Communist Tax Lawyer

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Large-Scale Privatization Planned in Ukraine

Ukraine hopes to gain from privatization of US$1.3 billion in 2011 by selling at least 25 percent in 162 enterprises this year, Interfax reports.

The draft list of enterprises includes stakes that have been offered multiple times in the past but never sold.

“We continue to campaign, that the electricity should go for privatization. And it will be privatized. This will be the main event of the privatization of the year,” Alexander Ryabchenko, Ukrainian State Property Fund (SPF) chairman said earlier in December 2010.

In the oil sector, the SPF plans to sell 50 percent plus one share in Ukrnaftaprodukt. It will also offer 25 percent plus one share in Sumyoblenergo, and 46 percent in Cherkassyoblenergo.

Ukraine International Airlines (UIA) is also in the privatization draft list. By selling 61.58 percent of its stake the cabinet plans to earn around US$31.6 million.

“The UIA stake won’t be sold if the assessment will be less then US$31.6 million,” official familiar with the matter told reporters.

The sale of Ukrtelecom will be the largest privatization deal in Ukraine since 2005, when ArcelorMittal bought Kryvorizhstal.

With revenue from the sale of 92.79 percent stake in the company, according to preliminary estimates, could reach 10-12 billion hryvnia (US$1.5 billion).

According to Ryabchenko, the sale of state telecommunications company, Ukrtelecom, originally scheduled for December 2010, will help implement this year government’s economic development program.

“The real price of Ukrtelecom is about US$2 billion, but it was slightly little underrated,” Tomas Fiala, the managing director at the Dragon Capital investment company, said to KievPost.

“Ukrtelecom is the champion of the privatization plans. But the process is not transparent,” said Ihor Mitiukov, the former Ukrainian finance minister, the director of Morgan Stanley Ukraine and the director general of the Financial Policy Institute.

Fiala said that despite the lower price, the privatization of Ukrtelecom was a good sign for investors. He predicted that competition for Ukrtelecom would unfold between Ukrainian and Russian companies, which he declined to name.

Director of International Relations and Investor Relations at System Capital Management Jock Mendoza-Wilson said that under the current situation, Ukraine should conduct the last stage of Ukrtelecom’s sale as transparently as possible in order to attract investors to the privatization of the energy sector in 2011.

He said that without the privatization, it was impossible to resolve energy problems in Ukraine and that the successful privatization of this sector would attract foreign investors.

Mitiukov said that apart from privatization, Ukraine’s energy sector should arouse the interest of investors in the recently adopted very attractive legislation in the field of green energy, which obliged the state to buy such energy at 100 percent at high tariffs.

Among other interesting objects for privatization in Ukraine, investors also named ports and a number of large state-owned engineering enterprises, like 94.9 percent of Ukrpapirprom paper mill, 25 percent of Chernigov Radio Instruments Plant, 100 percent of Kyiv Motorcycle Plant, 100 percent of Feodosia Shipyard More and 91.6 percent of photo materials producer Svema.

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