competitive bid regarding the strategic development plan for the state enterprise “ukrspyrt” for...

COMPETITIVE BID REGARDING THE STRATEGIC DEVELOPMENT PLAN FOR THE STATE

ENTERPRISE “UKRSPYRT” FOR THE MEDIUM TERM

Acting Director of the SE “Ukrspyrt”Roman Ivaniuk

August 19, 2015

CURRENT ORGANIZATIONAL CHART

2

• Headquarters• Licenses for manufacturing and realization

of the alcohol, raw alcohol, technical alcohol, bioethanol

• 41 places of activity (PA), including:- 39 for alcohol manufacturing- 2 for bioethanol manufacturing

State Enterprise “Ukrspyrt” Concern “Ukrspyrt”

• 41 manufacturing companies (separate entities)

• Licenses for manufacturing only• The realization of the products through the

SE “Ukrspyrt” under a commission agreement

• The majority of companies in the process under bankruptsy

27.3

4.0

1.7

1.4

0.6

Technical fluids in flow

Bioethanol Rectified ethyl alcohol

35.0Mdal

25.8

6.0

1.4

Rectified ethyl alcohol


Bioethanol

33.2Mdal

Both companies production:

Ethyl alcohol Technical alcohol Technical fluids (washers, solvents etc. bioethanol (blending agent)

Alcoholic beverages Main fraction of ethyl alcohol Wet grain stillage concentrate

Annual production capacity, millions dal

Technical alcohol

Raw alcohol

THE RESULTS OF SE “UKRSPYRT” WORK FOR 1 HALF OF 2015 UNDER NEW MANAGEMENT CONTROL (1)

3

For 1st half of 2014 For 1st half 2015 Diff., %Net income before tax UAH 49 M UAH 96 M +96%Net profit margin 6% 13% +117%Amount of taxes paid UAH 95 M UAH 119 +25%Gross profit per 1 dal of produced alcohol UAH 53.75 UAH 65.43 +22%

Gross profit margin (mark-up) 38% 33% -13%

Net profit per 1 dal of produced alcohol UAH 8.52 UAH 26.18 +207%Operating expenses UAH 222.7 M UAH 139.4 -37%

As of 01.01.2015 As of30.06.15 Diff., %Accounts balances UAH 9.8 M UAH 36.4 M +271%

Including ailing banks UAH 7.6 M UAH 7.6 M -Working plants 4 14* +250%Accounts payable, including: UAH 1,418 M UAH 1,236 M -13%- Bank loans UAH 75 M UAH 0 M -100%- NJSC “Naftogaz” UAH 66 M UAH 0 M -100%- Payables to the budget UAH 392M UAH 360 M -8%- Overdue – for the grain UAH 58 M UAH 11 M -81%Financial plan approval Not approved Approved for 2015.

Submitted for approval for 2016

* As of Aug 2015р. – 17 plants

-9% -23% -36% -37%

+96%+117%

+207%

6м20146м2015

4

виручк

а

валови

й при

буто

к

обсяг

вироб

ництва

креди

торсь

ка за

борго

ваніст

ь

чисти

й при

буто

к

рентаб

ельніс

ть

чистий

приб

уток н

а 1 дал

+41%+88% +58%

-13%

+398%

+255% +215%

1кв 2015р2кв 2015р.

Major indicators dynamics for 2014-2015

Major indicators dynamics for 2015


Revenue Productionvolume

Gross profit Operatingexpenses

Net profit Profitability

Net profit per 1Dal

Revenue Gross profit Productionvolume

Accounts payable

Net profit Profitability

Net profit per 1Dal

6m20146m2015

1q20142q2014

5

Січень Лютий Березень Квітень Травень Червень2,100

2,300

2,500

2,700

2,900

3,100

3,300

3,500

3,700

Comparison of purchase prices for raw materials SE "Ukrspyrt" with av-erage market* prices for grain, UAH with VAT

