European Commission has completed monitoring of Mechel’s steel subsidiaries in Romania

Mechel OAO (NYSE: MTL), one of the leading Russian mining and metals companies, reports compliance of its Romanian steel subsidiaries with the viability benchmarks established by the European Commission within the framework of the Romanian steel industry restructuring strategy.

The European Commission monitored Mechel Targoviste and Mechel Campia Turzii in the period from 2004 to 2008, as soon as state aid was granted for both plants in the course of privatization. The state aid was provided in the way of writing-off the plant’s historical debts. The Commission monitored certain parameters of the companies’ activity, including: labour efficiency increase, reduction of materials consumption, manpower optimization, modernization of production facilities, and compliance with the EU environmental standards.

The European Commission’s final report has confirmed compliance of Mechel Targoviste and Mechel Campia Turzii with all the key benchmarks required.

Andrey Deineko, Chief Executive Officer of Mechel-Steel Management OOO, commented on the event:

“The European Commission confirmed our Romanian subsidiaries’ compliance with the key restructuring benchmarks and this means that we would not have to pay back the state aid that had been granted to us during the privatization period. Thus, we may say about high efficiency of our Romanian subsidiaries’ development strategy. The company invested over US$100 million in Mechel Targoviste and Mechel Campia Turzii between 2004 and 2008 which is 1.5 times above the level of investments specified by the EU. Owing to the crisis the subsidiaries’ performance in 2008 was worse than we had expected. We plan to reach the pre-crisis production levels by the end of 2010. We shall also continue our started modernization programme, the main aim of which is new technologies implementation in steel-smelting and rolled products sectors and increase in output of high value added products.”