Kyiv, July 19, 2016. A second competition on sale of Odesa Port Plant (OPP) is planned to be held in the autumn of 2016. This was informed by Igor Bilous, head of the State Property Fund of Ukraine, at a press briefing at Ukraine Crisis Media Center. “We are discussing options for second putting up of the Odesa Port Plant to auction. We intend to bring this to the attention of senior officials and begin the second round in late summer or early September after correcting the mistakes,” said the head of the State Property Fund. In particular, it concerns proposals on OPP debt restructuring, starting price decrease and extension of the terms of submitting applications, signing the documents, making payments.
The competition on sale of OPP fell through because of lack of bids from investors. The deadline for applications was July 18. Igor Bilous reminded that about twenty investors became interested in the OPP sale. Eight of them signed a confidentiality agreement and began to learn information about the status of the company. Among these eight investors were structures from the United States, Netherlands, Turkey, Oman, Poland, Brazil and Algeria. “Three participants who were making the finish received the whole package of the auction guarantee documents for submission to the State Property Fund and the National Bank,” noted Igor Bilous.
According to the head of the State Property Fund, the main factors that prevented the competition were the company debt of 193 million dollars (excluding fine and interest); insufficient state guarantees for investors in case of lawsuits over episodes of the previous activities of OPP; complexity of the dividend repatriation even in view of the recent legislative changes; failure to return the bank guarantee and the lack of tax incentives and preferences. “Amid all the problems existing in the Ukrainian economy and the company, the starting auction price appeared to be too high – stated Igor Bilous. – The fair value of this company is half a billion dollars or more, but we need to find an adequate starting price that suits the majority of participants having strategic interest to buy this company.” A discount at which OPP will be put up to auction is being discussed in the working group. It is not improbable that it will amount to 30 per cent.
There are very tight deadlines for applications (45 days) and 30 days to carry out all the necessary procedures after signing the purchase/sale agreement, which are critical deterrents to the competition. Igor Bilous noted that it has been this factor which has caused non-participation of several powerful companies. “Investors started to focus on the process only after the competition announcement. We have faced the problem that 45 days are not enough. Some investors were physically unable to submit their applications,” explained the head of the State Property Fund.
In summary, Igor Bilous noted that the lessons learned by the State Property Fund from holding the competition on sale of OPP will be taken into account in the energy assets privatization, which, according to the head of the State Property Fund, is scheduled to start in August 2016. But the effectiveness of sales in general and of OPP in particular will be higher, if the legislative changes are made it will negate the factors that have prevented the OPP sale the first time. The State Property Fund will propose these changes for consideration at the Cabinet of Ministers meeting during the next two weeks. “We have started to discuss this issue with the government, we will submit it to the committees and to the Verkhovna Rada so that we have some tools in the future,” informed the head of the State Property Fund.