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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

Capitalism, Forward!

15 June, 1999 - 00:00

State Property Fund speeds up privatization

The Day's information
The State Property Fund (SPF) has identified an additional 59 public limited
companies (PLCs) whose shares are subject to sale ahead of schedule in
1999. These include 29 PLCs whose blocks of shares were handed over to
the state earlier.

The State Property Fund has also begun to fulfill one of the World Bank's
conditions for issuing the third installment of its industrial development
loan: to start privatization of at least ten so-called Group-G enterprises
under individual plans, with shares being sold at a contest or an open
tender (at least 50% of the assigned capital), Ukrayinski Novyny reports.

Earlier SPF deputy chairman Yuri Hryshan announced at a press conference
that the fund was preparing a decision to confirm authorization for the
Commerzbank AG consortium to prepare and hold an open tender to sell a
51% share in the Khartsyzk Tube and Pipe Works. Commerzbank AG had earlier
been requested to advise the SPF on selling 51% of the assigned capital
of the Crimean Soda Factory. According to Mr. Hryshan, the consortium has
also showed interest in the Lutsk Cardboard and Prepared Roofing Paper
Combine. Another foreign advising company, Robert Fleming & Co., Ltd.,
has agreed to prepare and sell the equity of the Skloplastik (Glass and
Plastic) Association and the Lviv Bus Plant, Interfax-Ukraine reports.

In the words of Mr. Hryshan, the money from advisor-sponsored equity
sales might not be available this year. "Speaking of privatization, we
first of all emphasize work with strategic investors, not equity sales
on the stock market," World Bank Vice President Johannes Linn said during
his visit to Kyiv. He stressed that speeding up privatization will not
only promote competition and strengthen the position of the private sector,
but also make it possible to partially solve the problem of foreign debt
service. Privatization earnings remain quite a real source of additional
revenues to Ukraine's depleted state budget. SPF data show that as of May
25 the state budget had received UAH 230.3 million as a result of privatization
(76% of the first quarter plan).

Out of 932 share blocks of 891 PLCs recommended for sale at stock exchanges
and via the OTC system by the Fund, 239 share blocks have been sold, with
sale prices exceeding the face value in 47 cases. (The unquestionable leader
in this category is the 16.21% interest in a Kyiv factory that manufactures
processing equipment for the Todak Agroindustrial Complex, the market value
of which was almost 129 times its nominal face value).

According to the SPF press center, as of May 25, 106 tenders (67 commercial
and 39 non-commercial) had been held, and 16 contracts signed to buy and
sell PLC equity worth a total UAH 149,987.281. The buyers were mostly attracted
by the following PLCs:

The Sumy-based Frunze Mechanical Engineering Research and Production
Association: the selling price of the tendered 25% share block exceeds
the face value fifty times and is UAH 44,470,125. The winner, Latvia's
Grata Ltd., pledged a total investment of UAH 227,197,100 investment;

The Odesa Oil Refinery: the selling price of two tendered blocks (25.95%
each) exceeds the face value 24 times and is UAH 27,683,000. The equity
buyer, the LUK Sintez Oil Limited Co. registered in the British Virgin
Islands, pledged a total $19,204,000 investment;

AvtoKrAZ Holding: two 25% blocks were sold at UAH 19,935,684, which
is three times the face value of the blocks. The tender winner, the Ukrainian-German
Mega Motors Joint Venture, is to invest UAH 220,700,380 in the factory;

Turboatom: a 25.22% block sold at UAH 52,096,000 (twice face value).
The Ukrainian-Andorran AMP Joint Venture is to invest UAH 216,150,000.

According to the SPF press service, the investors have already paid
a total of UAH 393.4 million and $310.3 million under contracts signed.
In general, under 868 equity purchase and sale agreements, Ukrainian joint
stock companies are to receive investments worth UAH 1.6 billion and $756
million over 1995-2003. Of this, UAH 324.8 million and $13.3 million are
to be under ten agreements on the purchase and sale of equity in electricity
generating companies (as of May 1 this year, UAH 101.3 million had already
been spent). The SPF press service notes that out of the ten agreements,
one (Zhytomyroblenerho) has been fulfilled, another six are being fulfilled
on schedule, and three electricity companies (Prykarpattiaoblenerho, Odesaoblenerho,
and Kirovohradoblenerho) are behind schedule.

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