Закупівельні ціни ДП "Укрспирт" Ринкові ціни на зерно

* Source: NIBULON

-17%

-11%

-8%

-6%-2%

-11%


January February March April May June

Purchase prices of SE Ukrspyrt

Market prices for grain

SE “UKRSPYRT” – TARGET STATE AFTER THE ACCESSION OF “UKRSPYRT” CONCERN AND MOH COMPANIES

6

A competition commission for the purchase of raw materials and equipment was created.The effective planning of the purchase, logistics and storage of the materials.Savings on purchases ~20%The corruption component was excluded from the procurement process of goods and services for SE "Ukrspyrt"The execution of contractual obligations of debt to suppliers made it possible to perform the purchase of raw materials with payments delay up to 30 days

Закупівлі

Assets, remaining a part of Concern "Ukrspyrt" can be sold on a competitive basis, with the exception of equipment for the production of alcohol, which should be utilized for scrap or transferred to SE "Ukrspyrt"

Administration

Already completed

Purchase

Re-certification of the PAs management was performed, then recruited exclusively through competition, PAs staff was optimized staff, managerial staff of the SE "Ukrspyrt“ reduced by 33%.A technical board of the SE "Ukrspyrt" was established to determine the most effective technologies and the most advanced equipment, for the implementation of effective control methods of production, selection of highly efficient strains of yeast, enzymes, implementation of new technologiesAdministrative and management costs were optimized through the implementation of accounting automation, improvement of the business processes efficiency and organizational structure transparency.The remuneration system was optimized, incl. by excluding of the excessive bonuses, material assistance.The company funds usage was optimized by reducing the debt burden, the use of trade credit and treasury functions optimization.

• The number of managerial staff – 150 persons due to:• Workplaces automation• The optimization of business process

management• Switch to electronic workflow

• Effective procurement planning system• Reducing of the purchase price through the

proactive procurement• The use of additional financial tools to optimize

purchasing prices for raw materials

SE “UKRSPYRT” – TARGET STATE AFTER THE ACCESSION OF “UKRSPYRT” CONCERN AND MOH COMPANIES (2)

Закупівлі

ProductionAlready completed

Realization

Full satisfaction of demand in Ukraine, diversificationThe budget payments increased by optimizing production costs, lowering prices for the purchase of raw materials and the consequent increase of VAT, dividends and income tax payableIncreased exports, including Turkey, Armenia, Turkmenistan, Georgia and PolandExpanded sales outlets through exportsBoilers reconstructed to substitute the gas with solid fuelThe offers to supply ethyl alcohol, which corresponds to the code of heading 2208, were received from the companies Universal Kemical Ltd, Farmont and SADELONPrime Minister assignment to release the alcohol for export at Rotterdam Platts Rates was received

Production assortment expandedExcessive production capacities redeveloped on the production of goods in demand, i.e. industrial alcohol, raw alcohol, bioethanol (blending agent), technical products.The organization of wet corn storage and processing has significantly reduced the cost of dryingImplemented energy saving measuresThe production of bioethanol and bioethanol-based components was increasedDraft Resolution on raw ethanol production and sale under nomenclature code 2208 was prepared and reviewed at a meeting of the Cabinet of Ministers (currently under revision) The training for specialists of enterprises with the determination of the enzymes activity, which helped to reduce costs by 37% - from UAH 3.95 to 2.5 UAH to the cost of production per 1 deciliter of alcoholThe attracted investors' funds were used at working PAs for mounting of the equipment for the production of wet concentrate, the increase in commodity products totaled 2.5 million in the first half (6.8 thousand tons).The reconstruction of the Voyutychi PA for the production of technical designation was started with the assistance of the funds of the investor - the “OKKO“ company

• Cost reduction per unit of output• The reduction of the gas consumption per unit of

production by 15% in 2016• Production assortment expansion• The increase in production due to start of standing

plants

• The increase in sales both in the domestic and foreign markets by expanding the product range and markets

• Import substitution (technical fluids, solvents)

7

EFFORTS TO IMPROVE TECHNICAL AND ECONOMIC PERFORMANCE OF ENTERPRISES TAKEN EARLY 2015.

