Ukraine is eyeing the sale of state-owned businesses at distressed prices in order to raise funds. If lawmakers agree during a session slated for the start of May, Kyiv could earn more than $400 million in a best-case scenario by selling enterprises ranging from a fertilizer producer to utilities, smelters, and an insulin maker, according to Bloomberg. Proponents are hoping sales could start no later than the third quarter.
Nitrogen producer Odesky Pryportovyi Zavod (OPZ), which Ukraine has tried to sell at least a few times over the past decade with no success (GM Dec. 16, 2016), is reported to be on the list. Approximate capacity at the plant is 1.2 million mt/y of ammonia and 1 million mt/y of urea.
Another $190 million could come from leasing farmland, Rustem Umerov, the Head of the State Property Fund, said in an interview.
“There are emerging markets, and there is an emergency market, and as an emergency market, we are one of a kind,” he said. While he’s aware most investors couldn’t fathom putting money into a country under attack, he tells those “brave” enough to consider Ukraine that “this should be a 20x story for you in the future.”
The need for urgency is at least three-fold. First, Ukraine must help fund its war effort and keep institutions dependent on foreign aid above water. Secondly, capital injections and management overhauls in state-owned companies can help revitalize the economy. Finally, the companies on the fund’s balance sheet, most of which were built in the middle of last century, are rapidly losing value.
“If we don’t sell them this year, then next year their only value will be real estate, and in the following year, just the land they stand on,” Umerov said.
Umerov is the eighth person to take over the State Property Fund since the so-called Revolution of Dignity toppled the pro-Russian government of Viktor Yanukovych in 2014. None of his predecessors were able to achieve the goal of selling big swathes of the state-run economy, which have a post-communist legacy of corruption and mismanagement. Two died by reported suicide, while a former Chairman is being investigated for embezzlement charges that he denies.
Lawmaker approval of the sales and leases is not assured. Umerov said legislators are broadly divided into two groups between those who want to sell everything and those that do not.
Umerov said if lawmakers do not approve, the alternative would be to shift toward joint ventures with other state-run companies to ease the burden on public finances. Another source of potential revenue is to confiscate companies with links to Russia in Ukraine, he added. One example is Russian-controlled JSC Sense Bank, one of Ukraine’s largest lenders, which the government is considering nationalizing.
Despite the unprecedented obstacles, Umerov said Ukraine had another advantage: the solidarity of investors and allies who want to support the country in driving Russia from its territory.
“Most of the investors I have spoken to – these are corporate and institutional investors – have said that, for them, Ukraine’s market isn’t attractive at all,” he said. “But from the point of view of justice, of the desire to support Ukraine, that’s it.”