System bug may thwart fast privatisation plans

The obscurity about the mechanism to be used for sell-off of the state’s residual stakes in companies may foil the operation in embryo. Options considered so far include listing companies directly on the Bulgarian Stock Exchange (BSE), organising public auctions through the BSE, and direct negotiations. However, a Pari daily’s inquiry shows that none of them guarantees success and the state may fail to get the much-needed revenue.
Poor planning If the government decides to sell state stakes by centralised auction on the BSE, that will exclude institutional investors from the bidders’ list. The law does not allow pension funds and insurers to invest in companies that are not traded on the official market. Interest in the residual stakes could be shown by the companies’ current majority owners or by portfolio investors. However, equity investors are rarely ready to buy small stakes. The electricity distribution utilities are the most attractive companies for investors. However, the government cannot list them on the BSE, because that has to be decided by their majority owners. What is more, the majority owners are not interested in buying the state’s 33-percent stake in the companies.

Luring bidders The sale of the state’s minority stakes can provide between BGN 300 and 500 million. The exact amount will depend on which companies will be offered, Privatisation and Post-Privatisation Control Agency acting executive director Todor Nikolov told the Pari daily. The estimation does not include the possible sale of a minority stake or a subsidiary of Bulgarian Energy Holding (BEH). Listing 10 or 15% of BEH may secure an additional revenue of BGN 1 billion. The list of minority stakes for sale should include a portion of BEH, which will lure investors, Nikolov advised.
On the block Minority packages that are currently up for sale will also be put on the list. These include the former duty-free zones in Varna (46%), Bourgas (19.45%) and Plovdiv (46.4%). The first package is being offered by auction. As for the other two stakes, two procedures have failed so far and a third one is under way. Even now the agency is selling minority packages, provided they do not exceed 10%. What is new in the idea is to put bigger stakes under the hammer. Currently centralised auctions are closed procedures that do not allow achieving a good price. Making the auctions open will encourage bidding, Nikolov was adamant.
Stumbling blocks The main problem in the upcoming privatisation procedures is connected with technical issues. The process will depend on the companies’ managers and majority owners. The second problem is the interest the stakes can attract. On the one hand, the crisis has substantially reduced interest in privatisation. On the other, the very condition of the companies is of crucial importance.
 

Finance

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