Ukraine cabinet approves first large privatization adviser

Ukraine’s Cabinet of Ministers approved at its weekly
meeting on Nov. 14 the State Property Fund’s selection of a Concorde Capital
subsidiary as its privatization adviser for the Kyiv-based President Hotel, the
Interfax-Ukraine news agency reported. The first tender to select privatization
advisers for six large state companies, as required by a new law, was convened in late July. Based on
the tenders, Concorde Consulting was selected as the adviser for the
privatization of the President Hotel and two other companies.

However, the results of five of the six tenders
(except the hotel) were been later rejected by a court that ruled on a claim by
the failed contenders. An appellate court will hear the case on Nov. 28.
Commenting on the issue, the head of State Property Fund, Vitaliy Trubarov,
expressed his hope that “all the groundless accusations will be overturned by
the court” and the big privatization will be unblocked.

Recall, a new law to improve the privatization process
in Ukraine was adopted by parliament in January
that explicitly separates all the privatization targets into large assets
(controlling stakes of companies with book value of assets exceeding UAH 250
mln) and small companies. The law stipulates that the privatization of large
assets should be performed with the help of M&A advisers selected at a
tender (or without advisers, if such a tender fails). The only company that
will be privatized under the old legislation is Centrenergo (CEEN UK), whose
auction to sell a 78.3% stake has been announced for Dec. 13.

Alexander Paraschiy: As approval
of the first advisers has been delayed, it’s apparent now that first
privatization of large assets, in the meaning of the new legislation, will not
happen in 2018. Therefore, the only large company that has a chance to be
privatized this year is Centrenergo. So far, we see a chance for its successful
privatization at no more than 50%. Other assets to be privatized under the new
legislation will be technically easier to sell, in our view.

The success of a large privatization in 2019 will
largely depend on the ability of the State Property Fund to unblock the results
of the adviser selection process. But such a blockade might be only the
beginning of the sabotage of the privatization process by forces that are
controlling large state assets in Ukraine and milking them.