A number of companies have applied for tenders called by the State Property Fund (SPF) of Ukraine to select advisors for the privatization of insulin producer Indar, President Hotel and Odesa Port-Side Chemical Plant with July 20 set as the deadline for applications, an informed source in the government has told Interfax-Ukraine. “There are applications, and there are many of them,” the source said without giving details.
The SPF’s press service told Interfax-Ukraine that it was not authorized to disclose details at the current stage, advising waiting for the results of the tenders. As was reported, the SPF late in June called tenders to hire advisers to sell 100% of Kyiv-based PJSC United Mining and Chemical Company (UMCC), 70.7016% of PrJSC Indar, 100% of PrJSC President Hotel (all three are based in Kyiv), and two wholly state-owned enterprises: Krasnolymanska Coal Mining Company in the town of Rodynske, Donetsk region, and Kharkiv-based Electrotyazhmash Plant (ETM), as well as 99.5667% of PJSC Odesa Port-Side Chemical Plant (OPZ) in Odesa region.
The deadline for Indar, President Hotel and OPZ is July 20 inclusively. The first stages of the tenders are scheduled for July 26, and the second stages for July 30.
In case of UMCC and ETM, the deadline for applications is July 23, and tenders will be held in two stages: on July 27 and on July 31.
Ukraine on July 12 met with representatives from the ‘big four’ auditors, namely Ernst&Young, Deloitte, PwC, KPMG, as well as Morgan Stanley, Rothschild, ICU, Concorde Capital, Dragon Capital to present details of tenders to select advisers on large-scale privatization,.
The adviser’s tasks include an analysis of the economic, technical and financial performance of an enterprise; bringing the main indicators of its financial statements in line with international accounting standards; carrying out audits (financial, environmental and others), implementation of due diligence and a SWOT analysis of the assets, including assessment of the competitive positions in Ukraine and international markets.
Ukraine’s State Property Fund (SPF) has called first six tenders to hire a privatization adviser to prepare the sale of six out of 22 enterprises approved by the Ukrainian government for privatization this year. In particular, tenders were called to hire advisers to sell 99.5667% of PJSC Odesa Port-Side Chemical Plant (OPZ) in Odesa region and 100% of Kyiv-based PJSC United Mining and Chemical Company (UMCC), the SPF said in announcements in the Vidomosti Pryvatyzatsii privatization bulletin on Monday.
Other four tenders will be called for advisers to sell 70.7016% of PrJSC Indar and 100% of PrJSC President Hotel (both are based in Kyiv), and two wholly state-owned enterprises: Krasnolymanska Coal Mining Company in the town of Rodynske, Donetsk region, and Kharkiv-based Electrotyazhmash Plant (ETM).
The deadline for Indar, President Hotel and OPZ is July 20 inclusively. The first stages of the tenders are scheduled for July 26, and the second stages for July 30.
Applicants for UMCC, Krasnolymanska and ETM are to send their bids before July 23. The tenders will be held in two phases: on July 27 and July 31.
In all cases, the fixed sum of an adviser’s fee is set at no more than 0.5% of an enterprise’s state-owned assets. In case of the sale of an asset, the size of the variable part is up to 2% of the value of the sold asset, it said.
As was reported, Ukraine’s Cabinet late in May 2018 published a list of large-sized enterprises subject to privatization this year. It includes 23 enterprises: five regional power distribution companies, Centrenergo, Turboatom, Zaporizhia Titanium and Magnesium Combine (ZTMC), and Sumykhimprom. Only an adviser on Centrenergo has been selected as of now. It is Ernst&Young, which on June 19 submitted its status report.
Acting Head of the State Property Fund of Ukraine (SPF) Vitaliy Trubarov has signed orders on the privatization of 22 large facilities. “There is no way back. The fund signed 22 orders for the privatization of large facilities. This is the first large list of enterprises for sale for the last ten years,” he said on Facebook. As reported, the SPF intends by July 1 to declare tenders for the selection of advisors for the privatization of 22 facilities.