8

Financial optimization:

• The debts to suppliers of raw materials repaid by 81%, bank loans repaid in full, which will reduce the financial expenses of the enterprise;

• Financial diagnosis involving financial auditors "big four“ was launched

• Restored accounting data as of 31.12.2014r. after their complete destruction; accounting data and information protection methods implemented; the analysis of accounts receivable is being conducted for the possibility of its recovery;

• It was agreed to provide interest-free loans to consumers of SE "Ukrspyrt";

• The cost of raw material purchases decreased by 20% due to efficient management and creation of competitive commission for the purchase of raw materials and equipment;

• The number of the managerial staff of SE “Ukrspyrt” was decreased by 33%;

• vodka and liquors production was organized in Lutsk PA;

• native stillage sold foe the amount of UAH 968 thousand.

Operational optimization:

• The investment plan developed and approved;

• There is a Resolution of the Cabinet of Ministers of Ukraine on the production and trade of the raw alcohol under nomenclature code 2208;

• shipment of the main faction of ethanol for export and increase in selling price of the main faction, fusel-ester concentrate and fusel oil on the domestic market;

• Increase in production of alcoholic beverages of own production with an increase of their sell-off on the domestic market;

• development of new formulations of alcoholic beverages and packaging design to increase sales;

• contract for the supply of blending agent is signed;

• signed contracts to supply vodka to Nigeria, USA, Georgia, Azerbaijan (the first batch in an amount of 5 thousand. dal).

1міс 2015 2міс 2015 1кв 2015 4міс 2015 5міс 2015 1п/р 20150

1,0002,0003,0004,000

Production of alcoholic beverages by SE “Ukrspyrt”, thousands dal

1m2015 2m2015 3m2015 4m2015 5m2015 1H2015

increased capacity by increasing of the cooling surface at BRU, which reduced the cost of production by 5% organized the production of wet distillery stillage concentrate for cattle breeding needs stream generating machine transferred to alternative solid fuel – peat, that has replaced the gas usage and

reduced the cost by 10%

Stadnytsya PA

The technology of low-temperature cooking, which reduced production costs by 10% by reducing power consumption, was implemented

The stillage heat recovery for brew heating was implemented, which reduced production costs by 10 % by reducing power consumption

The stillage heat recovery for batch heating was implemented, which reduced production costs by 5% by reducing power consumption

organized the production of wet distillery stillage concentrate for cattle breeding needs preparatory work conducted to attract investment funds to transfer boilers to burning of solid fuels (peat,

coal, pellets). Completion is scheduled for Q4 2015.

Zaluchchya PA

prepared permission documents for processing of main fraction of ethyl alcohol (FEA) to technical ethyl alcohol, which makes it possible to solve the problem in the field of FEA sell-off and to reduce the cost of technical ethyl alcohol

started production of denatured ethyl alcohol (technical alcohol for producers of the organic synthesis production)

Prepared permission documents for the processing of confiscated alcohol products to technical ethyl alcohol, which allows to reduce cost of technical ethyl alcohol

Dovzhok PA

Alcohol production for internal needs has started Energy saving measured implemented (increased wart concentration) New kinds of vodka and alcoholic beverages was organized, new design and new formulations were

developed according to traditions of Polissya region; organized the production of wet distillery stillage concentrate for cattle breeding needs preparatory work conducted to attract investment funds to transfer boilers to burning of solid fuels (peat,

coal, pellets)

Lutsk PA

THE MEASURES TO IMPROVE THE PRODUCTION COSTS WITH IMPLEMENTATION SINCE 2015 BEGINNING (1)

9

Production reconstruction was made to produce bioethanol (capacity 6 thousand dal/day) Documents for transition to PA are in preparation The production of wet grain stillage concentrate was organized

Zarubyntsi AF

The technical documentation for the production of technical products under nomenclature code 3820, previously imported, with packing in consume packaging

The project of dehydration mounting with capacity of 1 thousand dal/day for the producing of dehydrated technical production (modern technology of dehydration on molecular sieves)

Thorivka PA

boiler “LOSK“ is commissioned, which makes it possible to improve boiler efficiency, reduce the cost of heat energy and reduce the cost of production by 5%

wet concentrate production scheme was mounted, that made it possible to increase profits by UAH 1.2 million

preparatory work conducted to attract investment funds to transfer boilers to burning of solid fuels (peat, coal, pellets). Completion is scheduled for Q4 2015.

