LLC Pobuzhsky Ferronickel Plant
Solway Investment Group has already invested $130 million in PFP as direct investments. The group plans to invest another $50 million, provided that the political and economic situation in Ukraine stabilizes and if there will be favorable conditions on the world market.
Solway Investment Group, together with the Canadian company, Hatch Group (one of the world’s largest engineering companies specializing in metallurgy engineering services and project management), have begun the next phase of the Plant’s reconstruction.
The favorable situation on the world nickel market has recovered, which in turn allowed the Plant to increase its ferronickel production again, up 27.76% compared with 2009.
Global demand for nickel has fallen sharply, therefore nickel prices have fallen almost three-fold. According to the 2008 annual results, output of ferronickel increased by 12.77% vs. 2007, and according to 2009 annual results, production decreased by 26.13% vs. 2008. One of the two furnaces had to be stopped, some of the employees (retired workers, supporting staff and employees whose functional responsibilities could be combined) were laid off, and part of the remaining workers were employed on a part-time basis. Those workers operating the stopped furnace were provided with other workplaces. The average salary decreased to UAH 2000, a drop of 13%. In comparison with salaries of other enterprises, this wasn’t so bad. But what is really important is social spending, including that in the local settlement, remained on the same pre-crisis level. For a long period of time, the owner of the Plant actually subsidized the enterprise with his own money.
Until the mid-2008 the company had employed 1,970 people. The average salary was UAH 2,320 (at the rate of USD1 = UAH5), and the number of job applications received by Plant’s HR Department exceeded the need for many years in advance. By that time, Solway Investment Group had invested approximately $60 million in the Plant.
PFP is developing dynamically, constantly improving its production technologies, and now is ranked 7th in the world in terms of ferronickel and nickel production.
The modernization of the plant continues, the results are as follows:
- all production processes have been computerized;
- rotary kilns for heat treatment of ferronickel concentrate have been put into operation;
- a branch of ore drying and granulation of metal, gas cleaning of the converter department, and a garage-defroster for 12 railway cars have been built;
- gas coolers have been upgraded;
- major repairs have been carried out according to modern requirements of all maintenance premises, buildings, structures and roads;
- the territory of the Plant has been put into order.
The socio-cultural base of the enterprise has changed dramatically:
- The Cultural center, recreation center and sports complex have been renovated;
- a new school and a kindergarten with space for 100 children have been built;
- a rehabilitation center with 25-meter swimming pool, solarium, gym and sauna has opened;
- the medical unit was equipped with new modern equipment.
- a 100-kilometer gas pipeline was laid in Pobugskoye, a church was constructed, a new hospital was built at the plant, and its medical personnel provides services to all local residents.
In the winter of 2006, more than half of the residential buildings were frozen in Pobugskoye, The Plant sent 18 maintenance teams to eliminate the consequences of the accident.
The plant was awarded the honorary title of “The Best Enterprise in Ukraine”, its products were awarded the national quality mark “The Highest Order” and the honorary international quality award “Euromarket-2004”.
The owner of the company changed again. The international investment group, Solway Investment Group became the new owner and remains so today. In the summer of 2003, the authorized capital of the Plant was increased by UAH 90.6 million to reach UAH 161.2 million (by almost 1.8 times), with further transfers of another $800,000. In total, the new owner invested approximately $20 million, which allowed reconstruction works to be performed and for the launch of one of the two PFP furnaces as early as in December 2003 (the second furnace began producing ferronickel in January of the following year).
The plant was idle. Investors declared they were ready to spend $15 million for renovation to launch production in February 2003. However, the reconstruction works were slow, and PFP’s owners did not have UAH 11 million to pay off the enterprise’s payables and wages. In November 2002, the Economic Court of the Kirovograd region initiated bankruptcy proceedings for LLC “Pobuzhsky Ferronickel Plant”. This was the second time the plant was declared bankrupt in seven years.
There was a major accident at the Plant. An explosive wave destroyed the wall separating the transformer substation from four oil-filled transformers. A fire caused damage to the construction structures of the smelter shop floors, and part of the roof was broken. Losses from amortization of fixed assets amounted to UAH 6 million. Fortunately, there were no human casualties. The accident was caused by a weak lining in the furnace, designed for smelting ferronickel from nickel ores extracted at local deposits, with an average nickel content of 0.75%. While in the imported ores, the nickel content reached 2.2-2.3%, which required increasing the melting temperature to 270-280 degrees Celsius, and the old furnace lining could not withstand the higher temperature.
Investors had invested in the reconstruction of the enterprise and the resumption of its operations (the ore furnace was restored, accounts payable were eliminated, and working capital was replenished), and in 2001 the plant released the first 150 tons of ferronickel after a long downtime. Until December 200,1 one of the two production lines for the production of ferronickel with a capacity of 3,000 tons per year was operated at the PFP, in terms of the net nickel content of ferronickel. The raw materials were to be imported only.
In August 2000, according to the approved reorganization plan of the enterprise, on the basis of the integral property complex of JSC “Pobuzhsky Ferro-Nickel Plant” was created a completely private LLC “Pobuzhsky Ferro-Nickel Plant”. It was co-owned by a group of investors, including the UK-registered Nikomed Ltd., which received 51% of the shares.
In accordance with Presidential Decree No. 210 of July 15, 1993 “On corporatization of state-owned enterprises” and Decree of the Ministry of Industry of Ukraine No. 233 of July 15, 1994, the state Pobuzhsky Nickel Plant was transformed into OJSC “Pobuzhsky Ferronickel Plant”. However, all attempts to resume ferronickel production were unsuccessful. There were five years of total downtime. The company did not work, its equipment was stolen, the shops were destroyed, and the village itself became desolate: there was no heat in the houses, electricity was interrupted, many residents left the village. After the Kirovohrad Regional State Administration included the plant in its program for socio-economic development of the region, it was given the right to promptly manage the block of shares of the bankrupt OJSC.
The first stage of the Pobuzhsky Nickel Plant was commissioned (two tubular rotary kilns – TVP, one ore thermal furnace – RTP and four converters). The first batch of commodity ferronickel was produced on December 29, 1972. In November 1973, the second phase (2 TVPs and 1 RTP) came into operation.
The Terms of Reference for the production of commodity ferronickel were developed and approved by the Council of Ministers of Ukraine in July 1964. But in the late 1960s, when prospecting for nickel ores in the north of the USSR and the Urals began, which in its turn allowed to establish more powerful production on the spot, the construction of the PFP was terminated. The construction works were restored only in 1971.
The Resolution of the Council of Ministers of the USSR No. 857 on the design and construction of a nickel plant and residential settlement near the village Kapitanka in the Golovanivsky district of Kirovograd region was approved. In Middle Pobuzhye, several deposits (Kapitanovskoe, Deryniukhinskoe, Lipovenkovskoye, Grushkovskoye) of silicate nickel ores were discovered and explored. Despite their relatively low nickel content (0.75% on average), they were intended to become the raw material base of a new metallurgical enterprise.