In Ukraine, for the first time, a seaport was sold, and this happened during the war
In January 2023, the State Property Fund of Ukraine sold the Ust-Danube Commercial Sea Port, and in early March it will hold an auction for the privatization of the Belgorod-Dniester Commercial Sea Port. “Apostrophe» found out how the privatization of port infrastructure is justified during the war.
“Ust-Danube MTP”. Was there a conspiracy
The first seaport was sold in Ukraine. This happened on January 17, 2023. Since 2020, seaports have been transferred to concession in our country, but the sale has occurred for the first time in the history of Ukraine.
The first privatization of the seaport was carried out during the war. Ust-Danube Commercial Seaport, located in the city of Vilkovo, Odessa region, was sold for 201 million hryvnia, which is 3.3 times more than its starting price (60 million hryvnia).
According to the State Property Fund of Ukraine (SPFU), eight participants competed for the right to buy the Ust-Danube port.
The State Property Fund did not name the winner of the privatization auction, but according to the Prozorro.Sales online system, Elixir Ukraine LLC, owned by Valery Vikhrenko, became the buyer of the port. The company is registered in Vinnitsa, its main activity is the wholesale trade in chemical products. In particular, it is known that Elixir Ukraine imports mineral fertilizers from the Serbian company Elixir Zorka. The company is also engaged in agriculture. Logically, access to a small port like Ust-Dunaysk is quite in line with the business interests of a company like Elixir-Ukraine.
As for the other participants of the competition, there are quite well-known companies among them. First of all, this is Ukrdoninvest LLC, a major Ukrainian businessman Vitaliy Kropachev. The main business interests of a native of the Donetsk region, Kropachev, are connected with the coal industry – during the presidency of Petro Poroshenko, he was even tacitly called “looking” for coal enterprises. Kropachev also has solid media assets – Era Production and the Ukraine World News TV channel.
Igor Mazepa’s capital investment company “Concord Factoring” also participated in the competition. Despite the fact that Concord has a solid investment portfolio in a variety of areas, its offer at a price amounted to only a little over 150 million hryvnia (second from the end).
Lesser-known players also claimed the port (including the winner of the competition). For example – OOO Trading Company Vostok. It is registered in Odessa, its main activity is the wholesale trade in grain, raw tobacco, seeds and animal feed. The owner of the company is Vladimir Medvedik. Taking into account the business profile of the enterprise, it is logical to assume its interest in acquiring the port, which was confirmed by the auction – Vostok took an honorable second place in it.
At the same time, two contestants look rather strange. One of them is Taibeks LLC. According to open data, the company is registered in Odessa, it was created only on October 14, 2022. The type of its activity is non-specialized wholesale trade. The owner of the company is Alexander Makhno.
The second company, Sanerston LLC, is also registered in Odessa. It was created on November 17, 2022. It is owned by Mikhail Savosin, however, it is noteworthy that on December 20 the head of the company changed – until that date it was headed by Alexander Makhno, the full namesake and namesake of the owner of Tibex, and after that date – by Savosin himself. The type of activity of Sinerston also changed – instead of non-specialized wholesale trade (specialization of Tibex), it became the wholesale trade in grain, raw tobacco, seeds and animal feed.
However, in any case, a significant number of bidders and the presence among them of well-known and independent players, such as Ukrdoninvest and Concord, suggests that there was no collusion at the auction.
Privatization during the war
Privatization tenders in Ukraine are rarely held without scandals. Not without them this time. The sale of the port was opposed by its labor collective, which sent letters to the government, the Verkhovna Rada and the State Property Fund with a call to postpone privatization until the post-war period. Also, port employees filed a statement with the National Anti-Corruption Bureau of Ukraine (NABU), in which they accused officials of the State Property Fund of illegal actions during the preparation and conduct of the privatization tender.
However, as we can see, the privatization of the Ust-Danube Commercial Sea Port has taken place. As for the reaction of NABU to the accusation against the State Property Fund, nothing is known about it yet.
But even without the negative reaction of the port workers, there are certainly questions regarding its privatization. And the main one is whether it is expedient in principle to sell state property during the war, in particular, seaports? By the way, recently the State Property Fund put up for sale another seaport in the Odessa region – Belgorod-Dnestrovsky, the auction will take place on March 3 (starting price – 187.6 million hryvnia). Also in the future, privatization of other port infrastructure is not ruled out.
On the one hand, we see that the competition for the Ust-Danube port was real, which is confirmed by the final price of the lot, which became much higher than the starting one – very often, even in peacetime in Ukraine, privatization tenders are organized for a predetermined buyer, and the price, for which he buys an object, often almost does not differ from the starting one.
