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Ukraine's Cabinet of Ministers approved at its weekly meeting on November 14 the State Property Fund's selection of a Concorde Capital subsidiary as its privatization adviser for the Kyiv-based President Hotel , the Interfax-Ukraine news agency reported. The first tender to select privatization advisers for six large state companies, as required by a new law, was convened in late July. Based on the tenders, Concorde Consulting was selected as the adviser for the privatization of the President Hotel and two other companies. However, the results of five of the six tenders (except the hotel) were been later rejected by a court that ruled on a claim by the failed contenders. An appellate court will hear the case on November 28. Commenting on the issue, the head of State Property Fund, Vitaliy Trubarov, expressed his hope that “all the groundless accusations will be overturned by the court” and the big privatization will be unblocked. Recall, a new law to improve the privatization process in Ukraine was adopted by parliament in January that explicitly separates all the privatization targets into large assets (controlling stakes of companies with book value of assets exceeding UAH250mn) and small companies. The law stipulates that the privatization of large assets should be performed with the help of M&A advisers selected at a tender (or without advisers, if such a tender fails). The only company that will be privatized under the old legislation is Centrenergo (CEEN UK), whose auction to sell a 78.3% stake has been announced for December 13.
The Kyiv Economic Court rejected the claim of the State Property Fund that demanded the cancellation of the sales-purchase agreement of 92.79% in Ukrtelecom in 2011, Interfax-Ukraine reported on Nov. 21. In its Nov. 7 ruling, the court rejected two funds' arguments of an alleged breach of an SPA agreement by Ukrtelecom's acquirer. The first claim was that the acquirer failed to invest at least $450mn in the company’s development in five years after the purchase (the court agreed with the defendant's position that $802mn in “investments” were made). The second claim was that the acquirer failed to spin off and pass to the government a subsidiary that provides special communication services for the state for two years after the deal (the court found that this subsidiary was created on time and was ready to be passed to a state body, though it was passed later due to bureaucratic reasons). Recall, the State Property Fund initiated in 2017 the cancellation of the 2011 agreement to privatize Ukrtelecom. In October 2017, the Kyiv Economic Court ruled in favour of the fund, and so did the Kyiv Appellate Economic Court in March 2018. However, Ukraine’s Supreme Court cancelled in July 2018 rulings of the lower courts and ruled to send the case for revision to the Kyiv Economic Court. Ukrtelecom was privatized in March 2011, when an unknown company called ESU paid for its 92.79% stake UAH10.6bn ($1.3bn). In 2013, the SCM business group of Ukraine’s richest tycoon Rinat Akhmetov purchased ESU and became the owner of the privatized Ukrtelecom stake. Akhmetov’s interim victory in his battle with the privatization agency is no more surprising after the Supreme Court ruling in his favour. This is not the tycoon's final victory, as all his shares in Uktelecom are being pledged under loans in Ukraine’s state banks, to whom it owes over UAH4bn. On top of that, Akhmetov is under risk to have to pay over $800mn to Raga, who claims in international courts that Akhmetov failed to pay for a purchase of ESU (Ukrtelecom) in 2013.
47 UKRAINE Country Report December 2018 www.intellinews.com