Odesa Portside stake starting price may fall to USD 150 mln

The State Property Fund (SPF) of Ukraine sees the need to significantly decrease the starting price of fertilizer producer Odesa Portside Plant (OPP) to attract more investors to a planned tender, SPF Head Ihor Bilous told journalists on Sept. 13. He suggested that the starting price for the plant’s 99.6% stake should be lowered to about USD 150 mln (from about USD 500 mln offered before), Interfax-Ukraine reported.

Bilous attributed the need to reduce the price to other buyer’s costs expected after the deal, including USD 251 mln in debt to Ostchem and potential working capital investment of about USD 100 mln that will be needed to recommission the plant, which is currently idle.

A final decision on the starting price should be made by the Cabinet of Ministers, Bilous said. He also reported that the Cabinet will consider some extraordinary measures to recommission the plant. In particular, the government may rule that state holding Naftogaz will supply natural gas to the plant under special conditions.

Recall, the SPF was unable to sell its 99.6% stake in OPP in July, as no investors submitted their official bids. The starting price of the stake was set that time at UAH 13.175 bln, or roughly USD 500 mln at today’s exchange rate.

Alexander Paraschiy: What was mentioned by Bilous yesterday did not look like a good sales pitch for OPP. The plant is idle due to low prices for its outputs (ammonia and urea) and its recovery needs special, non-market treatment. Staying idle, the plant is only extending its working capital gap.

Moreover, looking deeper into the “new price” suggested by Bilous, we can conclude that the total price that investors will pay is not changing much. Adding (1) the USD 150 mln price of the 99.6% stake, (2) the USD 251 mln debt that has now been officially recognized by the SPF, and (3) USD 100 mln in the needs to finance the emerged working capital gap, we get a sum of USD 501 mln. This is roughly the same price that was offered in July (though, we have to note that potential participants of the July’s tender might have added the debt to Firtash, in the amount of at least USD 190 mln, to their total costs of OPP purchase).

The investment looks even riskier when considering its potential investors will also be getting a court battle with Igor Kolomoisky, the winner of the OPP privatization tender of 2009. We will be surprised if the SPF sells its stake in Odesa Portside for USD 150 mln this year.