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04 October 2020

Ukraine launches privatisation of large state-owned alcohol producer, Ukrspyrt

In recent years, Ukraine has made significant moves towards the development of its alcohol production market. In December 2019, Ukraine adopted a law abolishing the monopoly of Ukrainian state-owned alcohol producer, Ukrspyrt, and announced the upcoming privatisation of Ukrspyrt’s assets.

Ukrspyrt, Ukraine’s largest producer of alcohol and alcohol-containing products, owns 41 production sites (all of which are intended to be privatised in the near future) and produces 36 million decalitres of spirit per year.

The Government intends to privatise Ukrspyrt’s production sites in several privatisation auctions to avoid the monopoly over alcohol production in Ukraine. Thus, the Ukrspyrt privatisation will fall within the small-scale privatisation procedure and will be carried out via transparent online auctions.

The privatisation of Ukrspyrt is intended to be completed by 1 July 2021. Until that time, the only way to produce alcohol in Ukraine will be to acquire an existing production site (i.e., construction and decommissioning of new production sites are not allowed until 1 July 2021).

On 15 September 2020, the Ukrainian State Property Fund launched the privatisation of Ukrspyrt’s production sites by auctioning the Nemyrivske production site in Vinnytsia region. As of  4 October 2020, four other production sites (in addition to the Nemyrivske production site) have been announced to be auctioned.

List of auctioned Ukrspyrt’s assets

1. Nemyrivske production site

• Auction date: 15 October 2020.
• Initial price: approximately UAH 49,600,000 (approximately EUR 1,500,000).
• Link: https://bit.ly/2GjdJBf

2. Artemivske production site

• Auction date: 20 October 2020.
• Initial price: approximately UAH 29,600,000 (approximately EUR 900,000).
• Link: https://bit.ly/33labHp

3. Ovechatske production site

• Auction date: 22 October 2020.
• Initial price: approximately UAH 19,800,000 (approximately EUR 600,000).
• Link: https://bit.ly/3lk6fgn

4. Lopatynske production site

• Auction date: 28 October 2020.
• Initial price: approximately UAH 19,700,000 (approximately EUR 595,000).
• Link: https://bit.ly/33lwm08

5. Bershadske production site

• Auction date: 29 October 2020
• Initial price: approximately UAH 19,800,000 (approximately EUR 600,000).
• Link: https://bit.ly/3ike2Zn

Conditions for the Ukrspyrt privatisation

Amongst other conditions, the investor (i.e., the person that acquires Ukrspyrt’s production site) will be required to:

• continue producing rectified spirit at the site until 1 July 2021; and
• continue employment of a defined number of employees¹ for two months following the privatisation, and to maintain at least 70% of existing employee positions involved in production (as of 1 January 2020) until 1 July 2021.

Privatisation auctions

In order to participate in the auction, a bidder must:

• register on the online electronic platform;
• pay a security deposit or provide a bank guarantee of 10% of the initial price²;
• pay the registration fee of approximately UAH 950 (approximately EUR 30); and
• submit the application for participation in the auction.

Before the privatisation auction, it is advisable to carry out due diligence of the auctioned asset. Documents regarding the auctioned assets are available on the official website of the Ukrainian State Property Fund.

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¹ The number of employees depends on the production sites – 84 employees for the Nemyrivske production site, 54 for the Artemivske production site, 66 for the Ovechatske production site, 49 for the Lopatynske production site and 73 for the Bershadske production site.

² Security deposits of bidders that lose the privatisation auction will be returned to such bidders. The security deposit of the winner of the privatisation auction will be accounted as part of the purchase price (and will not be returned if the winner does not sign the privatisation agreement).