Odesa Portside Plant may be shut down or leased, website says

The Ukrainian government is going to shut down its fertilizer producer Odesa Portside Plant on Dec. 31 and will seek an opportunity to lease its assets to a third party, the nashigroshi.org news site reported, citing a letter prepared by the head of the State Property Fund. The letter explains the plan to restructure Odesa Portside’s debt to Naftogaz, which was approved by the Cabinet of Ministers on Dec. 28. The restructuring plan foresees the gradual repayment of the debt (totaling UAH 1.0 bln as of mid-December and possibly reaching UAH 1.5 bln by the year’s end) in two years starting Apr. 1, 2017.

In other news, the Ostchem Holding belonging to tycoon Dmytro Firtash has made its first attempt in a local court to force Odesa Portside to repay USD 251 mln in debt to the holding, as was ruled by an international arbitration court earlier this year. The first attempt wasn’t successful, as the court ruled that Ostchem filed documents in an improper way, Interfax-Ukraine reported.

Recall, Ukraine made two unsuccessful attempts to sell its 99.6% stake in Odesa Portside this year: for UAH 13.16 bln (USD 520 mln) in July and for UAH 5.16 bln (USD 200 mln) in December.

Alexander Paraschiy: It comes as no surprise that Odesa Portside will have to halt operations as of Jan. 1 since Naftogaz was obliged by the government to supply natural gas only in 4Q16. In that time, the plant was loss-making as its costs of ammonia production were USD 320-340/t, based on our estimates, while the market price of ammonia in Ukraine was USD 165-260/t during the course of 4Q16.

The inability to sell Odesa Portside is among the Ukrainian government’s biggest failures for 2016. It has gone from ambitious plans to raise more than USD 500 mln from its privatization in early 2016 to now having to resolve its USD 251 mln debt to Firtash and finding somebody willing to lease the plant in order to save it.