Ukraine appeal fails to unblock Big Privatization

Ukraine’s State Property Fund announced on Jan. 28
that it lost its appeal against a court ruling that prohibits the signing of contracts
with financial advisers selected to help arrange the privatization of five
large state companies. The fund will appeal this ruling, said Head Vitaliy
Trubarov in the Jan. 28 statement.

Recall, the fund completed tenders to select privatization advisers for six state companies
in July 2018. Later on, the selection of the advisers of five of these
companies was appealed in the courts by one of the tender’s losers, prompting
the courts to forbid the fund and Cabinet to sign contracts with the four
winning firms.

Trubarov has characterized the litigation as an
attempt to wreck the Big Privatization under the new progressive legislation
approved in January 2018. This law requires the selection of advisers under the
fund’s tender procedure. The only company whose majority stake is being
privatized under the old legislation is power GenCo Centrenergo (CEEN UK), for
whom the process started before the new law was adopted. 

Alexander Paraschiy: So far,
only the President Hotel is being actively prepared for privatization with the
involvement of its adviser, Concorde Capital. It is among the smallest out of
assets included in the fund’s Big Privatization campaign. If the courts will
continue to block the government from signing contracts with its advisers, the
chances that Ukraine will reach its UAH 17.1 bln privatization target for 2019
(or even the IMF’s expected level of UAH 10.5 bln) will fade.

The last time Ukraine met its budgeted
privatization plan was in 2011, so the possible underperformance this year
won’t be surprising. At the same time, the failure to launch the Big
Privatization campaign, as had been promised by the government in its recent memorandum with the IMF, may weaken the government’s negotiating leverage
with IFIs.