Concessions and privatization: investors are welcome

Green light to concession reform

On 3 October 2019, the Ukrainian Parliament gave green light to the concession reform. The Draft law of Ukraine “On Concessions” has been adopted in the 2nd reading. It introduces a reform of the concession legislation and incorporates several laws which had previously regulated concessions (including those of motorways and roads).

The newly adopted Draft law defines concession as a form of public-private partnership (PPP), which implies granting by a concessor the rights to create and/or build (repair/ re-equip, etc), and/or manage the concession facility to a concessionaire, and/or to provide services on the terms determined under concession agreement. It also foresees the transfer of most of the operational risk to the concessionaire.

TOP-10 facts to know:

• The law reflects the best global practice in the industry;
• There is a clear distinction between the regulation of concessions and other forms of PPP implementation;
• Concessionaire selection is transparent: (a) a concession tender, (b) a competitive dialogue;
• Advisers and independent experts can be involved in PPP/concession projects;
• The land allocation procedures are simplified, and the concessionaire can withdraw from the project in case the concessor fails to ensure lease of the concession land plot;
• Concessions in different sectors got defined: (a) for markets that are in a state of natural monopoly (b) for the construction and operation of roads;
• The ownership of the facility under concession is clearly regulated;
• Transfer of licenses to concessionaire on the transition period made possible (6 months);
• Potential concessionaires are enabled to initiate concession;
• Disputes arising out of the execution of the concession agreement may be referred to the international commercial or investment arbitration.

 

Privatization of SOEs: investors are welcome

On October 2, 2019, Verkhovna Rada widened the list of state-owned enterprises eligible for privatization. Aimed to attract investment and promote economic growth and adopted in the 2nd reading, the Draft Law of Ukraine No. 1054-1 allows the privatization of more than 1,000 state-owned enterprises that haven’t been eligible for it before (except those of a strategic meaning).

What is new about privatization in Ukraine:

• More than 1,000 state-owned enterprises that have formerly been not subjects to privatization can be privatized now;
• Corporatization of SOEs on the list is in line with international practices;
• SOEs that cannot be subject to privatization are those providing national security; enterprises producing weapons for the Armed Forces of Ukraine; nuclear energy, sport, culture, communication and infrastructure facilities; enterprises providing traffic safety and navigation services, as well as facilities located in temporarily occupied territories (until the constitutional order of Ukraine is fully restored in these territories);
• The Government of Ukraine is obliged to develop and submit to Parliament a list of strategic enterprises in which the state cannot sell a controlling stake (50% + 1 share) within three months from the date of publication of the Draft law.