Ukraine to try selling Odesa Portside, needs updated privatization law

Ukraine’s State Property Fund (SPF) is going to organize a new tender to sell its 99.6% stake in fertilizer producer Odesa Portside, aiming to reduce the tender’s starting price, SPF Head Ihor Bilous told journalists on Aug. 19. The starting price could be halved to attract additionally “at least three investors,” according to Bilous, as reported by Interfax-Ukraine. The previous tender for Odesa Portside failed to occur in July as none of the potential investors (which numbered seven or eight, according to Bilous) confirmed their interest to participate. At that time, the starting price was UAH 13.2 bln, or about USD 527 mln. 

In other news, Bilous reported via the SPF website that the Fund has prepared a new legislative bill “On privatization” aimed at optimizing some procedures. In particular, the new law will grant more time to potential investors to learn about privatization targets. The draft law also eliminates the involvement of ministries in preparing assets for privatization, which should prevent them from dragging out the process. Also, the document proposes penalties for SPF officials for dragging the process. The document will be reviewed by Ukraine’s Cabinet of Ministers before submitting it to the parliament (Verkhovna Rada).

Alexander Paraschiy: Last year, the SPF failed to sell any large state asset, blaming the inability of the Rada to adopt progressive legislation that was submitted in mid-2016. In February 2016, the Rada adopted the a bill, though it did not change much. The only large asset, scheduled for sale in July 2016, failed to be sold. Possible parliamentary opposition to the SPF’s new legislative initiative, even more progressive than last year’s effort, will serve as a good excuse for top officials to lay blame for what we believe will be a failure in the 2016 privatization plans.

Recall, the 2016 state budget (as well as for 2015) foresees UAH 17.00 bln in state proceeds from privatization. In 7M16, the SPF has sold state assets for UAH 0.06 bln (compared to UAH 0.15 bln in 2015). We don’t see a desire of top officials to fulfill these plans.