The Cabinet of Ministers decided to include Turboatom and ZTMC in the privatization list.
By the end of August, the 2017 privatization plan was approved, including several state-owned enterprises from Ukraine's top 100 largest list. "Stepan Kubiv's Government Committee (Economic, Financial, and Legal Policy) supported amendments to Cabinet of Ministers Resolution No. 271 concerning the list of assets planned for privatization in 2016-2017," wrote Deputy Minister of Economic Development and Trade Yulia Kovaliv on her Facebook page. The amendments included 126 new enterprises slated for privatization, while simultaneously excluding 102 companies (already privatized, in the process of liquidation, or in the ATO zone).
The Cabinet of Ministers' approval was not long in coming. "At its meeting on August 31, 2016, the government supported amendments to Cabinet of Ministers Resolution No. 271 of May 12, 2015, which approved the list of privatization objects for 2016. It was proposed to increase the list to 319 objects (previously 302), specifically to include PJSC Turboatom and Zaporizhzhia Titanium and Magnesium Plant LLC," the State Property Fund reported on September 1.
State Property Fund head Igor Bilous explains the expansion of the list as a continuation of the "large-scale privatization strategy." However, the main reason the Cabinet of Ministers decided on a truly large-scale privatization is a shortage of funds.
The State Property Fund of Ukraine (SPFU) confirms this, noting that the privatization of listed blue-chip companies could generate significant budget revenues. The Ministry of Economy estimates the revenue from a successful sale to be at least $1,5 billion.
This is especially relevant following the failed attempt to privatize the Odesa Port Plant with a starting price of $520 million. The next tender is scheduled for October-November, but the authorities have yet to agree on a price for a controlling stake. This seriously questions the State Property Fund's ability to fulfill the UAH 17 billion privatization plan set out in the main financial document for the current year.
And in order to solve this problem, the authorities, willy-nilly, are forced to draw their last trump cards from the deck.
One of them is Kharkiv-based Turboatom, Ukraine's largest manufacturer of turbine equipment. Officially, it was the country's most profitable state-owned enterprise for over a decade (since 2014, the Seaports Administration, created the day before, assumed this position, as it began to accumulate revenue and profits from more than a dozen state-owned ports). Turboatom's net profit in January-June 2016 amounted to UAH 430 million, and in the first half of 2015, it was UAH 837,9 million. Turboatom also holds the record for profitability, reaching almost 40% in the first half of the year. For many years, officials cited these factors as the explanation for their reluctance to sell this asset. Among the most ardent opponents of Turboatom's privatization in the middle of the last decade was Valentyna Semenyuk, who then headed the State Property Fund of Ukraine on a Socialist Party quota. And it was under her leadership that Viktor Subbotin, head of the Kharkiv regional committee of the Socialist Party of Ukraine and the principal owner of Megabank, where the turbine plant had its accounts, became chairman of the board of Turboatom in 2007. In fact, Subbotin can now be considered the person least interested in the privatization of this enterprise. After all, he simply doesn't have the funds to buy it, and if a new owner were to take over, he would inevitably be fired, which would likely lead to a change in the bank servicing the public joint-stock company. After all, the leading contender for the purchase of Turboatom is Subbotin's old foe, Konstantin Grigorishin (Read more: Konstantin Grigorishin, Distinguished Oligarch of Ukraine and Russia), which has been a minority shareholder in the plant for many years: his asset management company, Svarog Asset Management, owns about 15% of the shares of the public joint-stock company.
Even more predictable is the upcoming tender for the sale of another blue chip company mentioned by the State Property Fund on September 1: Zaporizhzhia Titanium and Magnesium Plant LLC, which produces titanium sponge. This entity, as DS reported, was created in 2013 following a tender to attract a private investor for the state-owned enterprise ZTMC. By decision of Mykola Azarov's Cabinet of Ministers, an LLC of the same name was created, in which the State Property Fund received 51% in exchange for the Titanium and Magnesium Plant's property complex, valued at UAH 716,9 million, and 49% was given to the investor. The investor was the Cypriot firm Tolexis Trading, part of Dmitry Firtash's Group DF (Read more: DMYTRO FIRTASH. THE STORY OF A TERNOPIL BILLIONAIRE), which at that time controlled the monopolies in the extraction of titanium raw materials in Ukraine, Irshansk Mining and Processing Plant and Volnogorsk Mining and Metallurgical Company.
In fact, given that ZTMC is a limited liability company, its private co-owner can exercise the "right of first refusal" if the State Property Fund decides to sell its stake. This means the privatization agency is required to first offer its stake to Tolexis Trading, and only if Firtash's company declines will it be put up for public auction.
However, if the authorities so choose, they are quite capable of making the disgraced oligarch compliant. As DS reported, the National Anti-Corruption Bureau recently launched an investigation into a criminal case opened last September by the Zavodsky District Department of the City Administration of the Ministry of Internal Affairs of Ukraine in the Zaporizhzhia Oblast. Investigators are examining the circumstances surrounding the withdrawal of hundreds of millions of hryvnias from ZTMC, which Tolexis Trading had pledged to invest in it.
Read more: DMYTRO FIRTASH. THE STORY OF A TERNOPIL BILLIONAIRE
Konstantin Grigorishin, Distinguished Oligarch of Ukraine and Russia
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