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Jul 26, 2014

Key blue-chip companies owned by Ukraine still not up for sale

Kyiv Post
 

The Ukrainian government on July 17 finally approved a list of 164 companies that it hopes to privatize this year and earn $1.25 billion for state coffers.

The biggest ones include a power generator and regional power distribution companies, and nitrogen fertilizer producer Odesa Portside Plant, which controls the sea port and ammonia pipeline from Russia across Ukraine.

But the most interesting companies are missing, including the biggest oil company, Ukrnafta, controlled by Ihor Kolomoisky’s so-called Privat Group. Turboatom, the exclusive Ukrainian turbine equipment producer in which Konstantin Grigorishin is a minority shareholder is also not up for sale. Two titanium mining and processing assets - Sumykhimprom and Zaporizhzhya Titanium-Magnesium Plant - are also off the list. The former is managed by Dmytro Firtash’s former top executive, Igor Lazakovich. The latter is part of Firtash’s titanium business. As the only producer of titanium sponge in Europe, ZTMP on July 21 announced that it started producing value-added products such as, ingots, slabs, and alloys, following the introduction of advanced technologies at the plant.

Despite the State Property Fund’s expectation of making $1.25 billion on privatization, Dragon Capital senior analyst Desnnis Sakva thinks the government’s forecasts are too optimistic. "It is hardly realistic for the government to sell such a wide range of assets within a half year, not only due to the ongoing military operation in the East and its impact on the domestic investment climate but also due to the sheer volume of underlying paperwork," it said in a note to investors.

But Vasyl Yurchyshyn, director of economic programs for the Razumkov Center, said that privatization could be successful in Ukraine because assets are cheap. "If the competition will be open and rules are clear, then we can talk about significant revenue," he said.

The privatization list is long because the nation urgently needs money. But sales amid the instabilities of war could prove problematic.

"Free money does not appear tomorrow or the day after," Yurchyshshyn added. "Now we should talk about the attraction of an effective owner, and privatization in this context is perhaps the best option. So I have no doubt that this should be done now.

Second try for Odessa Portside Plant

This is the second attempt to privatize Odesa Portside Plant. In the summer of 2009, the plant was sold for only $625 million - the state expected $1 million - to Ihor Kolomoisky’s Current State Property Fund chief Dmytro Parfenenko head the government body when Kolomoisky tried buying the plant in 2009. Then-Ukrainian President Viktor Yushchenko stopped the privatization. But this year, Kolomoisky looks to have good odds, although Firtash’s DF Group may also bid. Market experts don’t want to predict who will win.

Centrenergo

The state’s 78 percent stake in power generating company Centrenergo has been on the privatization list since 2010. Among potential buyers who showed interest were Russian investors from President Vladimir Putin’s inner circle - "Inter RAO UES" and Gazprom. Ex-President Viktor Yanukovych’s son, Oleksandr Yanukovych, has also been involved, especially in 2012-2013. He was the main supplier of coal to Centrenergo during those years. A pool of foreign investors are also eyeing the prized asset, experts told the Kyiv Post.

Billionaire Rinat Akhmetov may be interested also. Akhmetov’s DTEK is one of the key players in the electricity generation market of Ukraine, so much so that the Antimonopoly Committee may not permit him to buy the company. Kolomoisky could also be a bidder, according to a recent interview he gave to Channel 5.

 
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