The new state managing team under President Zelensky moves fast to do away with the Soviet heritage, at least in economy – and the legislatively guarded lists of state enterprises not subject to privatisation are flying to hell thus freeing hands of responsible authorities, setting in future equal rules to all market players, and probably animating the market itself a bit.
There are 13 state-owned stevedoring companies to be pushed into free market waters. All or them have names of the corresponding ports like State Enterprise (SE) Odessa Sea Trade Port which might mislead those uninitiated – no, all the hydraulic structures, land plots and harbourages remain in state property anyway, the same as in case of already existing private ports. Though there are some assets like warehouses, auxiliary fleet, repair facilities and workshops, administrative buildings, weighing machines and cargo labs, handling machinery and motor vehicles etc.
There are two main ways of handing over the mentioned assets to private management: concession and sale. And Minister of Infrastructure of Ukraine Vladyslav Kryklii has already decided which are going to follow the second path: “We plan to sell out three small ports: Bilhorod-Dnistrovskyi, Skadovsk, and Ust-Dunaisk. Because it’s unlikely that somebody will come for the concession. They are too unfeasible, even lacking funds for the wages already”, he noted in his recent interview.
Therefore, now State Property Fund of Ukraine is in charge of the companies’ further fate. According to the rules, assets may proceed by ‘major’ or ‘minor’ privatisation course. In case of major privatisation, there should be buyer-friendly steps taken by the corresponding Ministry, independent advisers hired, financial audit etc. As concerns the minor course, SPFU is going just to put the object to its official e-auction as it is, and choose those who offer more. The assets valued less than 250M UAH (~1M USD) are subject to minor privatisation, and presumably the Fund will not deviate from its usual procedures. The assets are assessed by their book value, or most likely in accordance with their latest financial results. All our three objects are short of this limit, as it is well understood from the Minister’s unpalatable confession above.
There is only one difference: some minor assets may be sold with conditions, some without. There might be some debts to be settled, social guarantees, keeping the company’s form of activity etc. In our case we have Law on Ports envisaging special conditions for the sale of integral asset packages in ports, namely the buyer’s exclusive right for 49-years lease of the corresponding berth(s) and territories necessary for the full production cycle. Otherwise he’s forced to share them with other companies.
Another minus for potential buyers: there will be no negotiations. SPFU sets the fixed sale conditions. And there will be no information support on the part of the Fund as in case with concession – no visits, no talks in situ, no company’s books and records available etc.
Hence, those who don’t want to buy a pig in a poke should better seek for inside information, hire dedicated consultants, especially local ones, and of course verify every step with a good lawyer!
This material was created loosely basing on the good reasoning by Andrii Pidhainyi, Managing Partner of AGRECA Law Firm (link below), who we owe our special thanks to.
https://cfts.org.ua/blogs/vnimanie_v_prodazhu_postupayut_svezhie_morskie_porty_507