Vitaliy Koval became the head of the State Property Fund two months ago. Among the main tasks of the Fund are large-scale privatization and proper management of state-owned enterprises.

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Vitaliy Koval, the head of Ukraine's State Property Fund, discussed the agency's priorities and plans in an exclusive interview with, touching on state-owned enterprises, potential privatizations, Ukraine's sovereign wealth fund, and former Russian oligarch assets. Last week, the State Property Fund became the owner of PINbank, which belonged to Russian Yevgeny Giner. What are the Fund's plans for it: will you sell it or will it become part of the sovereign wealth fund?

Vitaliy Koval: This bank has already been nationalized. It is not currently up for privatization. We are considering the possibility of transferring it to another management body, another state institution, which will manage it, because the bank has a license.

What confiscated assets of the Russians that were transferred to the State Property Fund do you plan to sell this year?

Today, Russian assets should work for Ukraine. There are many sanctioned assets: from parking spaces, confiscated apartments, non-residential premises, to, for example, such facilities as Demurinsky GOK Mining and Processing Plant or Aeroc LLC (a gas concrete plant owned by one of Russia's largest developers, Andrey Molchanov – Ed.) By the way, Aeroc is currently being prepared for privatization, and I think it will be one of the most interesting lots this year.

I visited Demurinsky GOK this Saturday. We are looking at the possibility of synergizing it with the UMCC (United Mining and Chemical Company) because Demurinsky has a substantial deposit. This is not about merger. We are talking about synergy when in order to increase the capacity of the two companies, the material and technical base of UMCC could be used on the decent reserves of the Demurinsky GOK deposit.

So, you are not planning to merge Demurinsky GOK and UMCC into a single enterprise?

We are consulting with engineering and geology experts to understand what to do with these assets now – to sell them together or separately.

Did you manage to take full control of Demurinsky GOK?

The management was changed in early 2023. The last production there was in December last year. Currently, 264 specialists work at Demurinsky.

Ukraine has launched the process of confiscating machine-building plants in Sumy, which used to belong to Russia's Hydromashservice. Have you had any talks with the government to transfer them to the State Property Fund? 

So far, this enterprise has not been transferred to us. It is not currently under the control and management of the State Property Fund.

Let's start with the plans: how many large and small privatization objects do you plan to privatize this year? How many and which objects should remain in state ownership? 

We have two lists of enterprises. The first is the list of small-scale privatization, which includes 1,460 objects. These are peat-gathering companies, bakery plants, hotels, expert and technical centers of the State Labor Service, experimental prosthetic and orthopedic enterprises, as well as other facilities for modernization and restoration of production and re-profiling, the so-called brownfields. The list of large-scale privatization includes 18 objects. 

Each enterprise has its own economic life. Our task this year is to earn 4 billion hryvnias ($106.6 million) for the state budget from privatization. And the first weeks show positive dynamics, which is confirmed by the numbers. 

How much money do you plan to raise from the sold Russian assets?

The proceeds from the sanctioned assets will go to the Fund for Liquidation of the Consequences of the Russian Armed Aggression. We don't have any specific plan, but we understand that the more assets we sell, the better. The amount of money in the Recovery Fund will depend on the quantity and quality of the sanctioned assets sold. 

Let me remind you that sanctioned assets are assets that have been transferred to the State Property Fund by the decision of the High Anti-Corruption Court for their sale and filling the budget of Ukraine. The SPFU's goal is to find pro-Ukrainian owners who will launch production, create new jobs, and boost the development of the territories.

All assets related to the aggressor state must be sold in a transparent and open manner through an auction. This became possible thanks to the government, which approved the Procedure for the Management of Sanctioned Property. The funds will go to the Fund for Liquidation of the Consequences of the Armed Aggression of the Russian Federation.

Ukraine's privatization plans: State Property Fund head talks assets to be sold in 2024
Vitaly Koval (photo: FSMU press service)

What is happening around Centerenergo now? What is your relationship with its supervisory board?

The Fund interacts with the company through its organizational structure and manages the company through the Supervisory Board. We regularly hold working meetings with the management of Centrenergo on the company’s state of affairs. I can say for sure that under my leadership, the contacts of the State Property Fund with enterprises will be deeper.

I have already visited Centrenergo and will be there again, in particular, to control the stocks in the warehouses. Currently, there are 174,000 tons of coal there, and tens of thousands more are on their way to the enterprises.

Today, Centrenergo's power plants have increased their generation more than six times, reaching the level of 2013.

It is important that Centrenergo also plays a social role. When the country's electricity generation falls, the company gets involved as much as possible and maintains the required level. Indeed, this leads to losses for the company. But this is about the country's energy stability.

From which countries does Centrenergo currently receive coal and in what proportion?

Currently, all TPPs of PJSC Centrenergo are supplied with fuel in accordance with production needs. The warehouses are replenished with coal from all state-owned mines of Ukraine, within their production capacities. However, these volumes are not enough. Therefore, imported coal is partially used.

