[bi3on.info] - Еconomic and political views of old-new Ukrainian leaders can be the subject to the wide discussion, but the idea of handling national enterprises and whole sectors in such a way what really should be looked at closely.
Recently one by one medium and small businesses and plants are being sold or rather presented, revealing the creeping takeover of the state’s key enterprises. Some of them are already privatized, but many more still to come.
What are we dealing with?
OJSC Odessa Portside Plant (IPF) is one of the largest chemical enterprises in Ukraine. It is fully owned by the state so far. The company specializes in producing ammonia, liquid nitrogen, carbon dioxide, liquid oxygen and urea (the second largest production in Ukraine). Undeniable plus and main advantage compared to other chemical enterprises - monopoly for handling ammonia. The plant has its own small port, which is designed for handling this product and its derivatives. Note that the pipeline itself is now on a balance, but not included in its authorized capital and representing a strategic object, as of today is not subject to the privatization, remaining a state-owned object.
The proposed separation of the transit complex for privatization cannot solve the problem of monopoly. The only way is to create an effective mechanism of the regulation. Especially attractive Odessa Portside Plant becomes, knowing the fact that the plant is the end point of pipeline Togliatti - Gorlovka - Odessa. It connects Odessa with huge plants, as Tolyattiazot (RF) and Ukrainian Stirol. About 90% of the factory produced products are exported. Main destinations of urea export are India, Turkey, Pakistan, Brazil, Mexico. Ammonia is being exported to Israel, Turkey, Poland, Portugal, USA.
Obviously, the port plant is a strategically important object, as it produces about 20% of ammonia fabricated in Ukraine and a quarter of urea (2009). In order not to jeopardize the economic security of Ukraine, our state has to control the tariffs for transportation of ammonia in the country and transshipment port for export. Gas price increase had a great impact on the yield of the plant, because the main component of the process is natural gas, the cost of which adds up to 80-90% to the price of the end-product.
In 2006 and 2007 the price reached 95 and 130 dollars per thousand cubic meters, respectively, and in the first quarter of 2009 - 360 dollars. The sharp fall in world demand for primary exports of the plant also significantly affected the yield. The price of urea by the summer of this year did not exceed $250 per ton (Summer 2008 - about $ 800 per ton), and ammonia - 160-180 dollars per ton (Summer 2008 - U.S. $750-800 per ton).The approximate cost of this enterprise is difficult to establish, and in the crisis period all the more. But, if everything is opposing the sale, perhaps it would be only reasonable to postpone it. Clearly, the economic sense of privatization is finding a better owner.
But, the program of technical re-equipment of the enterprise could be an alternative which can significantly increase the value of an asset. The preparation of preliminary competition and privatization in the atmosphere of the legal fog prevailing, is not contributing to the strengthening of Ukraine’s image as an attractive investment destination. According to the former Commissioner of the President of Ukraine of international energy security Bohdan Sokolovsky, alienation in the post-crisis period of the state enterprises such as OJSC Odessa Portside Plant – is not the best solution. In any case, privatization should be conducted in a transparent, correct and understandable way, unlike previous attempts.
Privatization: Ukrainian way
As it unfortunately often happens, the competition was not transparent. Many issues appeared before and after the event: litigation, courts, prosecution, appeals, and withdrawals. The series of court battles started with the lawsuit of the former chairman of the State Property Fund Valentina Semeniuk-Samsonenko. The District Administrative Court of Kyiv prohibited to take any action on privatization. Then the court put privatization on hold at the suit of Cherkassy Azot, but the company later withdrew its claim. Still privatization tender for IPF was held despite everything. It involved Nortima, Azot-Service (related to Gazprom) and Frunze-Flora (associated with Konstantin Grigorishin). The auction ended in the purchase of the enterprise by Nortima for five billion UAH. But after half an hour Privatization Commission MFI refused to accept the results of privatization. As we can see it is one confusing story.
History repeating?
According to the current State Property Fund Chairman Alexander Ryabchenko, Odessa’s port plant should be kept in state ownership. “I think the Odessa’s port plant was badly and wrongly privatized as an object. The ammonia pipeline in general is not the subject to the privatization, so it can never be privatized", - he said in parliament. However, his coalition colleague, Deputy Prime Minister Sergei Tigipko is not so sure about the need to preserve strategic assets in state ownership. He believes that it is necessary to develop new approaches to the privatization.
The economic situation requires the reduction in the state sector from the current 37% to 20-25%. The times when "public" meant "nobody’s" are over. Where the state is inefficient, where the company deliberately brought to bankruptcy - the decision to privatize should not have alternatives, - said Sergiy Tigipko.
So the desire to continue with the privatization of the plant has been announced once again. Thus, the Ministry of Economy of Ukraine initiates cancellation of the presidential decree (May 2008) of the ban on the privatization of one of the largest chemical enterprises in the country - OJSC Odessa Portside Plant. In the opinion of former President’s Representative on Energy Security Bohdan Sokolovsky, today we are probably talking about the backstage promises to the Russian side.
It is not believable that in the current conditions present government will take such a step. In this case it may give one more political reason for the opposition attacks. And they will try not to give such an advantage. "If hypothetically the competition will be held once again, the results can be worse than before”, - said the expert. Previously known conditions for the privatization were as follows: a buyer was required to sustain economic activity and to ensure profitable and stable operation of the enterprise.
The Revenue from sales of products (goods and services) within five years from the date of the ownership transfer was not supposed to be less than the following: 1st year - 2.34 billion UAH, Second year - 2.51 bn., third year - 2.68 billion., fourth year - 2.85 billion., fifth year -3.02 billion. "But it is hard to say whether it is possible at the present conjuncture. In current market conditions (prices of fertilizer and gas for Ukrainian factories), the operating profitability of the enterprise will not exceed 10% in 2010 compared with a rate of 34% in 2008, however, if the plant will get investors who can get a cheaper gas, the business can grow to be quite profitable», - said a senior analyst at Dragon Capital Tamara Levchenko.
However it is obvious that as long as there is no punishment for those who were guilty of violations of law and procedure, real investors will be reluctant to invest in the enterprise. Clearly, this is a reputation black spot. Ukraine will have to take severe measures to prove to the world that the situation has improved which can be a signal to the improvement of invest-climate in whole”,- says Bohdan Sokolovsky.