At the end of May, the Cabinet of Ministers of Ukraine published a list of enterprises of “big” privatization for 2018, which included 23 enterprises. The approved list, in particular, included five regional energy companies, Centrenergo, Odesa Port-Side Chemical Plant, Turboatom, Zaporizhia Titanium and Magnesium Combine, United Mining and Chemical Company, and Sumykhimprom.
Foreign investors are actively interested in buying state-owned stakes in energy supply companies, while at the same time they note the need to introduce incentive tariff formation (RAB tariffs) for the reliable evaluation of privatized facilities, Brian Best, the manager of the investment banking department at Dragon Capital investment company, has stated.
“We see a certain interest in the energy sector and we have a mandate from international investors for participation in privatization of regional energy companies,” he said at the conference “Turning Tides: M&A in Ukraine” organized by AEQUO law firm in Kyiv.
At the same time, the expert noted the importance for investors of the availability of a transparent and understandable system for electricity tariffs formation.
“Without clarity in the structure of tariffs, it is difficult for investors to understand what the future cash flow will be and how to calculate the value of these assets. RAB tariffs are definitely a necessary condition for privatization,” the expert said.
Speaking about other state enterprises to be privatized, the expert noted the presence of a number of obstacles that limit investors’ interest in such assets, despite the fact that many of them seem very attractive.
“For example, Odesa Port-Side Chemical Plant and Sumykhimprom are burdened with significant artificial debts. And in order to conduct fair privatization, it is important to clear the balances of the enterprises from these liabilities,” he said.
The Economic Development and Trade Ministry of Ukraine plans to start privatization of large state-owned enterprises (SOE) from the sale of Centrenergo, First Deputy Minister Maksym Nefyodov has said. “Centrenergo could be the first test case, and other facilities would follow it,” he said at a roundtable entitled “Ukraine on the Way of Privatization” in Kyiv on Wednesday.
Acting Head of the State Property Fund of Ukraine (SPF) Vitaliy Trubarov said that after Centrenergo, it is likely that other power supply companies would be privatized. He also said that the start of the privatization of large companies is planned for this autumn.
CENTRENERGO, ECONOMY MINISTRY, ENERGY COMPANY, PRIVATIZATION
The Ukrainian government has approved a list of large enterprises for privatization in 2018. It includes 26 enterprises: five regional electricity supply companies, Centrenergo, Odesa Port-Side Plant, Turboatom, Zaporizhia Titanium and Magnesium Combine, United Mining-Chemical Companyand Sumykhimprom.
“We are selling them to make investments and enterprises work efficiently. We need to attract qualified advisers to privatize large enterprises… We will get it over with the shadow privatization in Ukraine by this decision,” Prime Minister Volodymyr Groysman said, commenting on this decision at a meeting on Thursday, predicting a strong confrontation of opponents to this approach.
Head of the State Property Fund Vitaliy Trubarov said that 18 enterprises are already in the Fund’s management, including Ternopiloblenergo (50.999%), Zaporizhiaoblenergo (60.2475%), Kharkivoblenergo (65.001%), Mykolaivoblenergo (70%) and Khmelnytskoblenergo (70.0089%), Kherson (99.8328%), Dniprovska (99.9277%), Kryvy Rih (99.9864%) and Severodonetsk combined heat and power plants (CHPPs), Azovmash (50%), Turboatom (75.2241%), Zaporizhia Titanium and Magnesium Combine (51%), Oriana (99.9988%), Aluminum foil plant (state-owned enterprise), President Hotel (100%), Centrenergo (78.289%), Odesa Port-Side Plant (99.5667%) and Sumykhimprom (99.9952%).
Trubarov said that three enterprises are managed by the Ministry of Economic Development and Trade: United Mining-Chemical Company (100%), Electrotyazhmash and Dniprovsky Electric Locomotive Plant (state-owned enterprises), two more facilities are in the management of the Ministry of Agrarian Policy and Food – Agrarian Fund and the State Food-Grain Corporation of Ukraine (100%) and one each are subordinated to the Ministry of Energy and Coal Industry, the Cabinet of Ministers and the Ministry of Health: the Coal Company Krasnolymanska (state-owned enterprise), Ukragroleasing (100%) and Indar (70.7016%) respectively.
