Privatization 2022: what they sold
The State Property Fund says they successfully sold some small state property from September to December and plan to sell more in 2023 for a total value of UAH 6 billion.
The State Property Fund held over 170 online auctions from September to mid-December. The state budget got UAH 1.14 billion from privatization. The total amount of state property sold is close to UAH 2 billion.
According to the results of the auctions, we see that business is adapting to work in conditions of power outages and possible blackouts. Competition in the privatization of state property remains at a high level – 4-5 participants compete on average in the auction.
Aleksey Sobolev
director of the state enterprise “Prozorro. Sales”
In 2023, the State Property Fund expects more interest in state property from businesses. They also plan to resume selling large objects.
Privatization 2022: Distilleries, recreation centers and garages
The State Property Fund holds around 10-20 privatization auctions per week. They usually sell property for a few hundred thousand to tens of millions of hryvnias. They focus on small-scale privatization, and the maximum cost of a lot can't exceed UAH 250 million.
Based on the results of previous auctions, the best items to be auctioned are distilleries, separate property complexes, former sanatoriums and camp sites, machine-building enterprise assets, and non-residential premises under construction.
- distilleries with production facilities;
- separate property complexes;
- former sanatoriums and camp sites;
- assets of machine-building enterprises;
- non-residential premises and construction in progress.
In 2022 so far, some large lots that got sold are: Marilovskiy distillery in Ternopil region for UAH 150 million, property of a Ukrspirt state enterprise subdivision in Ternopil region for UAH 70.3 million, Erotorn Research Institute in Lviv for UAH 55 million, Kristall Jewelry Factory in Vinnitsa for UAH 45 million, and 50% stake in the “Orion” machine-building production association for UAH 80 million.
- During past auctions, the starting prices of the lots increased by 3 to 13 times. Distilleries and property complexes received the most attention from potential buyers because winning the auction means getting a ready-made platform with connections for business development. This is convenient for entrepreneurs and companies needing to move quickly from active to calmer areas.
- 2023 will begin with small objects
- The State Property Fund plans to sell 8 more lots in the last week of 2022. This includes a recreation center in Fontanka village in Odesa region, a 22 sq m garage in Uman, a Mezhrayshelk coco dryer in Kremenchug, a group of inventory objects in Veliky Berezny, Mishkovitsky distillery in Chortkiv, Hydrogen sulfide clinic in Dnipro, and a store in Bogorodchany village in Ivano-Frankivsk region.
- Also, the State Property Fund has announced some plans for privatization at the start of 2023. There are 7 auctions scheduled in the first ten days of January. However, there are no significant assets being sold. The lots mainly consist of administrative buildings and non-residential spaces. Their initial prices range from UAH 11,000 to UAH 1.7 million.
- In the state budget law for 2023, they are planning to generate UAH 6 billion from privatization. This is UAH 2 billion less than the amount included in the current version of the 2022 state budget. However, if privatization brings in at least a couple of billion hryvnias to the state treasury by the end of this year, it will be positive.
Plans for large-scale privatization remain unchanged.
The government has already announced its intention to restart the privatization of major facilities. Large privatization was first put on hold on March 30, 2020 due to the coronavirus pandemic and quarantine restrictions. Then, from February 24, 2022, martial law froze the sale of state property.
However, since the beginning of 2022, the Verkhovna Rada has passed two bills (now laws No. 1365-IX and No. 2468-IX), which allow for the resumption of large-scale privatization and changing its rules. The main change is that the sale of both large and small assets will be moved to the Prozorro system.
The only issue is that the Cabinet of Ministers has not yet provided a clear privatization plan. Before the war, the main state-owned enterprises that were set to be privatized were Odessa Port Plant (OPZ), United Mining and Chemical Company, Turboatom, Centrenergo, and several regional energy companies. However, it's uncertain if they will be included in the updated sale list, particularly after the extensive shelling of the energy infrastructure.
Privatization in 2022. Sanctions and tax liens also have benefits.
In reality, the state budget can gain funds not just from traditional privatization. The State Property Fund will also sell assets that Ukraine seizes from sanctioned individuals — Russian citizens.
The SPF received the first portion of such assets on December 9. These include 17 real estate properties in the Zaporozhye region and shares of corporate rights of 5 businesses situated in Kyiv and Zaporozhye, which are owned by Russian businessman Vladimir Yevtushenkov.
“The assets were transferred by decision of the Supreme Anti-Corruption Court. The State Property Fund got the opportunity to sell them through privatization and lease with the further direction of the proceeds to the state budget,” the official statement of the State Property Fund says.
How many objects of large privatization do we have, for example? 5 or 10 enterprises? They work? No. What will happen to them in a year? It will no longer be an asset, but a property complex that will become just land. Therefore, we must find effective owners who can launch these companies and start selling their products.
Rustem Umerov (from an interview with Ukrayinska Pravda)
head SPF
Additionally, on November 25, Law No. 2719-IX came into effect. Its provisions allow for the possibility of privatizing state and communal property that is under a tax lien. Furthermore, the State Property Fund will be able to send such property for sale without the consent of the regulatory authority (State Tax Service – ed.). The only catch is that the buyer of collateralized assets will be required to settle the tax debt within 6 months after the purchase.
Privatization 2022. Sanctions and tax liens are also useful
In fact, the state budget can receive money not only from traditional privatization. The State Property Fund will also sell assets that Ukraine collects from sanctioned persons — citizens of the Russian Federation.
The SPF received the first portion of such assets on December 9. These are 17 real estate objects in the Zaporozhye region and shares of corporate rights of 5 enterprises located in Kyiv and Zaporozhye, owned by Russian businessman Vladimir Yevtushenkov.
“The assets were transferred by decision of the Supreme Anti-Corruption Court. The State Property Fund got the opportunity to sell them through privatization and lease with the further direction of the proceeds to the state budget,” the official statement of the State Property Fund says.
In addition, on November 25, Law No. 2719-IX came into force. Its norms, in particular, provide for the possibility of privatizing state and communal property that is in a tax lien. Moreover, the State Property Fund will be able to send such property for sale without the consent of the regulatory authority (State Tax Service – ed.). The only thing is that the buyer of collateralized assets will be forced to pay off the tax debt within 6 months after the acquisition.
According to the State Property Fund, 41 collateralized objects will be privatized. The total starting cost of these enterprises is about UAH 1 billion, and the total tax debts exceed UAH 300 million.
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