Ukraine initiates massive privatization

The Ukrainian government has approved a privatization list for the year 2015, which has not yet been made public, Ekonomichna Pravda reported Apr. 6 on a document it claims to have. According to the source, the cabinet plans to sell a 78% stake in power GenCo Centrenergo (CEEN UK) and 25% in GenCo Donbasenergo (DOEN UK), and chemical giants Odesa Portside Plant and Sumykhimprom. On top of that, the privatization plan includes some mining assets: peat mining holding, coal mines located in Western Ukraine, and 17% of Donetsk-located Zasiadko Coal Mine. Also included in the selloff are 13 ports and the Danube Shipping Company. According to Ekonomichna Pravda, the government is justifying its plan to privatize the assets as it sees their state ownership impractical.

The Ukrainian budget for the year 2015 foresees USD 17 bln in privatization proceeds. It has already received UAH 8.8 bln from the sales of frequencies for 3G mobile licenses in February, which seems to be included in the total privatization proceeds.

Alexander Paraschiy: The lack of efficiency in state-controlled companies, the government is referring to by initiating a massive sale of state assets, is apparent. It is not only due to corruption, but also due to lot of bureaucratic impediments that do not allow the development of the assets under state control.

At the same time, it is apparent that this year is not the best time to sell any assets in Ukraine. This can be clearly illustrated by the inability of President Petro Poroshenko to fulfill his promise to sell his confectionery business. That being said, there is a high risk that state assets will be sold with huge discounts (to a theoretical fair value, or to prices that were formed during previous privatization attempts). This could lay the groundwork for a future revision of such sales.