An explanation from the State Property Fund of Ukraine on the formation of the starting price of state-owned shares in public joint-stock company Odesa Portside Plant will attract higher bids, Managing Director for Eastern Europe and the Caucasus at the European Bank for Reconstruction and Development Francis Malige has said.
He said that the initial price is important, as it should reflect the state of the enterprise and the market where it operates. It is better when the State Property Fund explains the parameters used in the appraisal of the shares, and then each will be able to make own conclusion on the cost of the plant, Malige said.
He said that the starting price does not set the final price of the plant.
If too low starting price is set, investors who are slightly interested in the acquisition of the plant could take part in the auction, he said. The auction mechanism is competition between buyers and it helps to sell the enterprise at higher price to the interested parties. If the starting price were too high, there is a risk that some investors would not even show their interest to the asset. Finally, due to the absence of competition the final price could be low and the auction even could be a failure, he said.
Malige said that transparency and openness is important in settling other issues around the plant, in particular, its debt to Ostchem Holding Ltd. (part of Group DF).
It is important that investors should be informed about this problem and how it would be resolved. This does not mean that the problem should be resolved, as it could take much time, he said.
Malige said that the last actions and the success of the auction would be an important indicator of the government’s readiness for further reforms.
