Revenues of budgets of various levels from small-scale privatization of state and municipal property in the state electronic trading system Prozorro.Sale amounted to almost UAH 3.3 billion in 2023, according to a joint press release on Thursday.
“In total, in 2023, businesses and citizens privatized almost 914 objects across the country. 350 of them are state property sold by the State Property Fund (SPF) and its regional offices through online auctions on Prozorro.Sale, and another 560 are assets sold by communities,” said First Deputy Prime Minister and Minister of Economy Yulia Svyrydenko.
It is specified that the state budget received more than UAH 2.6 billion, while the privatization of communal facilities brought communities more than UAH 650 million, and the price of the facilities increased almost threefold as a result of electronic auctions.
“It is important that privatization is not just a one-time revenue for the state or local budgets, it is primarily about attracting investment and economic development,” emphasized Svyrydenko.
CEO of Prozorro.Sale Serhii But noted that in total, more than 3.6 thousand participants competed for the right to purchase state and municipal property in 2023.
“The business demand for small-scale privatization objects in the second year of the full-scale war remains, with an average of more than three bidders. Factories, hotels, warehouses, outpatient clinics, car dealerships – these and other objects have found a new effective owner this year thanks to online auctions,” said Booth.
Head of the SPF Vitaliy Koval added that, in addition to development and modernization, job creation and mastering new markets, another important area of privatization auctions under martial law is the search for objects for business relocation. According to him, this is especially relevant for the hospitality industry (catering, restaurant business and hotel industry), agricultural, logistics and other sectors of the economy.
“That’s why the most popular real estate objects, which is 76% of the sold property, are industrial and administrative assets. Businesses are interested in the so-called brownfields – abandoned enterprises with communications. After all, it is enough to make repairs there and you can start your own business or expand an already running production,” explained the head of the privatization agency.
He said that the SPF plans to actively involve big business in privatization.
“We are already preparing a large-scale privatization. We also plan to open a transparent agricultural land lease market and sell the aggressor’s assets at auctions to compensate for the damage caused by the war,” said Koval, who previously announced a goal of over UAH 4 billion from privatization in 2024. Among the most interesting proposals for next year’s auctions, the SPF mentioned the UMCC, Demurinsky GOK, Centrenergo, Odesa Port Plant, Ukraina Hotel, and Ocean Plaza shopping mall in Kyiv.
According to the press release, the highest price for the privatization of state-owned facilities in 2023 was paid by the winning bidders for the Hermitage Hotel in Kyiv – UAH 311 million, the unified property complex (UPC) Volyntorf – over UAH 212 million, and the UPC of the State Enterprise Ukroboronresursy – over UAH 210 million.
It is specified that among the communities that actively worked with the small-scale privatization market, Dnipro was the most active – 35 successful auctions, Lviv – 32, and Kyiv – 23. The most expensive municipal privatization objects this year are the Zhytomyr Regional Cinematography Center – UAH 40 million, non-residential premises in Lviv with an area of 550 square meters – over UAH 25 million, and non-residential premises in Zhytomyr region with an area of almost 600 square meters – over UAH 22 million.
As reported, small-scale privatization in Ukraine was suspended with the start of full-scale Russian aggression in February and resumed in September 2022. In less than the last four months of last year, more than UAH 1.4 billion was transferred to the budgets of various levels as a result of more than 200 auctions.
The State Property Fund of Ukraine (SPFU) has re-put up for privatization the Gannopil distillery in Khmelnytsky region, the press service of the agency reports.
“This is the second attempt to sell the Gannopil distillery. At the previous auction, the investor offered UAH 2.6 million, but did not pay for the lot and lost UAH 400 thousand of the guarantee fee,” the SPF reported.
The agency reminded that the alcohol industry enterprises can produce alcoholic beverages, soda, solvents for the chemical industry and bioethanol.
According to the report, the Gannopil distillery started its operations in 1928. The company could potentially produce 20 thousand liters of alcohol per day. However, the plant has not been operating since 2011.
The area of the distillery’s premises is 10,208 thousand square meters, which includes 62 buildings: administrative offices, warehouses, workshops, workshops, alcohol storage facilities and wells.
In addition to the winning bid, the new owner has to pay UAH 16.2 million in debts to employees and the budget.
The starting price of the enterprise is UAH 3.8 million.
The auction is scheduled for August 31.
Ukrainian President Volodymyr Zelensky signed law No. 8250, which will allow the State Property Fund (SPF) to resume big privatization and make state property management more efficient by improving the SPF structure.
