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CEO and Managing Partner of AgroGasTrading, Oleksandr Gorbunenko, in his op-ed for "NV-business" shared his own vision of the challenges and prospects of privatization of the Odesa Port Plant. He also analyzed the problems that held back the implementation of the four previous attempts to attract the strategic investor to the enterprise.

According to Oleksandr Gorbunenko, there are three key barriers to privatization of Odesa Port Plant: "First, the privatization process is excessively politicized. Trying to be likeable for voters, politicians, year after year, promise the public to sell the plant for one or even two billion dollars, thus forcing the State Property Fund to overprice the starting bid at the auction.

Second, the selection of bidders was not transparent enough, and its result happened to become directly dependent on the subjective opinion of the top government officials. To such a huge extent that in 2009, the government that set the rules for the privatization of OPP itself, de facto was forced to send them over for finetuning.

Third, the enormous damage to the investment attractiveness of OPP is caused by the complications in its financial position and debts accumulated during the recent years. In total, they reach UAH 10.3 billion. The main creditors of OPP are Naftogaz (UAH 2.2 billion) and the Ostchem Holding (about USD 250 million). Construction of plants like the Odesa Port Plant, "from scratch" today would cost the foreign investors 250 to 400 million dollars, Oleksandr Gorbunenko notes.

At the same time, the starting price of the privatization auction should take into account the existing debts of the OPP.

Within the last 11 years, the government has tried unsuccessfully to privatize the OPPs, four times. Now there is no alternative to privatizing OPP. The incentives to do it is not just the set of Ukraine's commitments to IMF, or the plans of the Cabinet of Ministers and the State Property Fund, but also the basic logic. It is necessary to take into account the interests of all parties to the process.

"It is necessary to privatize OPP so that three parties benefit from it: both the state and the enterprise with its entire staff, and the investor, too", the head of AGT emphasizes. The main interest of the state in the issue of privatization of OPP is to get as much benefit as possible of such a decision. However, the plant as a whole property complex exists a kind of a hub, with 5-6 businesses potentially carry out their activities independently. Privatization of individual facilities of the OPP will bring the state has more costs than the sale of the entire property complex.

So, in the territory of OPP, there is a functioning ammonia pipeline, production of fertilizers, a huge railway shop with dozens of locomotives and a fleet of over 500 cars, as well as one of the largest greenhouse complex in Southern Ukraine for growing cucumbers and tomatoes, the so-called "green shop".

"Plus, many secondary assets: health centers, hotels, sports facilities, medical institutions, etc. With a competent approach, each element of such system can become self-sufficient, and at the same time, contribute to the stability of the entire production chain," Oleksandr Horbunenko explains.

However, the real value and uniqueness of the Odesa Port Plant is its qualified personnel, top-notch operators with higher education, and it takes about two years to train them.

“Such professionals are not something you just squander around. In the list of investment obligations for future owners, it makes sense to include social guarantees for the employees. They should at least keep the existing social insurance for medical and recreational services", the head of AGT believes.

Almost 3,000 employees of the plant depend on the continuous workload of the OPP. For them, the functioning of the OPP means the availability of work, a salary and confidence about their tomorrow. In addition, the staff

of the plant is united into a pretty solid and proactive trade union organization: its opinion must be taken into account when preparing for privatization auction.

However, according to the CEO of AGT, there is no perfect recipe for privatization of Odesa Port Plant. But there are a number of key requirements that must be fulfilled in any case. "There is no perfect algorithm for privatization of the Odesa port plant. It is clear that one must take into account a number of key requirements, in order to preserve the integrity of production chains; at the same time, giving them flexibility and dynamics to meet the ever-changing market conditions. Also, the interests of the staff should be protected. These are the three pillars, and it is necessary to build a dialogue with all parties involved: the trade union committee of OPP, the investment advisor to the State Property Fund, and the investment and business community. Because the truth is born only in an open and competent discussion", Oleksandr Horbunenko emphasized.


30 June, 2020