The government is steamrolling ahead with plans to raise billions, starting with the sale of state-owned chemical giant Odesa Portside Plant.
The government led by Prime Minister Yulia Tymoshenko is steamrolling ahead with plans to raise billions of dollars in badly needed revenues by privatizing large enterprises, starting with the sale of state-owned chemical giant Odesa Portside Plant.
But just as her government adopted conditions on Jan. 30 for the Odesa Portside auction, which experts said could fetch as much as $1 billion, President Viktor Yushchenko played a political gambit, in the view of experts, and criticized the sale’s handling.
Privatization receipts are needed fast to fill budget shortfalls, including Tymoshenko’s billion-dollar refunds of Soviet savings lost in the early 1990s, said Vadym Karasiov, a Kyiv political analyst.
The populist refunds are expected to win more votes for the increasingly popular Tymoshenko, expected to challenge Yushchenko for the presidency in the 2010 election.
Remittances come at a cost, which the government hopes to fill in part by selling off prized assets this year, experts said, including state fixed-line phone monopoly Ukrtelecom.
Tymoshenko is rushing ahead with privatizations “to fulfill all her social spending promises and to keep the state budget deficit below 2 percent,” Karasiov said.
Tymoshenko hopes to conduct these privatizations in a transparent way, mirroring the Kryvorizhstal sale, regarded as Ukraine’s only transparent auction.
Among her main campaign slogans ahead of the vote was to hold transparent sales. Due to Tymoshenko’s increasing popularity, with presidential elections around the corner, Yushchenko will criticize her every step and point out every mistake, Karasiov said.
“Tymoshenko needs to sell, but is [the Odesa plant] ready?” he said. “Maybe it’s worth waiting some time and better preparing to increase the price.”
Last week, the Presidential Secretariat criticized the Odesa Portside sale terms because they could allegedly allow the Ukrainian government to break agreements with the investor and unilaterally re-nationalize the plant, all without a court ruling.
Officials in Tymoshenko’s government said sale conditions could be swiftly redrafted to shore up the new owners’ rights.
State Property Fund officials, responsible for organizing auctions, said the sale of a 99.57 percent stake in Odesa Portside is still scheduled to begin this month, with opening bids between $500 and $700 million.
The privatization of Ukrtelecom, which could raise another $1 billion, is expected to commence later this year.
The Odesa Portside sale is expected to be the most expensive since the $4.8 billion showcase auction of steel mill Kryvorizhstal in 2005.
Strategically located at the Black Sea, the port is supplied with raw materials by pipeline, giving it competitive advantages over other chemical plants in Ukraine. It is the country’s leading producer of nitrogen fertilizer and ammonia.
A rushed tender scheduled to be held during last fall’s snap parliamentary elections was canceled, and many financial analysts dubbed it suspect. Among the interested bidders were nine companies, among them four Ukrainian groups, four Russian chemical companies, and a Norwegian group.
“We estimate the company’s fair value to be in the range of between $500 and $700 million, however the price may surge to $800 million to $1 billion during the auction,” stated a Jan. 31 report issued by Dragon Capital, a Kyiv investment bank.
The plant posted $372 million in net revenues last year, an EBITDA of $95 million and a net income of $46.9 million, according to Dragon Capital. A minority stake of 0.4 percent was privatized to company management and staff last year.
