Tymoshenko: Plant to be privatized despite ban; Kyiv’s Galt and Taggart renamed to BG Capital; Troika Dialog: Cadogan likely to be liquidated.
Tymoshenko: Plant to be privatized despite ban
(AP, Staff Reports) – Ukraine’s cash-strapped government began final preparations on Sept. 22 to sell a key chemical plant despite a presidential order banning the sale.
The State Property Fund said it began examining bids from one Russian and two Ukrainian companies to buy the Odesa Portside chemical plant, which specializes in ammonium production, at a Sep. 29 auction.
The government has set the starting price at 4 billion hryvnia ($470 million; 319 million euro).
Prime Minister Yulia Tymoshenko’s attempts to sell off the plant have been hampered by a paralyzing tug-of-war with her bitter political rival, President Victor Yushchenko. Both are expected to compete in the January 17 presidential election and have recently sought to undermine each other’s policies.
On Sept. 23, the acting head of Ukraine’s State Property Fund, Dmytro Parfenenko, said the Odesa Portside auction would still take place on schedule, on Sept. 29, because the fund considered Yushchenko’s decree as not yet having entered legal force.
“At the moment, there are not court rulings or documents banning the Odesa Portside privatization tender,” he said referring to Yushchenko’s decree and a series of lawsuits that threaten to delay the sale.
Yushchenko has in previous years repeatedly stalled auctions for Odesa Portside and other big assets, including electricity utilities and state fixed-line telephone monopoly Ukrtelecom. If sold during the recession, the companies could sell for only a fraction of what they were expected to raise for state coffers in previous years. Desperate to fill a widening budget gap, the government has stuck to plans for privatization of these assets this and next year. Ukrtelecom’s privatization has been put off until 2010, also due to opposition from Yushchenko.
Last week, he issued a decree barring the sale of Odesa Portside, saying the plant was the country’s strategic asset and that Ukraine was not ready to sell it without first conducting wide-ranging economic reforms.
The president insists that the starting price is too low. Tymoshenko has dubbed Yushchenko’s actions as an attempt to sabotage her government, undermining the country’s financial stability and her chances of winning the January 2012 presidential contest. The International Monetary Fund, Ukraine’s main western lender, has supported the government’s privatization plans.
Analysts say the political wrangling between Yushchenko and Tymoshenko is likely to spook investors and decrease the value of the plant. Some experts also say the government should have waited until next year, when chemicals prices are expected to rise, boosting the plant’s value.
Going into the tender, bidders that expressed interest include Sibur, a petrochemical affiliate of Russia’s natural gas giant Gazprom, and companies controlled by Ukrainian billionaires Igor Kolomoisky and Oleksandr Yaroslavsky.
Companies controlled by both Ukrainian businessmen have in recent days filed lawsuits that threatened to delay the sale, but government officials say the sale will continue nevertheless. Insiders allege the lawsuits could be intended to scare off foreign bidders to keep the price low.
Konstantin Grigorishin, a Ukrainian-born Russian tycoon who has interests in Ukraine’s electricity and manufacturing sectors is also expected to bid. Norway’s Yara International has also expressed interest in bidding, according to Tymoshenko, through a consortium that includes companies from Libya and Poland.
Kyiv’s Galt & Taggart renamed to BG Capital
Galt & Taggart, a leading investment bank operating in Ukraine has been renamed to BG Capital, the company said in a Sept. 16 statement.
The group said the name change is part of a “larger restructuring at BG Capital that started in late 2008 with the appointment of Nick Piazza as Chief Executive Officer, and is designed to more closely associate the company with our parent company, Bank of Georgia.”
Piazza, who will continue heading the Kyiv-based investment bank for the group, said: “We are very excited to be taking what is the first step towards the greater integration of BG Capital into the Bank of Georgia financial group. This move will allow us to improve the range and quality of services we will be able to offer our brokerage, retail, and corporate clients.”
BG Capital also announced that it has moved to a new office in Kyiv. The new location is 77-A Chervonoarmiyska Street, 2nd floor.
Troika Dialog: Cadogan likely to be liquidated
Cadogan Petroleum, a London-listed hydrocarbon exploration and production company whose principle assets are located in Ukraine, faces an increasing risk of liquidation, investment bank Troika Dialog said in a Sept. 24 report.
Cadogan, backed by western hedge funds and the European Bank for Reconstruction and Development, was in recent years touted as one of the first western-styled and transparent investments into Ukraine’s murky oil and natural gas sector. But the company has faced numerous hurdles since its inception, including corruption scandals and attempts by Ukraine’s government to reclaim licenses on its hydrocarbon fields in Ukraine.
“Late last week, news emerged that the Environmental Protection Ministry had proposed revoking Cadogan Petroleum’s three main exploration and development licenses, accounting for 99.5 percent of the company’s reserves. The move represents the second legal challenge to the company’s main licenses. In our view, the risk that the company will be liquidated has now risen significantly,” Troika analysts Peter Keller said.
Cadogan has pledged to challenge the Ukrainian government’s moves. But management remains tied up in an internal corruption scandal. Ian Baron, an interim CEO brought in to clean up the company, was months ago brutally beaten up in downtown Kyiv. It remains unclear if the assault against him was related to corruption charges against Cadogan’s previous management.
In an Aug. 28 report citing company officials, Reuters said Cadogan was seeking ways to distribute surplus cash to shareholders and that it had sufficient capital to continue operations for the foreseeable future.
Reuters said the group had about $65.23 million in cash, adding that an internal investigation into potential procurement irregularities within the group was ongoing. Citing the company, Reuters also said that “further irregularities may also be identified that could further impact the accounting treatments applied for the six months ended June 2009 and the years ended December 2006, 2007 and 2008, it said.
Cadogan commenced litigation in London’s High Court against its former chief executive, Mark Tolley, and chief operating officer, after potential accounting irregularities were uncovered. The company said litigation is expected to be heard in early 2010.
