Ukraine PM cancels privatization of Odesa Portside next week

Ukrainian Prime Minister Arseniy Yatsenyuk ordered to cancel an Aug. 26 sale of a 5% stake in the state-owned fertilizer producer Odesa Portside Plant, according to an Aug. 19 blog posting by State Property Fund Head Ihor Bilous. The cancellation will allow the government to better prepare for the plant’s privatization to conduct it “in the most transparent way” and “for the maximum benefit of the state”, he wrote.

It will be more efficient to sell Odesa Portside after the approval of a new privatization law that has been already drafted by the Fund, which would enable it to make the process more efficient, Bilous said. The new law would cancel the requirement to sell 5-10% stakes before the state can offer a controlling stake.

The Aug. 26 privatization was planned to be convened through a stock exchange auction, with a starting price of UAH 450 mln for a 5% stake, implying MCap of UAH 9.0 bln (USD 408 mln). The bigger stake, 94.6%, had been initially planned for sale for November 2015.

In September 2009, the Fund convened a privatization tender to sell a 99.7% stake in Odesa Portside. The holding company controlled by Igor Kolomoisky was declared its winner, offering a UAH 5 bln price for the stake (USD 630 mln at the exchange rate then). Later, the Fund cancelled the results claiming the price was too low.

Alexander Paraschiy: The plant is being privatized for more than seven years, which is more than enough time to prepare a transparent tender, in our view. At the same time, the postponement of the Odesa Portside tender until new rules are adopted is a logical step.

Odesa Portside is the biggest asset, in terms of value, among those in the government’s privatization portfolio. Clearly, its sale will be an important indicator for transparency and efficiency of the entire Ukrainian government, which means the preparation for the sale should be ideal. Moreover, it would be important for the government to get a higher price for the plant, as compared to the calcelled 2009 tender.

Fulfilling plans for improving privatization legislation is also important for an efficient tender. A negative fiscal outcome from the privatization postponement is the risk that the government won’t have time to fulfill its USD 17 bln plan for privatization proceeds in 2015.