The Miners of Krasnodon Won’ t Be Marching on Kyiv
This week Ukraine’s State Property Fund (SPF) invited bids for a 60% stake in the Luhansk- based Krasnovuhillia open join-stock company. Although the shares’ starting price is UAH 705.136 million, SPF head Mykhailo Chechetov is sure the facility will be sold for at least UAH 1 billion. What makes him so sure is the experience of previous tenders that were submitted earlier this year: for example, the selling price of Kryvorizhstal exceeded the starting one by half a billion, and Pavlohradvuhillia by a quarter of a billion hryvnias. Potential investors have already shown quite a keen interest in the final privatization bidding of 2004.
According to Mr. Chechetov, the total price of the project is two billion: the second billion is supposed to come to Krasnodonvuhillia from a backer in the form of investments within five years. “This is a fantastic sum of money,” Mr. Chechetov emphasized.
The main word in the contract to be signed with the winner is “ensure,” which occurs in almost every clause and makes the document explicit. In particular, the investor will ensure timely payment of taxes, other budgetary fees, and wages, as well as guarantee wage hikes under the collective bargaining scheme. The head of the State Property Fund believes that the stringent obligations imposed on the investor will help solve all wage problems, and “the coal miners of Krasnodon will never again march on Kyiv.”The investor is also supposed to ensure proper medical, sanitary, and domestic services for miners, while workers who do hazardous work will be supplied with special clothing, footwear, individual protection gear, and food products that help cure and prevent diseases. Krasnovuhillia pensioners have not been forgotten either: they have received a promise that they will be furnished with household coal on the same conditions as those who work.
The State Property Fund chairman hopes this will be one of the best privatization projects in the coal-mining field because it is patterned after the Pavlohradvuhillia tender, in which the fund takes great pride, and not without reason. “When the President of Ukraine issued his decree (on Pavlohradvuhillia — Ed.), he blazed the trail for successful privatization in coal mining, for which we are very grateful to him. Now it will be easier to proceed along a well-beaten path,” Mr. Chechetov said. In his view, the bidding conditions allow both national and overseas investors to freely participate in the auction. According to the bidding conditions, foreigners can set up consortiums with Ukrainian enterprises that in the past three years have produced no less than 1 million tons of coal or no less than a minimum of 200,000 tons of coke a year. The SPF plans to summarize the bidding results within the first ten days of November.
By selling Krasnodonvuhillia, the State Property Fund is going to raise the level of privatization earnings to an all-time high of UAH 9.3 billion as opposed to an expected UAH 8.5 billion. This is the 2004 forecast of this country’s “chief privatization officer.” This will help to exceed not only the originally set target of UAH 2.1 billion but also the government-modified plan of UAH 5.24-billion budgetary revenues. According to Mr. Chechetov, the state budget has already received UAH 8.5 billion, with UAH 3.3 billion being revenues that have exceeded the already modified targets. An interesting touch: the government has become so used to this year’s privatization records that after consultations with the Verkhovna Rada’s budgetary committee, it increased over-fulfilled revenue targets to UAH 4 billion. There is not a shadow of a doubt that this goal will be achieved.
The SPF believes that this year’s privatization successes will be complemented by breakthroughs in other fields under the fund’s jurisdiction. As Mr. Chechetov reported, the 2004 plan for state corporate right dividends (UAH 448 million) and lease payments (UAH 165 million) is sure to be fulfilled. The dividends have already brought in UAH 346 million, with Naftohaz Ukrayiny to contribute the rest later this year. Lease earnings totalled UAH 115 million in the first eight months of 2004. The State Property Fund chairman hopes that this will help to reach UAH 169 million by the end of the year.
