the state put Ivano-Frankivsk KHP up for auction
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These messages sound louder during the blockade of agricultural products on the border and because of the destroyed enterprises in the south in the east of the country. And, therefore, companies that provide services for storage, drying and processing of grain and are located in a conditionally safe place have considerable business potential.
In addition to warehouses and elevators, it includes a mill and a feed mill. And this means that the enterprise can provide cleaning, drying, and storage of grain from the moment of harvest to its sale.
These messages sound louder during the blockade of agricultural products on the border and because of the destroyed enterprises in the south in the east of the country. And, therefore, companies that provide grain storage, drying, and processing services and are located in a conditionally safe place have considerable business potential. On December 19, the state will hold an auction for the sale of one of these objects – the unified property complex (EMK) of the state enterprise “Ivano-Frankivsk Bread Products Combine”. In addition to warehouses and elevators, it includes a mill and a compound feed plant. And this means that the enterprise can provide cleaning, drying, and storage of grain from the moment of harvest to its sale. What is interesting about this bread products plant, what are the conditions for its purchase, and about the potential of such objects, they spoke with Oleksiy, the acting director of YEMK Oilman and experts.
Commercial building in Ivano-Frankivsk: what the new owner will get
The Ivano-Frankivsk Bread Production Plant (KHP) is located in the suburbs of Ivano-Frankivsk.
It was built in the early 1980s. Before the company fell into a debt hole due to the actions of the former management and stopped working through the courts in 2019, wheat, rye and corn flour, various cereals and compound feed were produced here. The products were sold in Ukraine and abroad.
Also, local agricultural producers were provided with grain cleaning, drying and storage services.
The starting price of YEMK at the auction is UAH 52.7 million. The winner will own more than 46.7 thousand square meters. m of buildings, including warehouses, laboratories, administrative buildings, a canteen, a mill, packing lines, cowsheds, a garage, etc., as well as for the use of 12.3 hectares of land.
The enterprise has 14 units of vehicles and special equipment, equipment of Soviet and Austrian production. And also – railways and roads with the appropriate infrastructure.
Oleksiy Oliynyk
“You see, growing and harvesting grain is one thing. But in order to make a profit from it, you need to store it correctly, bring it to the right humidity, deliver it on time and with the preservation of product quality. We have equipment that does all this, there is a powerful laboratory, specialists with extensive experience,” says Acting Director director of the Ivano-Frankivsk bakery Oleksiy Oliynyk.
Another important unit of the facility is the mill. Back in 2017, Ivano-Frankivsk KHP flour was sold in stores all over Ukraine.
The mill can grind 240 tons of wheat and 35 tons of rye per day. The elevators can simultaneously store 79,000 tons of grain – that’s 4 silos with a height of 48 m.
YEMK is conveniently located from the point of view of logistics. There are car access roads, a railway is laid to the elevator itself.
The nearest station is 3 km away, so goods are delivered by their own locomotive.
Expert Rodion Rybchynskyi, who is the head of the Union “Boroshnomela of Ukraine” and the industry association “Ukrharchoprom”, considers the west of Ukraine, in particular the city of Ivano-Frankivsk, attractive for business related to the production of food products.
Rodion Rybchinsky
“There is an increased demand here: due to the war, many people moved here, companies relocated. Also, the region remains one of the few where there are still tourists. For the same reasons, livestock farming is developing here. Therefore, there is potentially a demand for both compound feed and flour. Due to the location is almost in the city, there should be no problems with finding personnel. One of the strengths of this KHP is the opportunity to create a hub for exports there: the borders with the EU are close, there is also its own railway and road infrastructure. Therefore, investors who are interested in working with Europe, here there are opportunities for development,” says Rybchynskyi.
In 2021, KHP could earn UAH 25 million per year to operate at full capacity
Acting Director Oleksiy Oliynyk headed the KHP in 2021 to prepare the facility for privatization. The once profitable enterprise was idle for the second year in a row.
And the matter is not the lack of customers, but the fact that several thousand tons of grain “disappeared” from the elevators due to one of the former managers.
Courts were held, and in the end, the executive service seized part of the property. Therefore, the plant could not work.