There is no Russian coal at Centrenergo?

I have no information about coal of Russian origin. All business activities are the responsibility of the board of Centrenergo. If such coal appears at the company, law enforcement agencies will deal with it.

"I have no information about coal of Russian origin. All economic activities are the responsibility of the board of Centrenergo."

At his press conference, the former acting CEO of Centrenergo said that the company's power plants have worn-out equipment and a shortage of coal, and that Trypillia and Zmiyiv TPPs may not survive the winter. How do you assess the performance of the companies as of mid-winter 2023/2024?

Today is the middle of the heating season. Once again, we have record generation capacity over the past ten years. We have coal in our warehouses. No collapse has occurred, no predicted "betrayal" has happened.

Let's be frank: at every large strategic enterprise, the former management tells the new one how to run things. But for some reason, no one reports their losses.

The Fund has enterprises where the former management has left millions of generated losses. Ex-managers of some of them allow themselves to tell us how and what to do. But for some reason, they are silent about their mistakes.

What is happening around the Odesa Port Plant, do you control it and what is your relationship with the management?

From the engineering point of view, this is one of the most properly designed enterprises. Despite being 45 years old, it is still very modern. The OPP is constantly in the orbit of the Fund's management, and the last meeting with them was last Monday.

Today, the enterprise operates in non-core areas: it produces oxygen and nitrogen. In addition, it is engaged in grain transshipment. But this activity generates only enough income to cover the company's basic expenses: to keep the staff and pay the lion's share of salaries.

We are now considering expanding our activities. The OPP has an opportunity to load multi-ton vessels. It actually acts as a deep-water port.

We do not rule out the possibility of launching it as a core business. But to do so, we need a security component. For example, we need to ensure that no missiles are fired at the ammonia production.

What are the chances of selling UMCC, OPP and Centrenergo this year? Are there any interested potential buyers for these companies? Are they from Ukraine or from abroad?

As of today, auctions for the sale of UMCC, OPP, and Centrenergo have not yet been announced. However, despite the martial law in the country, there is interest in these privatization objects from potential investors, both Ukrainian and foreign.

In particular, companies from abroad have already expressed their interest in participating in the privatization of the UMCC. The OPP will always be of interest to industrial investors because of the possibility of loading ammonia onto ships right at the production site.

But potential investors have some fear. It is because of the lack of war risk insurance.

Although there is a myth today that privatization is impossible in times of war, we have long since disproved it. Enterprises are sold – and at decent prices. The market itself regulates the value of really promising objects. That's why we have examples of auctions where the starting price of a lot equal to its book value increased tenfold.

Earlier, reports surfaced that the State Property Fund had announced large-scale privatization of Sumykhimprom and Ukrainian Energy Machines JSC (Turboatom and Electrovazhmash enterprises – ed.). How do you assess the chances of their sale, and how ready are these companies for privatization?

76% of the shares of JSC Ukrainian Energy Machines are managed by the Cabinet of Ministers, not the State Property Fund. This is now a strategic enterprise that works for the energy sector and critical industries. As far as I know, the government is not considering privatizing Ukrainian Energy Machines until the end of martial law.

"The government is not considering privatization of Ukrainian Energy Machines until the end of martial law."

We have just brought Sumykhimprom back under control and elected a supervisory board. For many years, this enterprise was not controlled by the state. Even though it owned 99.65% of the shares, it was actually controlled by another business group and was driven to bankruptcy. That is why our first task today is to stabilize Sumykhimprom.

In an interview with Forbes a year ago, Rustem Umerov, the former head of the State Property Fund, said that Ocean Plaza should be audited before it is sold, including undergoing financial, technical, and legal audits. You are planning to sell Ocean Plaza in the second half of next year, when would you like to conduct an audit of the asset?

We are analyzing the feasibility and possibility of conducting an audit of Ocean Plaza. There are a number of issues that we are currently studying, and then we will decide on the due diligence. As of today, there is no clear decision on whether it will be conducted or not.

There is no pressure on the minority shareholder from the State Property Fund. If it has any questions, we are ready for a dialog. Moreover, we had a meeting with representatives of Lanita Invest (the company of developer Andriy Ivanov, which owns 33.5% of Ocean Plaza – ed.) The SPFU has a single position on state property: it should be owned by pro-Ukrainian businessmen, not those who work against our country. If a minority shareholder has a pro-Ukrainian position and is not an enemy's accomplice, he will not be pressured.

"The SPFU has a single position on state property: it should be owned by pro-Ukrainian businessmen, not those who work against our country."

Does the Fund plan to change the management company that worked for the previous 66% owner? When will this happen? If not, why not?

We are currently analyzing their last year's activities. It depends on the financial performance and the speed of cooperation with the Fund on privatization issues. If we see that the financial discipline and financial results of the management company are negative, that they do not fulfill the main tasks assigned to them by the charter, that there is no interaction in preparing for privatization, then a decision to change them may be made.