On the other hand, wasn’t the starting price of the port too low, and therefore the final price seems impressive in comparison? By the way, this is what the port staff hinted at in their statement to NABU.
“Waiting for the right moment is always an unseemly thing,” Ilya Neskhodovsky, head of the analytical direction of the ANTS network, told Apostrophe. “I know many cases when, while expecting a price increase, they received, on the contrary, a significant drop.”
He expressed confidence that the price for which the Ust-Danube port was sold is absolutely adequate.
Investment banker and financial analyst Sergey Fursa agrees with this.
“For many years we have been saying the same thing: let’s wait for some moment, and the price will be higher. If we were now talking about large ports – Odessa, Chernomorsk, where we would expect competition from foreign investors, this would be inappropriate. But we are talking about small ports in which local players show interest. Accordingly, it is just expedient to sell these ports now. There is a lot of competition, and this is the most important thing”, — said the expert in a comment to the publication.
He stressed that the sale of such ports as Ust-Danube and Belgorod-Dnestrovsky is the so-called small-scale privatization. “And the main goal of privatization, especially small privatization, is the fight against corruption, and therefore this should also be done during the war.”, Fursa added.
By the way, it was the war that led to an increase in the interest of investors in the mentioned ports. This is due to the fact that due to the limited possibilities of using large seaports as a result of their blocking by Russia, the logistics chains have changed somewhat, which have moved to land and rivers. And, if before the Russian invasion, the mentioned ports were in decline, now their use has significantly intensified.
“Before the big war, almost everyone forgot about Ust-Dunaysk, but it was one of the first to resume work after the start of a full-scale invasion of the Russian army“, – said after the auction the head of the State Property Fund Rustem Umerov.
According to the State Property Fund, the port has resumed operations since April 2022, and since then it has transshipped 153,000 tons of grain and 58,300 tons of imported consumer goods for export.
However, such indicators are only 5% of the design capacity of the port, which is 4.1 million tons. Therefore, according to the Fund, the port has great potential for development. “But this requires investments that private business can bring.“, – says Umerov.
“Ust-Danube MTP”. But is the new owner going to invest money in this asset?
Yury Martynyuk, director of the State Enterprise Sea Trade Port of Ust-Dunaysk, who was categorically against the privatization of the port, said in an interview with the media that the conditions of the tender did not impose any obligations on the buyer in terms of investment.
Indeed, in the terms of the privatization competition nothing is said about investments. In fact, there are only two conditions – to pay off the company’s debts within six months and not to dismiss port workers during this period.
However, to participate in the competition, each applicant submits an appropriate application, in which he submits a plan for the development of the object after privatization.
At the time of publication of the material, Elixir Ukraine LLC did not respond to Apostrophe’s request regarding how it is going to develop the port, including through investments.
But Concord Factoring spoke about their plans to buy the port, which, we recall, participated in the tender, but offered much less money than was required to win.
“We had a business plan for the development of this object, and we offered a price at the auction in accordance with our understanding of the risks and potential profit from this object, the company’s press service told the publication. — Perhaps the winner of the auction has a different vision on the profitability or level of risks associated with this object, so they offered a higher price“.
From this comment, we can conclude that an experienced domestic investor considers the price of the Ust-Danube port of 200 million hryvnias, for which it was sold, to be too high.
“Ust-Danube MTP”. Forced investment
The winner of the competition, most likely, will still have to invest in the acquired asset.
“We must understand that the port has such geographical conditions that it is impossible to do without investments, and there will definitely be investments there”, – Alexander Parashchiy, head of the analytical department at Concorde Capital, said in a conversation with Apostrophe.
Therefore, let’s hope that the company that bought the Ust-Danube port (just like the one that will acquire the Belgorod-Dnestrovsky port) will not wait for better times and will invest in port infrastructure right now.
“Today we are actually limited in ports. We have problems with the port of Kherson, the port of Mariupol has been destroyed, Berdyansk is under occupation, and so on. Therefore, I believe that they did absolutely the right thing by selling it – the state does not have money to develop the infrastructure of this port, and the company that bought it will invest and ensure the supply of the necessary products through this port– says Ilya Neskhodovsky. — In other words, this is an increase in our logistics capabilities.“.
According to the expert, there is another important positive moment in the current privatization – it is a symbolic invitation to invest in Ukraine, even when there is a war.
“As for small and medium-sized ports, their implementation is absolutely justified. Let them compete with each other, and also create competition directly to large ports, which will push the latter to develop”, explains Ilya Neskhodovsky.
And after the war, it will be possible to think about large ports – whether to sell them, whether to keep them in state ownership and lease them out on a concession, or even leave them under state control. But that will be later.
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