Ukraine Sets $2B Starting Price for Auction

KIEV, Ukraine -- The government on Tuesday set a $2 billion starting price for a 93.2 percent stake in Ukraine's most profitable steel mill, more than doubling the price at which the mill was sold last year in a highly disputed privatization deal.

The State Property Fund also said in a statement that the winning bidder for the Kryvorizhstal steel mill will be obligated to invest $2.3 billion between 2006 and 2013 for unspecified improvements. The mill is due to be auctioned in October.

Kryvorizhstal Steel Mill

The statement offered no further details.

Kryvorizhstal was sold last year for $800 million to a consortium controlled by Viktor Pinchuk, a son-in-law of former President Leonid Kuchma, and Rinat Akhmetov, a tycoon who is Ukraine's wealthiest man.

Other major steel companies including Russia's OAO Severstal and the US Steel Corp. claimed they made substantially higher bids of around $1.2 billion.

After a long legal battle, the government in June seized control of the mill, calling the earlier sale an outright theft.

Vasiliy Yurchyshyn, an analyst with the Kiev's Razumkov think tank, said the new starting price was exaggerated "taking into account current political and economical instability in Ukraine."

"I don't think that any rational investor will come here and pay such a money," he said.

Kryvorizhstal, the country's most profitable steel mill, last year declared earnings of more than $400 million.

Neither Pinchuk, Akhmetov nor their lawyers were available for comment.

Earlier this year, Pinchuk lodged a complaint with the Supreme Court and another with the European Court for Human Rights, claiming that the court proceedings were violated.

Both cases are pending.

Source: AP