Odesa Portside Plant restores operations

Odesa Portside Plant, the nitrogen fertilizer producer and the key privatization target for 2016, restored its operations on Oct. 4 after they were stopped on Aug. 11, the State Property Fund of Ukraine reported on Oct. 5. Restoring the plant’s work was made possible after the Cabinet of Ministers required state natural gas monopoly Naftogaz to supply 0.3 bcm of gas this quarter. Odesa Portside may pay for such gas by itself, or accumulate arrears that will be repaid by a potential buyer of the plant, the Cabinet resolution said, and the price for gas should be the same as what Naftogaz charges for comparable consumers. The price of natural gas offered by Naftogaz to large consumers in October is close to USD 203/tcm, net of VAT and transportation costs.

Recall, the State Property Fund failed to sell a 99.6% stake in Odesa Portside in July. None of the potential bidders signed up for a tender with a starting price of the plant of UAH 13.2 bln (USD 0.53 bln).

Alexander Paraschiy: At a gas price of about USD 220/tcm (including transportation costs), the production costs of ammonia by Odesa Portside would be no less than USD 250/t, which is below the current market price of ammonia in the region (USD 165/t). Under such market conditions, the plant will be loss-making and will only accumulate debt and/or a working capital gap in 4Q16. We doubt the plant’s restart will increase its value, and also doubt that a new attempt to sell OPP this year will be successful.