“The law on the updated structure of the State Property Fund has been signed by the president. The document will improve the organizational structure of the fund: 12 regional branches of separate legal entities will become structural divisions of the SPF. This will create a mechanism for the establishment of market salaries and CRI in all regions and will increase the efficiency of state property management, “- wrote the head of the SPF Rustem Umerov in Facebook on Tuesday.
He recalled that the document also contains provisions for the resumption of large-scale privatization, improving the procedure for managing the sanctioned property, increasing the lease term of state property up to five years.
According to the norms of the law, by the decision of the VAKS, the sub-sanctioned property will be transferred directly to the SPF and the proceeds from the sale will be sent to the Fund for Liquidation of Consequences of Armed Aggression.
Umerov thanked the president, the government and MPs for supporting this important initiative.
Earlier, it was reported that after the mentioned law enters into force, the SPF will independently make managerial decisions on the unsanctioned property: privatization, sale, lease or management.
The law bans unsanctioned individuals and citizens of aggressor countries from holding positions as heads of state-owned companies and members of supervisory boards, and cancels the procedure for obtaining approval from local authorities for directors of state-owned companies that are managed by the SPF.
After the enactment of the law the department expects the increase of income from renting state property by 20-25%, or 100 million UAH per year, as well as the improvement of leased property.
On 30 May, the Rada supported the bill #8250 by 231 votes of people’s deputies with the required minimum of 226 votes.
The State Property Fund (SPF) will be able to resume big privatization, to lease state property for up to five years and will receive sub-sanctioned property upon the decision of the SAI and independently decide on its further fate.
According to the FGI in a press release, the relevant provisions are stipulated by law number 8250, which the Rada supported by 231 votes with the required minimum of 226 votes on May 30.
The fund specified that it will independently make management decisions on the sub-sanctioned property: privatization, sale, lease or management, and all the funds received will be directed to the Fund for liquidation of consequences of the armed aggression of the Russian Federation.
In addition, the law bans unsanctioned individuals and citizens of aggressor countries from holding positions as heads of state-owned companies and members of supervisory boards and cancels the procedure for approving local authorities for directors of state-owned companies managed by the SPF, the release said.
Regarding the lease, the Fund recalled that before the full-scale invasion, it could lease state property for up to 49 years, although the vast majority of contracts were for five years: in 2021, the share of five-year contracts was 88.8%.
At the same time, at the beginning of the war there were fears that due to low competition caused by the general uncertainty, the price of the lease may be underestimated, and from April 1, 2022 the Rada limited the validity of new contracts to the duration of martial law + 12 months after its cancellation, explained the IGF. He specified that during this time has concluded 1,153 such contracts.
“But in recent months, Ukrainian business has gradually adapted to the challenges of martial law … Term limits do not encourage entrepreneurs to participate in lease auctions, so now 38% of them do not pass due to lack of demand,” explained the Fund.
After the law enters into force, the agency expects to increase the income from renting state property by 20-25%, or 100 million hryvnias per year, as well as to improve the condition of the leased property.
According to a press release, the law also aims to improve the management structure of the IGF: the head of the Fund will have the right to appoint and dismiss deputies, 12 regional offices – separate legal entities will become structural units, and the organizational structure will be built on a functional principle. “As a consequence, a clearer and more understandable responsibility for the work of the State Property Fund and the installation of the KRI for subdivisions and market salaries for employees,” the statement said.
The State Property Fund of Ukraine (SPF) this year plans to complete the full privatization of the alcohol industry, which will hold online auctions for the sale of 26 distilleries across the country.
As reported on the IGF Facebook page on Thursday, for the 2.5 years since the de-monopolization of the alcohol industry there have been 39 successful auctions for the sale of distilleries, which added more than 2 billion UAH to the country’s budget, allowed to attract private investment and reduce illegal production.
“Did you know that not long ago Ukraine had a monopoly on alcohol production? We were one of only two countries in the world that had such a practice. However, in the summer of 2020, the state decided to de-monopolize the industry and began privatizing distilleries. “, – reminded the department.
According to him, before the start of privatization Ukraine spent about 200 million UAH a year for the maintenance of unprofitable factories. An even bigger problem was shadow production, which amounted to 55% in 2019.
The fund specified that in the 39 completed privatization auctions participated 133 entrepreneurs, as a result, due to competition, the value of the proposed assets increased by an average of 2.4 times.
“Not only alcohol producers are interested in buying distilleries. Pharmaceutical companies, producers of motor fuel and agricultural companies interested in processing their own products also take part in the auctions,” emphasized the FGI in its report.
As reported, in September-December 2022 the SPF held 12 auctions for the sale of distilleries. The auction winners offered more than 849 million hryvnias for these facilities, which is three times more than their total starting price. Thus, distilleries became one of the most popular destinations for investment in state property last year.