Storonybaby PA

10

On behalf of the Prime Minister on technical purposes production, the reconstruction of Voyutychi PA was started with the assistance of the investor’s funds - the “OKKO“ company. The daily capacity will be 35,000 l/day with packing in consumer packaging from 1 to 10 liters

The technology presumes the processing of sugar- and stratch-containing substancesVoyutychi PA

The completion of preparation of permits for the production and packing of medical ethyl alcohol - new kind of product for the SE "Ukrspyrt", which will allow to engage the factories and earn additional profitsDubovjazivka PA


conversion of enterprises to the production of technical alcohol with the implementation of energy saving technologies for the production of alcohol for export

preparatory work conducted to attract investment funds to transfer boilers to burning of solid fuels (peat, coal, pellets).

Myshkovytsi PA Ivankiv PA

preparatory work conducted to attract investment funds to transfer boilers to burning of solid fuels (peat, coal, pellets). Completion is scheduled for Q4 2015.

The stillage heat recovery for brew heating was implemented, which reduced production costs by reducing power consumption

Novosilka PA

Conversion to the production of raw alcohol under code 2208 for the export with implementation of resource and energy saving

Borok PASukhodillya PA

Zalozhtsi PARava-Rus’ka PA

11


Strutyn PA The enterprise transferred to solid fuel burning – pelets, that made it possible to reduce cost by 10% Wet grain stillage concentrate production was organized

Kobylovoloky PA organized the production of wet distillery stillage concentrate for cattle breeding needs preparatory work conducted to attract investment funds to transfer boilers to burning of solid fuels (peat,

coal, pellets). Completion is scheduled for Q4 2015

Reconstruction of brewrectificating department for the production of alcohol “Lux” sort with elements of heat recovery was performedNemyriv PA

License for bioethanol production was obtained, laboratory accreditation was performed The registration of places for bioethanol storage was performed Equipment overhaul was performed The enterprise was prepared for the bioethanol production with capacity of 4,000 dal/day

Luzhany PA

The enterprise retrofitting with equipment for alcohol production from molasses for export was performed

12


Factory launched for alcohol production Work on stream generating machine transfer to alternative solid fuel, that will allow to replace the gas

usage and reduce the cost by 10%Marylivka PA

Kozliv PABershad PA

Ethyl alcohol production restored Preparatory work conducted to attract investment funds to transfer boilers to burning of solid fuels (peat,

coal, pellets)

Borshiv PA

PLANNED MEASURES TO INCREASE THE COMPETITIVENESS OF SE “UKRSPYRT” (1)

13

1. Expanding the range of production and conversion of standing excessive capacities to produce the production in demand:• bioethanol;• Technical alcohol;• Absolute technical alcohol;• Technical production;• Raw alcohol 2207 code of UCGFEA;• Raw ethanol 2208 code of UCGFEA;• Dry grain stillage.

2. The improvement of technological schemes due to:• Complex raw processing;

• The enameling of inner surface of the fermenting apparatus to improve the quality of equipment disinfection;

• The implementation of plants water recycling;

• To conduct the technology audit of all companies of SE “Ukrspyrt” in 2015 to determine the actual production capacities according to guidelines for the determination of capacity of basic technology equipment of alcohol production, developed by “UkrNDI Spyrtbioprod”

• The installation of the mount for the technical alcohol absolution with capacity of 3,000 dal/day

3. Ensuring of effective control of production and operating activities:• the implementation of a consolidated system of accounting

and operational management accounting;

• system of operational control of production processes at each stage of production and storage of alcohol;

• the implementation of electronic registration of production with data transfer to the State Fiscal Service;

• To provide some PAs with status of branch, which conduct their own purchases according to approved budgets;

• Implementation of operational input control of enzymes activity for quantitative reduction of usage.

4. Implementation of energy saving measures:• transfer of steam generating mounts to alternative fuels

(liquid and solid);• implementation of biogas production from stillage technology

that will allow to receive the biogas with methane concentration up to 75%;

• installation of more efficient burners for combustion of liquid fuels;

• the replacement of energy-intensive engines;• installation of frequency converters;• automation of production processes;• heat recuperation in industrial processes;• reducing production costs through the use of secondary

energy;• the implementation of the technology of brew purification

under vacuum.

