Sunday, October 23, 2005

Ukraine's Yushchenko Banks on New Steel Mill Sale

KIEV, Ukraine -- Ukraine's largest steel mill goes on the auction block for a second time on Monday, a sale touted by President Viktor Yushchenko's liberal administration as a milestone in coaxing back wary investors.

Three firms are in the running to buy the Kryvorizhstal plant in central Ukraine and have submitted sealed bids to be opened in an open tender, broadcast live from 0800 GMT.

The starting price for Ukraine's biggest post-Soviet sell-off is 10 billion hryvnias, although authorities hope the sale will bring in half as much again.

Each entrant, once the envelopes are opened, will have the chance to bid up the price.

In the running are the world's top steel maker Mittal and two Ukrainian firms -- LLC Smart Group, with Russian links, and Industrial Group, controlled by France's Arcelor.

The auction is seen as a key event in defining the reformist agenda of the administration propelled to power by last year's "Orange Revolution" rallies.

Throughout the long campaign that ultimately led to his victory, Yushchenko denounced as "theft" the plant's original sell-off in June 2004 for $800 million, below other offers.

Court rulings struck down the sale won by a group led by industrialists with close links to Yushchenko's predecessor Leonid Kuchma. The president described the new privatization as a "moral obligation" last week.

Ukrainska Pravda, the country's most authoritative Internet news site, said at the weekend Industrial Group was the favored candidate for an administration which has predicated all decision-making to a long-term drive for European integration.

"A success for Arcelor would be a signal for other Western giants that one can invest billions in Ukraine," it wrote. "It would also serve as a political beacon."

Jolted by eight months of infighting that culminated in his dismissal of radical Prime Minister Yulia Tymoshenko, the president has vowed to proceed with a new sale.

But he promised an end to "reprivatizaton", the watchword for a mass review of sell-offs while Tymoshenko was in office. Together with new premier Yuri Yekhanurov, he faced down two votes in parliament last week demanding a halt to the sale.

Western investors mostly stayed away from Ukraine during Tymoshenko's term in office. Growth over the first nine months of 2005 slowed to 2.8 percent -- its lowest level in five years.
About 10 companies had expressed an interest in the sale for a time. But the field was reduced, analysts say, by conditions on production imposed by authorities and by the worsening of conditions on world steel markets.

Source: Reuters

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