“When I first got to the territory of this enterprise, I was struck by its scale: elevators, heights of 14 floors, a network of warehouses, a mill, a huge area where life once bustled. It had the appearance of a town within a city. Unfortunately, I did not see seeing with my own eyes how this powerful facility works. At the time of my arrival, there were 19 people left out of 120. There was so much equipment and machinery that I hired a company to do an inventory… If the plant could run at full capacity, I would make 25 million hryvnias of profit per year. This is in the conditions of the pre-war year 2021, when there was a competitive environment in Ukraine, and most traders delivered grain by sea through the ports of Odessa,” Oleksiy Oliynyk says.
And he adds that despite being idle, the company looked well-maintained and ready to resume work. But to do this, it was necessary to pay off debts or restructure them.
However, private creditors did not want to deal with a state-owned enterprise.
As a result, a powerful object that provided work to local people, paid taxes to the community and whose services were used by businesses, fell into disrepair.
How the state promotes privatization and compensates for risks during war
The auction for the sale of YEMK Ivano-Frankivsk KHP will take place on December 19, 2023. The state issues it for UAH 52.7 million.
The new owner has an obligation to maintain the team and settle the debts regarding wages and taxes within 6 months. Currently, it is about UAH 23 million. In the process of privatization, the buyer of the object becomes the legal successor of the rights and obligations of the state enterprise.
Volodymyr Solonina
“In order to attract investors, during the period of martial law, the legislation does not require the establishment of repayment terms for other payables. We will only monitor the payment of debts from wages and taxes. The rest of the debt will be paid only at the initiative of the creditors to whom this company owes. We have already sold enterprises with such debt. As practice shows, some creditors apply for debt reimbursement immediately, others – after some time. That is, it is definitely difficult to say how it will be this time,” says Volodymyr Solonyna, head of the Regional Department of the FSMU in the Ivano-Frankivsk, Chernivtsi, and Ternopil regions.
And he adds that during construction, considerable funds were invested in this facility, it ensured the preservation of the state grain reserve.
Currently, private companies have built many modular elevators, but their capacity and list of services cannot be compared with Ivano-Frankivsk KHP.
According to Oleksiy Oliynyk, the construction of a new elevator using modern technologies costs from $5 million (about UAH 185 million).
And in Ivano-Frankivsk KHP everything is ready for work.
Expert Rodion Rybchinsky is of the same opinion:
“Of course, it will be necessary to invest a lot of money in this facility to modernize the equipment. But it is still more profitable than building from “scratch”. For example, an elevator with a capacity of 79 thousand tons will now cost up to 20 million dollars. The mill – another 5-7 million. I’m not taking other objects anymore and I’m not talking about the time that will have to be spent on processing documents and obtaining permits. The Ivano-Frankivsk KHP is conveniently located from the point of view of logistics, you can immediately use an elevator here, there are warehouses, a railway And modernization can be carried out gradually.”
Currently, agricultural producers, traders, and suppliers are actively interested in the enterprise.
“Of course, there are similar enterprises in our region. But now there is enough work for everyone. The decision to privatize this EMK was made in the winter of 2020. But now it has acquired a new meaning: privatization is needed not only by the region, the collective, but also by the state. After all, such enterprises are one from the components of the national food security of Ukraine,” says Oleksiy Oliynyk.
Vitaly Koval
The head of the State Property Fund of Ukraine, Vitaliy Koval, is convinced that the funds received from the sale of state objects should serve to strengthen Ukraine’s defense capabilities, as well as to restart and improve the economy.
“Today, 1 hryvnia of investment creates an additional 4 hryvnias for the economy. That’s why we approach each object as a potential growth point. For the country and the region, this is the restart of the Ivano-Frankivsk bakery products factory by new owners. After all, these are both new jobs and taxes. State property during the war is an internal resource. That is why it is very important to find the shortest way to transform the state “liability” into an “asset,” Vitaly Koval sums up.
This article was produced with the support of the American and British peoples through the United States Agency for International Development (USAID) and the Foreign, Commonwealth and Development Office (UKaid). The views and opinions of the authors expressed in these publications do not necessarily reflect those of USAID, the US Government, UKaid or the UK Government.
On December 19, the state is holding an auction for the sale of one of these objects – the single property complex (USC) of the state enterprise “Ivano-Frankivsk Bread Factory”.
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