Ukrainian domestic financial group Ukrprominvest has bought a controlling stake in the Lutsk car plant, a deal that may help turn around the stalled car maker.
Based in Western Ukraine, the Lutsk car plant makes small off-road vehicles and car trailers.
Ukrprominvest paid Hr 10.8 million on April 14 for an 81.11 percent stake in the plant. Ukrprominvest has also committed itself to fulfilling a long list of conditions attached to the deal. The company will have to modernize the plant and install new equipment, including a new car assembly line.
Ukrprominvest will also have to pay off the company's debts of about Hr 4.6 million (around $853,000 at the current exchange rate) within the next two years.
The major requirement for the buyer is to ensure the plant produces 10,000 vehicles by the year 2004. The buyer must also create the capacity to produce car engines at the plant over the next two years.
That's quite an undertaking for the plant, which cranked out a meager 20 vehicles in 1998. The company's profitability has nose-dived in recent years, and last year reached minus 78 percent.
According to experts, the off-road vehicle produced at the Lutsk car plant, known popularly as the Volynianka after the region in which it is made, suffers from numerous defects, including a weak engine, excessive gas consumption and an unattractive design.
The Lutsk plant was designed to have a production capacity of 15,000 vehicles per year, though in recent years production volumes have amounted to a fraction of that amount.
Ukrprominvest has some experience in the car production industry, having worked with management at the Lutsk plant to start producing Russian-designed Lada cars.
The company's other holdings in Ukraine include a car repair shop, a taxi firm and some confectionery producing enterprises. Two of the confectionery brands owned by Ukrprominvest, Karl Marx and Vinnytsya, have recently become favorites with consumers.
In an announcement long-awaited by investors, the State Property Fund said it has chosen which five candidates will compete in a tender to advise the fund on how better to privatize the country's regional electricity distributors.
The five contenders are Credit Suisse First Boston, Commerzbank, Raiffeisenbank, the KINTO investment company together with the company Epic, and another joint bidder – Forum Bank and the Sigma corporation.
According to the terms of the tender, only investment banks experienced in the sale of energy companies worth at least $50 million may participate in the tender.
State Property Fund Deputy Head Leonid Kalnichenko said the fund would consider the technical aspects of the five competing bids before turning to their financial aspects. A final decision on which bidder will win the tender was to be announced on April 19.
The winner of the tender will provide consulting services to the SPF on the sale of large and controlling stakes in five of Ukraine's regional electricity distributors, or oblenergos.
The SPF announcement may mark a breakthrough in the fund's long battle to sell off stakes in Ukraine's lucrative energy-sector companies. The issue of privatizing the state's holdings in the energy sector has prompted near-constant bickering between the various state agencies connected with the process, with the terms of the sell-off provoking the most controversy.
Meanwhile, the government has issued a resolution promising to sell off all of the state's holdings in the oblenergos.
Ukraine, desperate for hard currency to meet ballooning foreign debt servicing obligations, is still negotiating with the International Monetary Fund over the release of loans frozen by the international lender in September. The IMF has made the privatization of the energy sector a key condition for its continued aid to Kyiv.
According to the government's resolution, the state will sell all of its shares in oblenergos, rather than retaining minority stakes as had been the plan before. Last year, the government said it would retain control of 25 percent stakes in each of the country's 26 regional electricity suppliers, as well as retaining a majority stake in Kyivenergo, the company that supplies power to the nation's capital.
SPF Results
Investment company Ukrainsky Tsinny Papery has bought a 25 percent stake in the Zaporizhya Cable Plant, according to a report in Ukrainian News. The value of the stake tendered was Hr 910,000 ($168,000). The Zaporizhya Cable Plant produces steel cables, and is the only producer of magnetized and enameled cables, according to Ukrainian News.
The plant worked at 30 percent of its capacity last year, the report said.
However, in a setback for the fund on April 17, the SPF failed to sell a 91.58 percent stake in Zakarpatnerudprom company and a 25 percent stake in Kyivmetrobud metro construction company in two separate tenders.
SPF Announcments
The State Property Fund has announced plans to fully privatize state airline Ukraine National Airlines this year. The company, which has yet to undergo privatization, flies to Bratislava and several destinations in Ukraine.
The SPF plans to sell a 51 percent stake via tender later this year and a 23.78 percent stake on the stock exchanges. The remaining 25.22 percent shares will be sold to the employees and managers at discounted rates.
The government has turned Ukrrudprom, an ore-mining holding company, into a commercial entity in preparation for the privatization of the company. The companies in which Ukrrudprom has holdings together account for 70 percent of Ukraine's iron ore production capacity.