PLANNED MEASURES TO INCREASE THE COMPETITIVENESS OF SE “UKRSPYRT” (2)

14

5. Improving the ecological condition of the environment by:

• the organization of wet stillage concentrate and dry distillate stillage production;

• the implementation of the technology of biogas production from stillage;

• the use of stillage centrate for the batch preparation up to 50%, that will allow to reduce the amount of artesian water and correspondently, reduce the emissions to filtration fields up to 50%.

6. Improvement of financial performance by means of:

• reduction of accounts payable by restructuring, partial or full cancellation;

• reduction of accounts receivable by penalties, including by the court;

• increase in sales in the domestic and international markets;

• creation of excise terminal in Illichivsk for the export of technical alcohol to Turkey and the EU countries.

7. Legislative initiatives

• Draft law on establishment of zero excise duty on ethyl alcohol for the production of technical products (washers, solvents), manufacturing perfumes, vinegars is prepared and currently under revision in Ministries and departments;

• Draft law for the establishment of codes in UCGFEA for production containing alcohol is prepared;

• Preparation of the draft law on strengthening of criminal liability for the manufacture and sale of counterfeit products;

• Prepared the bill on cancellation of penalties assessed to preserve the solvency of state enterprise;

• Preparation of amendments Code of Ukraine "On Subsoil" on extraction of groundwater up to 300 m3 per day for production without a special permit for subsoil use.

POSSIBLE RISKS FOR THE SE “UKRSPYRT” AND ALCOHOL INDUSTRY IN WHOLE

15

• Reducing the demand for alcoholic beverages in Ukraine

• Failure of Verkhovna Rada of Ukraine to approve the legislative changes for preferential and zero rate for alcohol products for technical industrial purposes, for the production of perfumes and food vinegar, which will make the price of products uncompetitive

• The importation of counterfeit goods (alcohol and counterfeit vodka) to Ukraine

• Dumping risk at the market of technical fluids

• The lack of legislative regulation of mandatory bioethanol content (blending agent) in engine gasoline with a gradual increase in the proportion up to 10%

• Failure to accept the laws of Ukraine on cancellation penalties and assessed taxes for periods before 31.12.2014r.

• Rising prices for raw, materials, transportation, exchange rate instability will lead to incompetitiveness of the SE "Ukrspyrt" products on foreign markets

• Deterioration of the political and social and economic situation in Ukraine

• Lack of fight against illegal production of goods

• Changes in the codification UCGFEA, such as assigning bioethanol not alcoholic code

• Granting permission to import alcohol

• Market demonopolisation

PROPOSALS FOR INVESTMENTS ATTRACTING FOR ENTERPRISE DEVELOPMENT

16

Objectives of investment plan of SE "Ukrspyrt": :• organization of bioethanol production using the standing exceeding reconstructed facilities of SE "Ukrspyrt";• expanding the range of alcohol products through the organization of production the fluids for flexography,

inks solvents, bioethanol, raw alcohol as a raw material for the production of bioethanol, alcohol-containing fluids of technical and household products, medical alcohol, ether-aldehyde fractions with an increased volume of related impurities;

• a number of preplanned organizational, technical and technological measures, referred to restore the effective work of SE “Ukrspyrt” and full load of excess capacities with the release of a fully competitive and marketable products;

• The replacement of imported products with domestic products;• Boilers reconstruction for burning solid fuels;• Mounting the dryers for production of dry grain stillage.

№ Ways of investments RationaleInvestments needs,

thousand UAH2015

1 Implementation of bioethanol production: Increase in bioethanol production

45 000 Kosari PA 45 000

2 Installation of stream generation boilers working on solid fuel: Substitution of gas

consumption with alternative (solid) fuel

sources

76 000

36 000 Zaluchchya PA Storonybaby PA 16 000 Stadnytsya PA 5 000 Marylivka PA 9 000 Kobylovoloky PA 10 000

The measures of the investment plan, for which the interested investors have already been found for overall amount of UAH 121 million and additional negotiations are

conducted regarding the terms and conditions of their participation in such projects in 2015:

