The State Property Fund of Ukraine (the “Fund”) has recently cancelled the sale of 5% stock in Odesa Port Plant PJSC (“Odesa Port Plant”). This decision follows the approach which the Ukrainian government tries to implement to cancel mandatory sale of 5-10% stock in joint stock companies of Groups C and D[1] before conducting a tender and to amend the valuation of privatisation objects.
To formalise such approach and facilitate an open, competitive and efficient sale procedure, the Fund has prepared a draft law (the “Draft Law”) that provides, among other things, for cancellation of the mandatory sale of 5-10% stock in Groups C and D objects on a stock exchange, and extension of the list of objects whose privatisation may involve consultants. The Draft Law currently awaits consideration by the Parliament.
In addition, the CMU has adopted a resolution establishing that the initial sale price set for Group D and fuel-energy complex objects is subject to review by the state privatisation authorities by the end of September 2015, and that any sale of stock such objects on a stock exchange would be suspended until then.
According to the 2015 Privatisation Schedule for Groups C and D companies, the 5% stake in Odesa Port Plant was to be sold on a stock exchange in July 2015, and the remaining 94.567% stake – through a tender in September 2015, however neither of these sales took place. The Fund has recently announced that privatisation of Odesa Port Plant is now postponed until January-February 2016. It is also expected that privatisation of other strategic objects, such as Centerenergo PJSC, will be moved to the middle of 2016. By that time the Fund expects to have the Draft Law enacted by the Parliament, which would allow selling such strategic objects for a higher price and involving credible foreign investment consultants to advise throughout the sale process.
The proposed new approach to privatisation is supported by U.S. Agency for International Development (USAID), the European Bank of Reconstruction and Development (EBRD) and other international financial institutions operating in Ukraine. Both the EBRD and USAID have offered technical and financial aid to Ukraine to assist in conducting transparent and efficient privatisation. Needless to say, in return they expect to see the Ukrainian government taking further steps towards progressive privatisation reforms.
[1] Group C (in Ukrainian – група В) includes integrated property complexes of the companies which, during a fiscal year, employ more than 100 employees and have a gross profit exceeding UAH70 mln. and/or value of assets sufficient to establish a joint stock company (currently, approx. USD70,388), and shares in joint stock companies formed in the course of privatisation and corporatisation;
Group D (in Ukrainian – група Г) includes integrated property complexes and shareholdings in joint stock companies which have strategic importance for Ukraine’s economy and security and those which have dominant market positions.
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