The government has submitted to parliament for approval a draft law on privatizing Ukraine's state phone monopoly, Ukrtelekom.
The government asked the lawmakers to allow it to retain a 50 percent plus 1 share stake in Ukrtelekom and sell off the remainder. According to the draft law, the government will channel 70 percent of revenue raised from the sale to the state budget and use 20 percent of proceeds to upgrade the company's creaky infrastructure. The government is planning to use the remaining 10 percent to revamp the country's military communications systems.
The government is currently under pressure from the International Monetary Fund to hasten preparations to sell Ukrtelekom, one of the country's most attractive state assets.
Analysts expect the legislature to debate the draft law by mid-April, when Julian Berengaut, the newly appointed chief of the IMF mission to Ukraine, comes to Kyiv for talks.
Ukraine is planning to privatize a 30 percent stake in Ukrtelekom at the beginning of next year. ***
In more good news for the food industry, Sweden's Cerealia Group acquired a 51 percent stake in the Kyiv region-based Boryspil food plant for an unidentified sum, according to Alfa Capital brokerage. The purchase brought Cerealia's holding in Boryspil to 98.8 percent. The factory will target domestic consumer with cereals, muesli and pasta. In a few years, the report said, Boryspil hopes to export its products to neighboring Russia and the Baltic states. The food industry registered significant growth last year, with the trend picking up speed throughout this year.
Meanwhile, the State Property Fund has suspended privatization of the Crimea-based Feodosia oil terminal, Ukraine's second-largest oil shipping company.
Last year the fund decided to privatize an unspecified stake in the company and held talks with Kazak companies on their participation in the sale. The annual capacity of the terminal, which includes the Feodosia Black Sea port, reached 4 million tons last year.
Later, on April 4, the State Property Fund said Ukraine will sell 25 percent of its only producer of airplane engines, Motor Sich, this year.
It said a 5 percent stake would be sold through the stock exchange by Sept. 1. Another stake, 20 percent, would be sold through a commercial tender later in the year.
The plant's charter capital, defined as the number of shares multiplied by the face value of one share, is Hr 2.182 million ($400,000).
The fund has already sold 41.14 percent of the company, which is located in Zaporizhya in southern Ukraine. The employees hold 33.86 percent in the company.
Privatization Results
Luk Sintez Oil, a subsidiary of Russia's oil giant Lukoil, has bought a 25 percent stake in Odessa oil refinery via a stock exchange. Luk Sintez paid Hr 13.5 million ($2.5 million) for the stake, bringing its shareholding in the refinery up to 76.9 percent.
Last year, Luk Sintez paid Hr 33.2 million for a 51.9 percent stake in the Odessa oil refinery, promising to upgrade the plant and, more importantly, supply the refinery with 2.4 million of crude per year. The refinery has an annual capacity of 3.8 million tons.
In another sale, a little-known company, Morsky Transbank, acquired a 5.21 percent stake in Ukrnaftoprodukt, an oil storage and distribution company. Morsky Transbank paid Hr 1.6 million ($300,000) for the stake.
Privatization Snapshot
After twice failing to sell large stakes in tire-maker Valsa, the State Property Fund is again trying to privatize the enterprise.
The fund is offering a majority stake in Valsa, at a starting price of Hr 34.8 million ($6.4 million).
Bids for the 50 percent plus 1 share in the Bila Tserkva-based plant are to be submitted by April 14.
Valsa, one of Ukraine's three tire-makers, has an annual production capacity of 1.05 million tires, with part of its output being produced with the help of modern equipment from Great Britain. Valsa sells most of its tires on the domestic market, and the remainder are mostly exported to Russia and other former Soviet republics.
The factory, however, has proved of little interest to investors, with the two most recent attempts to privatize the lumbering state giant falling through. First, the SPF tried to sell a 25 percent stake in the company last year, and then it offered a controlling stake (over 50 percent) this year.
Both sales failed, despite reported interest from some of the world's leading tire-makers, including U.S.-German Continental and Japan's Mitsubishi.
Investors' fading enthusiasm is probably due to Valsa's lengthy period of stagnation under state management, analysts said.
Valsa now lags behind its domestic competitors in terms of brand awareness, sales and capacity. The plant worked at only 30 percent of its capacity in 1997 and only 10 percent in 1998, sometimes standing idle for months. On top of that, barter transactions are rife, with the plant swapping almost all of its output for other goods, and paying its workers mostly in tires. Valsa is also said to be extremely inefficient in terms of energy consumption, analysts said.
However, experts still see hope for the tire-maker. A recent audit of Valsa revealed that better management practices at the plant could immediately cut costs by at least 35 percent.
