Pro-Gest - Microwaivers, lay-offs, elections, momentum

All,

Eventful times in Montova:

On the positive:

- Pro-Gest have signalled the consent of the Cartiere bonds 20, 21 and 22. In particular the 22s have agreed to accept early repayment (previously non-call all the way) in return for an earlier maturity at Dec 20.

- Moreover, last week the company submitted its application for the restart of Environmental Impact Assessment on the Mantova plant - including the expansion to 400kt. After - The Zagos wired the first E150k of construction fines to the local government.

On the negative:

- The environment testing team is to arrive on March 9th and testing should take two months from there. 

- Because there is little to do in that time and clearly also with some political calculation in mind, all 50 employees of the Mantova paper mill have been informed of their imminent lay-off last week. 

- In, a working-level meeting at the paper mill’s canteen between workers, Pattia Palazzi - the mayor, Andrea Maurari - the commissioner for the environment, Daniele Soffiati - GCIL trade union secretary, Alessandra Grossi - GCIL trade union communications and Fausto Banzi - provincial coordinator of the Italian Left wing party Sinistra Italiana, the parties involved discussed the circumstances around the lay-offs.

Elections in May:

- 2020 is election year in Mantova and Mayor Pattia Palazzi is heading a coalition government by the "Left Ecology Liberty” and the centre left Democratic Party. The environmental impact of the paper mill therefore plays a significant role. 

- The Democratic Party will in all likelihood remain in power, so no change anticipated, but with the heightened attention on the paper mill’s emissions as well as employment, the government is hoping to resolve the issue before elections in May, subject to the changed plan (without incinerator). 

- We understand from local journalists that the Democratic Party is leaning towards the opening of the plant and that the oncoming elections provide an opportunity to pressure its far smaller green coalition partner into the deal, given they will have the closure of the incinerator to show for. 

- Pro-Gest are also promising the construction of a waste-paper warehouse.

Thoughts:

The downside from the failure of this deal is so prohibitively abysmal that we still cannot find the courage to take a position in the bonds. Besides, the competition authority will still have to be taken care of too. But the momentum is beginning to be on Pro-Gest’s side and the first hurdle - the waivers - has been taken, while the all important license question will be solved in the next three months or never.

Wolfgang