The mall has been operating since November 2022. A few months ago, the state reinstituted the previous version of the charter, and now the majority owner can independently decide on the distribution of profits. When do you plan to pay dividends to shareholders? In particular, how much money will the state receive?

According to the law, if a company makes a profit, it is paid to shareholders in proportionate shares. That is, the state gets its share, and the minority shareholder gets his. It is not the state's decision whether to pay out or not. It is a matter of whether the management company has or has not earned enough money to pay them. As for the budget, the financial plan is approved annually.

Ukraine's privatization plans: State Property Fund head talks assets to be sold in 2024
Vitaly Koval (photo: FSMU press service)

Sometimes the State Property Fund is accused of selling enterprises for nothing...

Indeed, we are often asked why we start with such low prices, if, for example, an enterprise is sold for more than 10 million hryvnias ($266,518), and the Fund starts selling it at 500,000 hryvnias ($13,326). We put up objects for sale at their book value. During the bidding process, the participants, competing for the right of ownership, bring it to the market value. This once again demonstrates that the market is ready for privatization – it is.

For example, last week we sold properties where the price increased significantly. During the competition for a non-residential building in Lviv, the price increased seven times, and it was sold for 85 million hryvnias ($2.3 million). The price of the asset for the State Enterprise Agricultural Enterprise Land Fund increased more than five times – from the starting price of 8.5 million hryvnias ($226,540) to the winning price of 43.1 million hryvnias ($1.1 million).

Rustem Umerov announced the creation of a sovereign wealth fund to manage strategic assets. What is the current stage of its creation, and what objects do you plan to include in it in 2024?

The sovereign wealth fund is at the stage of formation and conceptualization of the idea. We are currently studying the models of other countries. A symbiosis of different models suits us. We held consultations with the French Holding Company, which is the local equivalent of the SPFU and owns more than 80 French state-owned enterprises. We are studying the Norwegian and Polish experience. We are even looking at how things work in the Middle East. By the way, there, the main income of sovereign wealth funds comes from the rental sale of oil. And we have to find our own opportunities to generate income for the state.

We are currently conducting a triage procedure to identify enterprises that are strategic for Ukraine and generate income. They will be the candidates for the sovereign wealth fund. But it's too early to talk about a specific list of companies, as we are still developing its concept.

The state has sold Volyntorf and Rivnetorf. There are plans to sell other peat enterprises next. Which ones do you plan to sell in 2024? How can the lack of special mining permits hinder the sale and how does it affect the price of the companies? And what should be done about it?

For example, at the time of privatization, RivneTorf generated 17 million hryvnias ($453,081) in revenue in the first half of 2023. And it was an enterprise with transparent documentation and permits. That is why it was sold for 205 million ($5.5 million). The lack of special permits negatively affects the price. It is also important that the management does a good job before the sale.

We will take the same approach with other peat enterprises. If necessary, we will change the management, work out the possibilities of obtaining the missing special permits, and bring them to privatization. However, according to recent changes in legislation, the company that privatized an enterprise with licenses has a priority right to re-register the existing licenses. This had a positive impact on the privatization of such enterprises.

As for employees at the enterprises. For example, at Chernihivtorf, the staff does not want privatization...

The staff do not want privatization anywhere. People do not want changes. This is because employees do not understand what will happen to the company after privatization. During the war, we must not allow enterprises to generate losses. If small-town groups have emerged at some enterprises, inciting staff and putting spokes in the wheels of privatization under the guise of some social processes, this is wrong. If the business process at a state-owned enterprise is systematically going downhill, revenues are decreasing, and the black market for selling their raw materials is flourishing, then I have a question: what is the management doing and what is the team doing that allows this negative factor to develop? And I'm not talking specifically about Chernihivtorf, but about this phenomenon in general.

The last question concerns security guarantees to protect investors. How do you see these guarantees, how do you communicate the possibility of practical implementation of these guarantees with our government? What could it look like?

Today we clearly understand that it is important to have guarantees for investors. They are divided into two components. The first is the physical security of property. This is about insurance risks. Here, we cooperate with the Export Credit Agency, which can provide international investors with insurance for their activities in Ukraine. This is insurance against military risks provided by the international agency MIGA (the World Bank's Multilateral Investment Guarantee Agency – ed.)

The second issue is the rule of law. Here, the State Property Fund works as transparently as possible. We are also in favor of showing the real situation at enterprises. We continued the practice of open days, when investors can come to the facility before privatization, and we provide access to the company's documentation and its risks. This is so that the investor can know in advance what he is getting in the bag.

Because the investor is the one who, through privatization, will replenish the state budget that finances the Defense Forces today. And tomorrow, he will restart the enterprise, create new jobs, pay taxes, and bring development to the region. That is why the Fund always meets the needs of those who, thanks to their active position on the "economic front," bring the Victory closer.