Privatization of 6 power companies and “Centrenergo” in the presence of RAB-tariffs will bring to the state of 20-22 billion

Deputy Chairman of the state property Fund Yuri Nikitin in an exclusive interview told about the features of the new government’s privatization bill on how to mailslots fate returned to state ownership of the Odessa refinery, as well as the state with the introduction of RAB tariffs may triple revenue from the sales of state-owned power companies

Privatization in new ways

– Yury Valentynovych, it is known that FGI has developed a new draft law on privatization (No. 7066), tell us about it in more details…

– Indeed, this year the efforts of specialists of the state property Fund, Ministry of Economics, experts of the Office of reforms was developed, a bill that has already been approved by the government and on 4 September was registered in the Verkhovna Rada. In the coming weeks, he will be considered in Committee. This is a fundamentally new law “On privatization” which combines the provisions of all existing seven. Importantly, he suggests – to do the same for all the principle of privatization of state property. Depending on the sectors, of course, may be features, but they should not be dealt with in separate laws and government decisions as a body, authorized to manage objects of state property. Also, the bill provides that if the object three times there is no demand at market value (determined by an independent appraiser), he put up for sale for 1 UAH.

The document also proposes changes to the criteria assessment of small privatization objects. To such will be charged to the company with an income of less than 200 million UAH for the year. Evaluation criteria for such objects will be simplified – it will be held at book value.

– What bill, what problems you want to solve with it?

– Honestly, I work in the state property Fund since 1995. And despite this, he sometimes confused start in the legislative and regulatory maze. Now there are seven laws and under them written out a lot of regulations. And some contradict one another. Because there are bills that were adopted ten years ago, and modern changes, and they forget that these norms already in there, in the old laws. The aim of the new bill is to combine everything in one document. Instead of seven documents – to write one. The criteria are simple – a single. To privatization, for example, the alcohol industry were not different than, for example, oil refining.

The document was developed on behalf of the Prime Minister Volodymyr Groysman?

Yes. But this assignment grew out of a Memorandum of the IMF. Both the IMF and the Americans have long insisted that the need for privatization were common rules that are understandable to investors. If we are confused, they do have to hire legal companies that then come to us and we begin to ask what and how.

– Do I understand correctly that as long as this bill is not passed, the privatization in Ukraine actively will not go?

– No. Privatization will go on. It’s just that this bill addresses global issues. Approaches, it should be noted, will remain the same as now – the openness and competitiveness. This is the principle we adhere to. That is, to sell at auction – openly and with a maximum number of participants.

IPF and “Sumykhimprom”

– Please tell us about the process of privatization of Odessa portside plant resonance.

– Why do you think that it is resonant? Frankly, just Igor O. Belous (former head of the SPF) took his direction, chose it as a pilot facility large-scale privatization. I think this was his fault in some way. Because you can’t take a single object as a pilot. Have a plan (privatization), there is a decision of the Cabinet, and there is not only one of the SCR. You need to work over all, because there is always a risk… Here in particular, around this plant such circumstances that it will be very hard to sell.

– You mean the indebtedness of the enterprise?

– … and not so much its size, how many, to whom this debt: Mr Firtash and his company.

– And what is the situation legally now with this debt?

– It is confirmed by the Stockholm court.

Is an appeal possible?

– There is no appeals procedure. The international court of justice. We trust them, he confirmed that it is.

– And how it will affect the value of the asset at the sale?

– So this cost is already calculated, in the last year. Was calculated and the starting price, and debt (250 million dollars). In the opening price it is taken into account. The investor knew that he would not have to pay the debt twice. But all say because it to Mr. Firtash, we don’t want to pay fines to the American government. And it will impose a fine on any company that will cooperate with the company, against the owner of which they are leading the corruption investigation.

– When the Odessa port will be put out to tender?

– We expect that it will be February 2018. The evaluation must be completed before the New year, but until the holidays. Early February makes no sense…

– There are companies that are interested in buying it?

– There are a couple of companies that do not operate in the US market. They are interested in. And if the price for them to be comfortable and they will understand how to put gas and at what price, and all of them at cost work out, then they will come. If the company cannot find the answers to these questions… maybe the second “Sumyhimprom”.

– In an interview with us Mr. Belous said that the OPP are interested in companies from the Middle East, we about these companies talking about?

– … Have our (Ukrainian) of the company, although legally, they are certainly not ours. But the owners there are Ukrainians. Not the oligarchs. The young entrepreneurs. Interested, yet. The IPF is not the only company that we are preparing for privatization.

– What the company then still cook?

– “Centrenergo”. You know it’s selected Advisor (Ernst&Young). It begins to work. Now the EA will carry out all procedures – the audit will make an assessment. Previously, we expect to gain a minimum of 4.5 billion UAH for the state-owned enterprises.

According to the agreement with EA, which has already been signed, assessment and negotiations with investors is to be completed by March 2018. And then there is already a sense to put the object into the contest. Roughly, training it will take about a month and a half or two will be a competition. So we come to June 2018, when the object can actually be sold.

– You mentioned Sumykhimprom, as it seemed, in a negative context. It is so problematic?

– It is bad. The company of 10 years is filing for bankruptcy. The main creditor is also a company controlled by Firtash. The debt “Sumyhimprom” less, of course, than the SCR. But, there is formed the creditors Committee, a plan of reorganization. And they work. That is, we understand that the state-owned shares (reference), which we want to sell, it is worth nothing. After running the creditors ‘ Committee. And while this is so, even having owned the package of securities, the shares, the investor will have the right to vote. In any case, appreciated the state package of Sumykhimprom 200 million UAH, will try to sell it.

