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14 June 2016

Privatisation news: auction for the sale of Odessa Port Plant announced

On 13 June 2016, the State Property Fund of Ukraine (SPFU) announced the auction for the sale of 99.567% of shares owned by the state in PJSC “Odessa Port Plant” (OPP). The initial price of the shares is almost USD 530 million* (13.175 billion UAH), which constitutes over 75% of all privatization proceeds that Ukraine expects to receive in 2016.

The sale of OPP signals the start of “big privatisation” announced by the Cabinet of Ministers of Ukraine back in May 2015. The SPFU emphasizes that privatisation of OPP will be transparent and will be carried out in accordance with best practices in order to renew the confidence of foreign investors in Ukraine. It should also become a model for successful privatisation of other assets.

Auction for the sale of OPP shares is scheduled for 26 July 2016. The guarantee deposit is almost USD 26.4 million* (658.7 million UAH). The price increment is USD 8 million* (200 million UAH). A potential investor should notify its intention to purchase OPP shares on or before 26 June 2016, and the bid should be filed with the SPFU on or before 18 July 2016.

Announcement of privatisation of OPP was preceded by a lengthy preparation, which included amendments to the Ukrainian privatisation laws. Hence, the Law of Ukraine No. 1005-VII of 16 February 2016 cancelled mandatory sale of 5-10% of shares in strategic objects on stock exchanges and allowed the parties to refer any disputes arising out of sale and purchase agreements concluded in the course of privatisation to international commercial arbitration. The law also improved the procedure for engagement of advisors in preparation for privatisation and sale of strategic assets. This allowed SPFU to engage UBS as financial advisor as well as reputable legal and accounting advisors to assist with the process of pre-sale preparation of OPP. Apart from this, the SPFU decreased the guarantee deposit for participation in the auction from 20% to 5% of the initial purchase price.

In case of any question on the peculiarities of OPP privatisation and the procedure for acquiring state assets in Ukraine (including on due diligence of privatised companies, negotiation process, auction, and performance of investor obligations), please contact Vladimir Sayenko, partner, or Oleksandr Nikolaichyk, senior associate.

OPP is a leading Ukrainian nitrogen fertilizer producer and transshipment company benefiting from its advantageous location on the Black Sea coastline. The Plant accounts for 23% of carbamide and 18% of ammonia production capacity in Ukraine, making it the largest producer of carbamide in the country and the second largest producer of ammonia. Exports account for c. 90% of carbamide output and c. 99% of ammonia output, with products shipped to over 30 countries worldwide, including EU countries and the US.

Useful links for investors:

OPP information teaser – http://www.spfu.gov.ua/userfiles/files/OPP_information_teaser.pdf

SPFU announcement on the auction on the sale of OPP shares – http://www.spfu.gov.ua/userfiles/files/Announcement_SPFU_Privatization_Bulletin_English.pdf

Fixed investment conditions for the buyer of OPP shares – http://www.spfu.gov.ua/userfiles/files/Fixed_investment_conditions_for_the_buyer_eng.pdf

Bidder guide for preparation to auction (in Ukrainian only) – http://www.spfu.gov.ua/userfiles/files/Guide_for_bidder_ukr(1).pdf

 * amounts in USD are calculated according to UAH – USD official exchange rate set out by the National Bank of Ukraine as of the date of this alert.

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