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40 distilleries will be put up for privatization by the end of 2020

18/ 09/ 2020
  Yesterday, the European Business Association met with Taras Yeleyko, Deputy Head of the State Property Fund of Ukraine, to discuss the launch of privatization in the alcohol industry and the new opportunities that have emerged for the business in this context. It will be recalled that the amendments to the law on state regulation of alcohol production and sales came into force On July 1, 2020. These amendments provide that private enterprises can be licensed for the production and export of alcohol. Also, until July 1, 2021, the only way for an enterprise to become an alcohol producer is to purchase a distillery facility under applicable law. It is expected that the introduction of large-scale privatization measures will liberalize the national alcohol market, as for years the development of the alcohol industry in Ukraine has been constrained by a strict state monopoly. Thus, the share of the shadow alcohol market in Ukraine has increased to 55% due to the lack of competitive conditions. As the result, each year the state loses up to 8-10 billion hryvnias of the revenue budget. Thus, the first auction for the privatization of the alcohol industry will take place on October 15, 2020. The demonopolization of the alcohol market will start with the sale of assets of Ukrspyrt, estimated at around 2 billion hryvnias. Taras Eleyko stated that Ukrspyrt has transferred to the Fund a number of assets for which the audit and inventory count are being conducted. Upon completion of all inspections, the approved objects will be posted on the Fund’s website, where all interested parties can read the documentation and other technical information for participation in the auction. It should be noted that when privatizing the distillery facilities, investors are obliged to comply with several important conditions. Thus, until July 1, 2021, it is obligatory to maintain the same type of activity of the acquired enterprise and 70% of its production staff. Also, for two years it is forbidden to demolish civil protection structures existing on the site. By the end of this year, the State Property Fund intends to put up for privatization altogether 40 distilleries in conservation. According to Mr. Eleyko, even though production activities at such facilities have been suspended, all equipment and facilities are in working order. Therefore, potential investors can restart the companys capacity for their needs. In general, Ukrspyrt includes a wide range of enterprises that can be an interesting investment for producers of food alcohol, technical alcohols, bioethanol, antiseptics, pharmaceuticals, and agrochemicals. Meanwhile, the working distilleries are planned to be put up for auction in 2021. The implementation of such large-scale projects will take place at a slow pace. In fact, a completely new market is being established where old pricing principles cannot be longer applicable. At the same time, demonopolization will be an important step to increase the efficiency of alcohol enterprises, as well as strengthen the export potential of national alcohol products. The European Business Association thanks the State Property Fund for its readiness for an open and transparent dialogue with business!   Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.

Yesterday, the European Business Association met with Taras Yeleyko, Deputy Head of the State Property Fund of Ukraine, to discuss the launch of privatization in the alcohol industry and the new opportunities that have emerged for the business in this context.

It will be recalled that the amendments to the law on state regulation of alcohol production and sales came into force On July 1, 2020. These amendments provide that private enterprises can be licensed for the production and export of alcohol. Also, until July 1, 2021, the only way for an enterprise to become an alcohol producer is to purchase a distillery facility under applicable law.

It is expected that the introduction of large-scale privatization measures will liberalize the national alcohol market, as for years the development of the alcohol industry in Ukraine has been constrained by a strict state monopoly. Thus, the share of the shadow alcohol market in Ukraine has increased to 55% due to the lack of competitive conditions. As the result, each year the state loses up to 8-10 billion hryvnias of the revenue budget.

Thus, the first auction for the privatization of the alcohol industry will take place on October 15, 2020. The demonopolization of the alcohol market will start with the sale of assets of Ukrspyrt, estimated at around 2 billion hryvnias.

Taras Eleyko stated that Ukrspyrt has transferred to the Fund a number of assets for which the audit and inventory count are being conducted. Upon completion of all inspections, the approved objects will be posted on the Fund’s website, where all interested parties can read the documentation and other technical information for participation in the auction. It should be noted that when privatizing the distillery facilities, investors are obliged to comply with several important conditions. Thus, until July 1, 2021, it is obligatory to maintain the same type of activity of the acquired enterprise and 70% of its production staff. Also, for two years it is forbidden to demolish civil protection structures existing on the site.

By the end of this year, the State Property Fund intends to put up for privatization altogether 40 distilleries in “conservation”. According to Mr. Eleyko, even though production activities at such facilities have been suspended, all equipment and facilities are in working order. Therefore, potential investors can restart the company’s capacity for their needs. In general, Ukrspyrt includes a wide range of enterprises that can be an interesting investment for producers of food alcohol, technical alcohols, bioethanol, antiseptics, pharmaceuticals, and agrochemicals. Meanwhile, the “working” distilleries are planned to be put up for auction in 2021.

The implementation of such large-scale projects will take place at a slow pace. In fact, a completely new market is being established where old pricing principles cannot be longer applicable. At the same time, demonopolization will be an important step to increase the efficiency of alcohol enterprises, as well as strengthen the export potential of national alcohol products.

The European Business Association thanks the State Property Fund for its readiness for an open and transparent dialogue with business!

 

Be the first to learn about the latest EBA news with our Telegram-channel EBAUkraine.

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