Is 100% of the shares?

– Virtually.

Odessa refinery

– Recently it became known about the return to the state a complete property complex of the Odessa refinery, which is said to have controlled structures Sergey Kurchenko. Tell us how SPF can work with this object?

– We take the Odessa refinery in the office, according to the decision of the Cabinet. Together with the company “Ukrtransgaz”, which has kept this object, according to the order of the Cabinet, we (the Foundation) must conduct a joint inventory of the property and then the act of transfer and acceptance will take it in control. Then we will carry out corporatization (to create joint-stock company), and then the state will make the decision, to control whether on the asset or put it up for privatization. Because today it is impossible. Since 2006, Ukraine has a moratorium on the privatization of the fuel and energy sector. And Yes, that is the problem. We still hang out 25% of the shares (state-owned) NPK “Galichina” – 10 years worth, “Naftokhimik Prykarpattya” about the same not working. But there is a moratorium and packages of these companies we can’t even enter the competition.

– Returning to the Odessa refinery, what are his prospects?

– Once you have created a joint stock company, will be appointed Director.

– By the way, now the enterprise works?

– Runs. If the plant has a boiler which heats the whole area in Odessa. It now will need to run. We’re working on it.

– I mean the profile of the plant can work?

– You have to understand, the Odessa refinery has never received raw materials (crude oil) by sea. Never. Always on it the oil was delivered from Russia, on the Dnieper oil pipeline. Maybe some little party there was… But it is designed for the processing of Russian, not the Caspian oil. I know it very well, because once this plant is already sold.

– All equipment is still there?

– Yes, it is. But in the 10 years that have passed since 2005… Five years the refinery was used active and five years inactive. Any equipment for such a long time, of course, wears out. And today’s technology used in the industry, allow us to obtain the light oil products of higher standards. So, in my opinion, for this enterprise will need to look for some other options… Perhaps to privatize. Maybe its possible synergy with other enterprise. The Odessa refinery could work in tandem with the “Oriana” is the Kalush chemical manufacturer. And if this synergy works, the company can be sold together.

– Oriana – the state enterprise?

– There are private and public owners.

– The company operates?

– Yes, as far as I know. It’s just one of the possible options. You just need to understand the main thing – the Odessa refinery can in the future put up for privatization and to sell, but he really only needed to someone who has the raw material for his work. Without raw materials the enterprise fit only for scrap.

Theoretically at sea on the enterprise, you can put the oil?

– It is possible. I don’t think these are very heavy costs to build the plant infrastructure. But you need to think about that and the sea this infrastructure should be created. I don’t think the same “Region” (controlled by oligarch Igor Kolomoisky. – Ed) will provide them with 3 million tons of oil – refinery and calculated on the amount of processing per year (2.8 million tonnes).

– And what should be the maximum load of the enterprise to make it work profitably?

Well, that’s when the Odessa oil refinery up and running properly, at least 2 million tons of oil a year it processed. That is, the load it was an average of 60% (and owners is acceptable. – Ed). We can say that the minimum requirement in the oil of this company 2 million tons And at such loading it is more or less stable.

– The company produced only gasoline?

– The whole range – and gasoline and diesel fuel.

Power companies and the RAB-tariff

– When can we expect the sale of state-owned power companies?

– We are now preparing a draft decree of the government, coordinating with the ministries. Like to sell “Centrenergo”, in their case, plan to involve the Advisor. But it costs (service Advisor), and considerable. The fact that the cost of the services of the Advisor are calculated on the basis of the potential value of the company. The higher the value, the lower the percentage the Advisor receives. In the case of “Centrenergo”, by the way, it’s 1-1,5% of the starting price. And it’s normal percentage. Moreover, according to the agreement, the adviser only half of the sum paid is guaranteed, the rest only after the sale.

In General, the sale of state-owned shares in power companies we have planned for next year (2018) – somewhere in August-October. This is the plan that we’ve already written. By the way, at the request of the Ministry of Finance which has asked us to find funds. We felt that if the six power companies sell in the next year and “Centrenergo”, provided that the same will be entered of RAB-tariffs will be able to gain from the privatization of somewhere 20-22 billion.

– And it is likely that RAB-tariffs will be taken?

The methodology has already been adopted, it remains only to decide when to enter them. Whether from 1 November this year, either from 1 January or 1 April of the following year. But we believe the cost of the packages of the power companies, with the condition that they will act in RAB-tariffs. If their cost (the state-owned power companies) last year was estimated to be somewhere in the 4.5 billion UAH, the introduction of RAB-tariffs give a price increase of 3-3,5 times.

– What do you think about the privatization of “Ukrspirt”?

I have openly said I don’t understand why the state the state monopoly on alcohol, if we (consumers) don’t drink alcohol. The consumer is drinking the final product – vodka. So that should be privatized, especially performance in the industry deteriorate further without upgrading, modern approaches. We Fund all has turned out for transparent privatization.

– What is preventing the process of privatization of state monopoly from the dead point, why is there still no real steps?

– I think the answer is obvious. Many are sitting on… (cash flow. – Ed). Here, in particular Minagropolitiki over the past eight months, we have a single enterprise are not handed over for privatization. And this despite the fact that the government, not even we, the Cabinet, which for some companies to make the decision. So they made the decision on the privatization of 10 enterprises according to the law Ministry for eight months had them to us in the Foundation to transfer… so far nothing has passed.

Interviewed By Elena Golubeva