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. Last Updated: 07/27/2016

IMF Queries Tender Conditions for Nikolayev Plant




The intervention of the International Monetary Fund has thrown the fate of the tender for the sale of the Ukrainian government's stake in the Nikolayev Alumina Plant into danger.


The plant is a key provider of raw materials for Russia's and Kazakhstan's aluminum industries. The terms of the tender, which was supposed to take place mid-March, will now not be known until next week, Ukrainian officials said Thursday.


The original terms for the privatization auction to sell a 30-percent stake in the giant, one of the biggest plants in the Ukraine, were announced mid-February and the tender was supposed take place within a month, but the recent intervention of the Fund could mean the auction will be canceled.


The initial terms included paying off the work's debts of some $1.2 million and the construction of an aluminum works in the Ukraine within two years. The starting price for the state stake is about $20 million, or about 10 percent of the plant's annual revenues.


The Ukrainian government holds a 55 percent stake in the plant. The second biggest stake in the plant - about 36 percent - is owned by Sibirsky Aluminum, one of the Russia's biggest companies and owner of the Sayansk Aluminum Plant.


But Leonid Kalinichenko, deputy head of the Ukrainian Property Fund, said Thursday in a telephone interview from Kiev that the IMF "made a suggestion" that the state sell its entire stake, rather than only 30 percent, and that the construction of a new works be struck from the conditions of the auction.


Kommersant newspaper Thursday quoted an unnamed Ukrainian government official as saying that "IMF's suggestions strangely coincide with the way the process of privatization is being viewed by [Russian tycoons] Roman Abramovich, Boris Berezovsky, Lev Chyorny and the TWG, or TransWorld Group, company: The stake must be bigger and the number of obligations must be smaller."


Abramovich and Berezovsky are linked to oil major Sibneft, which has said it has purchased majority stakes in Russia's two biggest aluminum plants, Bratsk and Krasnoyarsk, and nearly half of Russia's Achinsk Alumina Plant. The tycoons are also linked to LogoVAZ, which has apparently bought the Novokuznetsk Aluminum Plant. Russia's Antitrust Ministry is investigating the claims but says it has had trouble getting to the root of the deal, or even finding out if it happened at all.


Kalinichenko denied the IMF may have been influenced by Russian oligarchs. He said the IMF had merely pointed out that by selling a 30-percent stake in the Nikolayev Alumina Plant Ukraine has violated the country's own strategy of privatization: To sell controlling stocks to create effective proprietors.


"Yes, we violated our strategy, but the plant is unique for our country. Of course, we must apply an individual strategy to it," Kalinichenko said adding that he had no objections to any new owner of the state stock as long as it is "a reputable international organization and fulfills its obligations."


The Nikolayev smelter is the largest producer of alumina on the territory of the former Soviet Union, with capacity to provide about one-sixth of Russia's total needs.


Kalinichenko said nothing had changed in the terms of the auction so far even after a meeting with Fund representatives Wednesday.


"So far we plan to do what we wanted to do, but nothing is 100 percent certain in this life," Kalinichenko said.


Kalinichenko linked the possible change of the terms for the auction with the negotiations Ukraine is conducting over the terms of obtaining loans from the IMF.


"We are now working to resume IMF programs and such programs, of course, will be done under certain conditions. These suggestions were part of the conditions and we are discussing them."


The Fund plans to conduct a special meeting next week to finally decide the fate of the auction.


Alexei Petrov, spokesman for the Nikolayev plant, said in a telephone interview Thursday that "there are hopes the terms and the date of the auction will be clear next week."


Petrov said the plant's collective "long ago decided only 30 percent of the stake must be sold and 25 percent must be kept by the state so that it controls the property."


The works produced 992,000 tons of alumina in 1999 compared with 1.064 million tons in 1998, Reuters reported.