirth of steel in Italy” by Metinvest Adria, the joint venture established last year with the Danieli Group to build the state-of-the-art facility. It expects to produce 2.7 million tonnes of low-carbon steel a year and create 1,100 jobs in an area that has seen little activity in over a decade.

Under the original plan, funding was supposed to consist of debt, government grants and equity contributions from the joint venture partners. Metinvest agreed to contribute more than €500 million, or 75% of the total equity, but is now seeking to reduce this to less than €300 million, according to people familiar with the matter, who asked not to be identified.

Danieli, which has committed to providing 25% of the equity, and the Italian government did not immediately respond to requests for comment.

War damage

In its statement, Metinvest said it had obtained “strong support from all stakeholders,” including the Italian government, which had already approved grants and credit guarantees and allocated funds for the construction of a new quay in Piombino port.

Metinvest’s finances have come under pressure after it had to draw on cash reserves to pay back a $428 million bond in April. Some of the firm’s assets in Ukraine have been lost or damaged as a result of Russia’s invasion. High energy costs and labor shortages have also hurt its operations.

S&P Global Ratings upgraded its assessment of Metinvest’s creditworthiness this month after the bond was redeemed but kept a negative outlook on the business, highlighting the need for Metinvest to build a cash buffer. Metinvest said it had $150 million of unrestricted cash at the start of May, according to S&P.

Metinvest is exploring the possibility of raising long-term financing and recently met with investors to discuss the pricing and structure of a potential bond issue. Like most Ukrainian firms, Metinvest has not accessed the bond market since the invasion in 2022. Nonetheless, the group has managed to meet its financial obligations and reduce its debt load.

(By Edward Clark, Alberto Brambilla and Donato Paolo Mancini)