The State Property Fund of Ukraine’s official position on selling the VolynTorf State Enterprise at an open auction

During the organization and holding of an open auction for the sale of VolynTorf State Enterprise on October 6, 2023, the State Property Fund acted strictly in accordance with the existing legislation

At the time of the auction, the enterprise was included in the list of small privatization objects. The Government’s decision to halt the privatization of VolynTorf State Enterprise and transfer it to the Ministry of Energy of Ukraine’s management was not adopted and did not come into force. There were no other legal grounds to cancel the auction or to discontinue the privatization of the object.

According to the law, the starting price of small privatization objects for auction is determined at the level of the asset’s book value. The law does not provide for an independent appraisal to determine the starting price of a privatization object when there is a book value. Thus, the starting price of VolynTorf State Enterprise was set at the book value reflected in the company’s financial statements.

It is important that during auctions the starting price of objects increases in line with the received proposals. The Prozorro.Sale electronic trading system, which has proven effectiveness over the past five years, ensures equal access to auction for all participants.

The announcement of the auction was published in a timely manner and within the deadlines specified by the legislation in the ProZorro.Sale system, as well as on all information resources of the State Property Fund. Therefore, all investors interested in the asset had the opportunity to familiarize themselves with the auction conditions and information about the object and make a decision to participate in privatization.

Information about the number of participants and their proposals is confidential before the auction. Only at the start of the auction, the ProZorro.Sale system reveal all this information. At this stage, the system also determines the order of submission of proposals by participants in the round.

Current legislation provides that if only one participant is registered for auction participation, the auction may proceed. The bid offered by this participant is considered the winning one. In this auction, the starting price was set at the book value of the object, amounting to UAH 190.19 million, and the winning price was UAH 212.22 million.

It should be noted that the net profit of the enterprise for the first half of 2023 was only UAH 6.2 million, for the previous year 2022 – UAH 10.6 million, and for the years 2020 and 2021, the enterprise operated at a loss. Therefore, it is logical to assume that it would take the enterprise approximately 20 years to generate revenues exceeding UAH 200 million.

The sale of the VolynTorf State Enterprise at an open auction via the ProZorro.Sale system became the second example of privatization of the peat industry enterprises. In July 2023, the RivneTorf State Enterprise was put up for sale at an open auction with a starting price of UAH 47.14 million and was sold for UAH 205 million. This confirms that only the market can determine a fair price, and for this, the Fund provides all necessary conditions.

The State Property Fund is willing to cooperate with law enforcement agencies and will provide active support for any investigations.

According to the National Anti-Corruption Bureau (NABU), the former director of the VolynTorf State Enterprise is a suspect in a criminal case. At the end of 2013 and the beginning of 2014, he concluded contracts for the purchase of securities with the funds of the VolynTorf State Enterprise and resold these securities to a private company, causing damage to the enterprise in the amount of UAH 5.6 million. This is an obvious case of corruption and the flourishing of "gray" schemes based on state assets. Therefore, the Fund’s position is clear and understandable – attracting private investment to non-strategic state enterprises is a priority in the Fund's work.