Ukraine privatization agency insists on cutting Odesa Portside price

Ihor Bilous, the head of Ukraine’s State Property Fund (SPF), defended the need to lower the starting price for the tender for fertilizer producer Odesa Portside Plant in social media posts on Sept. 20. He highlighted that the global fertilizer market is at a 15-year low and many producers have to shut down operations. In such an environment, he believes Ukraine needs to sell the Odesa Portside as soon as possible, “otherwise it will become bankrupt”. He estimated the starting price of the plant’s 99.6% stake (earlier declared at about USD 510 mln) should be reduced to account for additional expenses of investors of about USD 380 mln (including USD 283 mln in debt and up to USD 100 mln in needed investment in working capital).

In another post that day, Bilous stated that the SPF already has four potential bidders for Odesa Portside. “If we decrease the starting price, there will be more potential bidders,” he said, which “will decrease the risk that the selling price will be low.”

Recall, the SPF was unable to sell its 99.6% stake in Odesa Portside in July, as no investors submitted official bids. The starting price of the stake was set at that time at UAH 13.175 bln, or roughly USD 510 mln based on today’s exchange rate.

Alexander Paraschiy: Bilous was especially active yesterday in defending the need to radically decrease the staring price of Odesa Portside, publishing two social media posts and one article on this topic. Such enormous activity may suggest the government is preparing to approve the reduced price, possibly at today’s weekly Cabinet meeting. It’s not clear who could be the bidders at this point after Bilous’s “pitches,” which should end up scaring away any interest.

The only possible explanation of Bilous’s assertive efforts to promote the sale at a high discount is the existence of a predetermined buyer. Such a buyer should be powerful enough to cope with the risks of the legal claims planned by Igor Kolomoisky, who argues that he’s the plant’s rightful owner; and should have some access to cheap natural gas. This makes us view as legitimate the recent media reports alleging that people close to the Ukrainian president are going to acquire the plant, possibly in partnership with oligarch Dmytro Firtash.