What are the prospects for large and small privatisation in Ukraine? How are conditions for investors changing? In what format can a private investor be involved in assets of strategic importance? For the answers to all these questions and more, read our exclusive interview with Dmytro Sennychenko, Chairman of the State Property Fund of Ukraine and Taras Yeleyko, Deputy Chairman of the Fund.
The interview was led by Oleg Neplyakh, Partner, Investment and Capital Markets, Head of Energy & Natural Resources, KPMG in Ukraine.
What trends in the economy do you see today?
Dmytro Sennychenko: Ukraine has embarked on a steady trend of economic recovery. We have a moderate budget deficit, and growing demand from investors is clearly seen in the work done by the State Property Fund. The global economy now has a lot of spare monetary resources, stock indices are at their peak, and investors are targeting profitable and attractive assets. From a strategic investment perspective, Ukraine is still quite a risky, transitional economy. However, Ukraine has a competitive advantage in that it can offer potential hyper-high yields on certain investment projects in the national economy.
Which industries are in the highest demand today and have the greatest prospects for future growth?
Taras Yeleyko: The period of 2020 to 2021 turned out to be very interesting from the primary state asset market perspective. It required unprecedented political will to launch the privatisation of entire industries that used to be considered state monopolies in Ukraine. We can now say for certain that we have successful privatisation cases in the distillery industry, for example. This is very important for Ukraine which has a complete raw material base. The distillery industry represents the second stage of processing crops and raw products, such as corn. Our country has the potential to become the largest exporter of distilled alcohol in Europe, but it has not taken advantage of this before. Now we have this process going forward. Among the interested parties are both local distilleries and financial investors, as well as various industrial companies. More than 20 industry assets have already been privatised.
Another example is agricultural production. We already have a number of bakeries in the process of privatisation. The state budget has already received UAH227 million from the sale of Dunayevetsky Bakery; almost UAH40 million above the starting price. On 30 August, an auction will be held for the privatisation of another asset, Radyvylivsky Bakery.
A separate area of focus is the modernisation of state-owned assets. The large-scale privatisation of correctional facilities has been widely discussed. I refer to ‘frozen’ facilities inside city boundaries that, on the one hand, require government funding for maintenance and, on the other, will never be used again. They occupy a significant area that may be used more efficiently after renovation. This project has been launched and the first correctional facility in Lviv went under the hammer, bringing over UAH400 million to the state budget. The facility will be turned into a large IT campus. Additionally, broad-scale privatisation of smaller non-core state-owned entities is already underway. In total, we plan to privatise about 500 different state-owned assets this year alone.