Capitalism, Forward!

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.