Successes and failures of Ukrainian privatization in the context of war

Last year, Ukraine launched «large-scale privatization» (objects with a book value of more than UAH 250 million), which immediately improved the implementation of revenue plans. It can be stated that there is demand from investors for interesting objects, but the constant risk of shelling of privatization objects, large debts, complicated legal history of assets, the need for large funds to modernize production facilities, and other factors remain problems.

Privatization results

Based on the results of privatization in 2024, it can be argued that a certain breakthrough has taken place. According to the Ministry of Economy, last year’s privatization proceeds amounted to UAH 10.5 billion, which is the best result since 2011 (however, given inflation, this can hardly be considered a great achievement). Of this amount, UAH 9.6 billion went to the state budget, while the privatization of municipal property brought UAH 865 million to local budgets. According to the State Property Fund of Ukraine (SPFU), 377 objects were sold.

This result was the result of the introduction of «large-scale privatization,» i.e., the sale of objects with an asset value exceeding UAH 250 million. This brought in almost UAH 6.5 billion, while small privatization brought in more than UAH 4 billion. The most expensive lot in the large-scale privatization was the United Mining and Chemical Company (UMCC), which brought in UAH 3.9 billion, and the small-scale privatization was the Kozatsky Hotel (UAH 400 million).

In the first half of 2025, the SPFU raised UAH 820.5 million from privatization to the state budget. There were 236 successful auctions with an average of seven bidders. As of the end of July 2025, the list of large-scale privatization included 21 objects, and the list of small-scale privatization included 1285. By the end of this year, the SPFU expects to raise UAH 3.2 billion from privatization.

At the same time, privatization auctions are often disrupted. The main reasons for this are:

• significant debts that are transferred to the new owner,
• complicated legal history of the asset, which scares investors away,
• lack of proper documentation at some state-owned enterprises,
  outdated condition of the facilities, which requires significant
• modernization costs.

Successes vs. failures

Last fall and in the summer of 2025, auctions for the privatization of the Ukraina Hotel, the UCC, and VinnytsiaPobutkhim were successfully held as part of the large-scale privatization. The government actively used these examples for its own PR purposes, although they showed different results:

• The value of the Ukraina Hotel increased 2.4 times, rising from the starting price of UAH 1.05 billion to UAH 2.5 billion. Three bidders competed for the hotel. A Ukrainian investor bought the property.
• UMCC was sold to a foreign company for UAH 3.94 billion, which is only UAH 39 million more than the initial price. This tender was held with only one participant.
• VinnytsiaPobutkhim received a new owner for UAH 608 million, which is twice the starting price. Two bidders competed for the facility, and the winner was a Ukrainian company operating in the same field as the enterprise. Retaining the latter is a condition of the tender.

At the same time, in August last year, the privatization auction for Zaporizhzhia Aluminum Production Plant (ZalK), which previously belonged to Russian oligarch Oleg Deripaska, failed due to the lack of bidders. ZALC was the only producer of primary aluminum in Ukraine, but this production was effectively destroyed by the previous owner in order not to create competition for his Russian assets.

The reasons for the lack of interested investors in the tender are both the high starting price (UAH 152 million) and the unclear situation with the asset itself. It is no longer physically possible to resume the old production, which means that either an investment of about $400 million in a completely new enterprise or a re-profiling of the existing facilities is required. In addition, a potential investor may be subject to lawsuits filed by the former owner of the nationalized enterprise.

The Odesa Port Plant (OPP), whose sale of almost 100% of its shares was approved by the government in late August, can add to the list of failed privatization examples. The starting price of the stake is UAH 4.49 billion.

The OPP is a classic example of clumsy and inconsistent Ukrainian privatization. The company’s privatization history stretches back to 2009, but since then, before the war, the company’s market value has fallen more than 12 times. The main obstacles to the current privatization of the OPP are the following factors:

1. Ongoing corruption scandals around the enterprise. In 2009-2025, there were more than two dozen publicly recorded scandals at the OPP alone. Their facts and frequency were not affected even by changes in governments.
2. Huge accounts payable. Due to a 2016 court ruling, the plant has to pay about $250 million to Dmitry Firtash’s Ostchem for the gas it supplied. In addition, the plant has many other debts.
3. Vulnerability to shelling. The company is located in a region that is regularly under Russian missile and drone attacks. Although the company has stopped producing its main products since September 2021 (due to problems with gas supplies and low product prices on the world market), its products are extremely explosive and toxic to the environment (fertilizers, ammonia, urea). That is, a shelling of the plant (which has already happened more than once), which will be operating as it should, could cause a man-made disaster.

It is doubtful that under such conditions, against the backdrop of huge risks of shelling, the current attempt to privatize the OPP will be successful.

Pro et contra

Whether privatization is appropriate in a time of war is an open and debatable one. In particular, the following reasons can be identified why large-scale privatization is not a good solution in the current situation:

• High investment risk. The constant threat of missile attacks makes investments in Ukrainian assets very risky. Investors may not want to invest in facilities that are under constant threat, especially in the frontline regions.
• Restrictions on competition. Due to the high risks, the number of potential buyers may be limited, leading to a lack of competition in the auction.
• Underpricing. In times of war, the state is unlikely to be able to sell its assets for their real value. Investors will offer a much lower price, taking advantage of the war risks and lack of competition, which may lead to the sale of state property for a pittance.
• Unstable work. Even if the enterprise is privatized, its stable operation during the war is questionable due to problems with energy supply, logistics, and other difficulties caused by the war.
• Formality of privatization. Certain privatization initiatives look rash in a time of war, and the state’s desire to sell valuable assets without even waiting for the active phase of hostilities to end is not very clear.

In June, the State Property Fund put up for privatization for the first time an almost 100% stake in Sumykhimprom PJSC. With a starting price of UAH 1.16 billion, the auction failed due to a lack of bidders. This happened against the backdrop of the Russian offensive in Sumy region, when the regional center was actually within direct artillery fire and drone strikes, and the region itself was under constant shelling.

On the other hand, experts of the CASE Ukraine think tank believe that privatization during the war is not only possible, but necessary:

1. The state is an inefficient owner. Maintaining state-owned enterprises means accumulating losses. For example, the UMCC, which was privatized for UAH 3.94 billion, had more than UAH 600 million in debts.
2. Transferring them to efficient hands that will invest in them will make it possible to get more successful enterprises in the future, which means new jobs, taxes, etc.
3. Privatization funds will not be superfluous in the current environment.
4. Possible losses will be borne by the new owner, not the state, in the event of possible Russian attacks on the asset.

Iron and steel privatization

The list of large-scale privatization includes a significant number of metallurgical assets, including UMCC, Demurinsky Mining, Zaporizhzhya Titanium and Magnesium Plant (ZTMK), Sumykhimprom, ZAlK, and Mykolaiv Alumina Plant (MAP). Let us remind you of what makes these companies interesting:

• UMCC and Demurinsky Mining produce ilmenite concentrate (a raw material for the titanium industry);
• ZTMK is the only European producer of sponge titanium;
• Sumykhimprom produces titanium dioxide;
• ZAlK produces primary aluminium;
• MAP produces alumina (a raw material for the aluminium industry).

As mentioned above, UMCC has already been sold to a foreign company, but earlier there was even a possibility of creating a state-owned vertically integrated titanium complex, with UMCC representing the raw materials segment and ZTMC the production unit. As we know, these plans did not materialize. However, it is not known when ZTMC, which is burdened with debts (according to the OPP scheme), will be put up for privatization.