Odessa Port Plant officials detained on eve of privatisation tender

Odessa Port Plant officials detained on eve of privatisation tender
Odessa Portside Plant enters new round of troubles ahead of July 26 privatisation start.
By bne IntelliNews July 14, 2016

The head of the supervisory board of the Odessa Port Plant (OPP) Serhiy Pereloma and the first deputy head Mykola Schurikov have been detained by Ukrainian authorities on suspicion of embezzling funds ahead of the plant's landmark privatisation tender scheduled for July 26.

"Enough evidence has been collected for a criminal investigation into embezzlement of  enterprise funds on a large scale benefitting two relatively high-ranking officials," the head of the Anti-Corruption Prosecutor's Office Nazar Kholodnytsky told journalists on July 14.

Ukraine's State Property Fund (SPF) is offering the plant for sale as the frontrunner in a renewed privatisation drive, with a starting price of UAH13.175bn ($531.6mn). The tender's deposit was set at UAH658.75mn ($22.5mn) with bids to increase in increments of UAH200mn ($8mn). Companies and persons from Russia and other individuals blacklisted by Ukrainian authorities are barred from bidding.

According to Kholodnytsky, Pereloma acted on behalf of Ukraine's biggest state-controlled oil producer Ukrnafta, partly controlled by Ukrainian oligarch Ihor Kolomoisky, the Ukrainska Pravda online newspaper wrote.

Earlier, the Nortima company, allegedly controlled by Kolomoisky, threatened to block the privatisation of a 99.567% stake in OPP. Nortima says any deal will be regarded as a purchase of stolen assets following a 2009 tender, in which Nortima outbid two rivals with an offer of  $600mn at the exchange rate at the time. However, the SPF declined to recognise the company as the tender winner.

Meanwhile, under a case brought by Ukrainian oligarch Dmytro Firtash, the Arbitration Institute of the Stockholm Chamber of Commerce in April ordered OPP to refrain from alienation or encumbrance in any way of its non-current assets until August 31, 2016. The government maintains that the move does not undermine the privatisation of large state-owned companies, with OPP as the centrepiece of the drive.

OPP accounts for 17% of Ukraine's ammonium nitrate capacity and 19% of its urea production capacity. Due to its strategic location on the Black Sea coast and connections to chemical transportation infrastructure, the plant is export-oriented: export sales constitute up to 85% of output, while the major export destinations are the EU and US.