In December 2022, “Averbud Ltd.” (Chystyliv village, Ternopil region.) won the right to privatize part of the property of the state enterprise “Myshkovitsy Distillery” (Terebovlyansky district, Ternopil region.), namely the distillery in Chortkiv (Ternopil region.).
At the beginning of January 2023, the Antimonopoly Committee of Ukraine allowed Timekol LLC (Kiev) to privatize Borschevsk distillery (Ternopil region), which is a part of the state enterprise Ukrspirt. The company won the right to buy the distillery for 17.7 million UAH at an online auction in October 2022.
In addition, on January 12, LLC “Es Oil” (Lviv) won the right to privatize Starobabskyi distillery with assets in five regions of Ukraine for 142 million UAH, and on February 6 LLC “Agroprompererobka” (Karbivka village, Vinnitsa region) won the auction for the privatization of Vashkovskiy distillery (Vashkivtsi Chernivtsi region) for 1.99 million UAH.
The Antimonopoly Committee of Ukraine (AMCU) allowed Aqua Solar Invest LLC (Bershad, Vinnytsia region) to purchase Kobylovoloki distillery (Kobylovoloki village, Ternopil region), which is part of Ukrspirt, and Vitagro Energy LLC (Gvardeyske village, Khmelnitsk region) was allowed to purchase the Marylivsky distillery (Nagirnyanka village, Ternopil region) from Ukrspirt.
The Committee approved the corresponding permits for the privatized assets at its meeting on December 1.
LLC “Aqua Solar Invest” won the right for privatization of Kobylivolokskyi distillery for UAH 70,25 mln on September 19, 2022.
According to the Unified State Register of Legal Entities and Individual Entrepreneurs, the ultimate beneficiaries of “Aqua Solar Invest” with a registered capital of 25 million UAH are Alexander Yaroshenko (25% in the share capital), Lilia Astapova (25%) and Elena Smirnova (25%), while until December 2020 the company was fully owned by Felix Lutsky. The legal entity is engaged in distillation, rectification and blending of alcoholic beverages, while before January 2021 its line of business was real estate trade.
This company already has experience in privatization of assets of state enterprise “Ukrspirt” – in October 2020 it won the online auction “Prozorro.Sells” the right to privatize Bershadskyi distillery for 19.81 million UAH, and in early February 2022 closed the deal to purchase it, having received permission of the AMCU.
The immovable property of the Kobylivolok distillery to be privatized with a total area of 11.5 thousand square meters is located on seven plots of land in Terebovlyansky district of Ternopil region with a total area of 36.95 hectares. The plant includes production buildings, granary, distillery, hangars, pumping stations, greenhouse, starch and malt shops, gas station, etc., as well as the technological equipment and the necessary communications.
The daily capacity of the distillery is 2.7 thousand dal of ethyl alcohol. The company was founded in 1905 and modernized in 2016. Production at the facility has been temporarily suspended.
In turn, Vitagro Energy won the right to privatize Marylivskyi distillery for UAH 150 mln on September 20, 2022.
According to the Unified State Register of Legal Entities and Individual Entrepreneurs, the ultimate beneficiary of Vitagro Energy LLC with a registered capital of 10 thousand UAH is Serhiy Labaziuk, a member of parliament (the Za Maybutne parliamentary faction). The main activity of the company is the production of electricity, but the legal entity may also engage in the cultivation of root crops and melons, as well as auxiliary activities in crop farming.
The company is part of the large Vitagro holding, which is engaged in the production and processing of crops, including fruits and vegetables, dairy farming and pig breeding. The Group cultivates about 85 thousand hectares of land in Khmelnytsky, Ternopil and Rivne regions and has a livestock of 110 thousand pigs.
According to Vitagro’s website, Vitagro Energy was founded in 2018 to develop renewable energy projects. The company has four solar power plants in the Khmelnitsky region on a total area of 29.5 hectares with a total capacity of 12.9 MW, and also works with other sources of renewable energy, such as wind and biomass.
The Marylivsky distillery is located in the village of Nagirnyanka, Chortkivsky district, Ternopil region. The list of assets includes 1518 items of buildings, equipment, movable and other property.
The enterprise is located on three land plots with a total area of 26.6 hectares and consists of an administration building, seven production shops, a bard storage facility, a starch workshop, greenhouses, hangars, warehouses for grain, finished products and alcohol, as well as other constructions and infrastructure facilities.
The distillery was founded in 1928, the maximum production capacity in 2009 was 7300 thousand dal per day.
Thus, the privatization of these two assets of Ukrspirt will allow the State Property Fund of Ukraine to transfer 220.25m dollars to the state budget.