SE “UKRSPYRT” PRODUCTION IN 2014 AND PLAN FOR 2015

17

Production in 2014р., million dal Production plan for 2015, million dal*

11.9

0.2

0.7


Bioethanol


12.8 Million

dal

*after the accession of the enterprises of Concern "Ukrspyrt"

13.5

1.0

1.1

0.9

0.7

0.18

Technical ethyl alcohol

Production in flow

17.38Million

dal


Vodka and alcohol

beverages

Main fraction of ethyl alcohol

Bioethanol

POSSIBILITIES OF BIOETHANOL, TECHNICAL AND RECTIFIED ALCOHOL PRODUCTION (1)

18

5% 7% 10%

170ths.tons

238ths.tons

340ths.tons

USD158

Million

USD222

Million

USD317

Million

Substitution of gasoline import with bioethanol

• Gasoline consumption in Ukraine amounted 4.2 and 3.4 million tons in 2013 and 2014 respectively.

• To run the program of mandatory use of bioethanol the production should be increased from 170 ths. tons (according to current norms of 5% content) to 340 ths. tons (to fulfill the norm of 10% content).

• With the consumption levels equal to 2014 and the norm of 10% bioethanol content the potential import substitution will be USD 317 millions

Required bioethanol production

2013 2014 2015 2016 2017 20180

20406080

100120140160

54.6

21.51.5

106.7124.9

143.1SE “Ukrspyrt” Bioethanol Production Plan, ths.tons

POSSIBILITIES OF BIOETHANOL, TECHNICAL AND RECTIFIED ALCOHOL PRODUCTION (2)

Substitution of technical alcohol import

• SFS uses for the alcohol-containing fluids the excise tax established for alcohol

• As a result, the production of technical alcohol fall to 0.2 millions dal in 2014

• The imports totaled 3.5-5 million dal (Belarus, Moldova, Lithuania, Poland)

• Alcohol plants have the capacity and technological schemes for the production of technical alcohol

• A zero or reduced rate of excise duty will allow to replace imports

19

Sell-off of rectified alcohol

• Unrealized rectified alcohol capacities of SE “Ukrspyrt” in 2015 make up to 12.3 million dal

• The export price on the EU market - about USD 5/dal, the Central Asia market – USD 8/dal

• Potential sales revenue from the rectified alcohol export will be between USD 61.5 million to USD 98.4 million

FUNDS INFLOW TO THE BUDGET

20

Excise tax VAT Allocations for social events

Income tax Dividends0

50

100

150

200

250

300

350

400 In its current state - UAH 541 millionUpon achieving the planned performance indicators - UAH 683 million

(UAH million)

Upon achieving the planned performance by SE "Ukrspyrt" the revenues to budgets of all levels and contributions to the state funds will increase by 26%

KEY FINANCIAL INDICATORS PROVIDED FOR 2015-2017

21

Approved financial plan

for 2015Actual 1st half 2015 Forecast 2015

Diff.Forecast/plan,

%2016 2017

Gross profit 387 240 600 55.01% 711 945% of income 13% 33% 33% 29% 29%

Administrative expenses -220 -77 -220 0.00% -178 -180

Marketing costs -29 -3 -29 0.00% -32 -36Other operational costs -62 -60 -62 0.00% -52 -53

Operational profit 76 101 289 280.13% 449 676% of income 3% 14% 16% 18% 21%

Financial costs -24 -8 -8 -68.70% 0 0Other expenses / Incomes -2 3 7 -467.50% -2 -2Income tax -9 -17 -52 477.47% -71 -108

Net profit 41 79 237 477.47% 375 566 % of income 1% 11% 13% 15% 17%

PRIVATIZATION PLAN (1)

22

Concern “Ukrspyrt”

MOH*

SE “Ukrspyrt”

The elimination of other companies, not transferred to the SE "Ukrspyrt"

SA**

Completion of the transfer of assets

that could potentially be

realized *

Transfer of alcoholic

beverage plant and alcohol plant

Transfer of 2 alcohol plants

Affiliates – producers of

potable alcohol

Affiliates – producers of

technical alcohol

Affiliates – producers of bioethanol

Affiliates – manufacturing

areas

IPC*** - producers of potable alcohol

IPC*** - producers of technical alcohol

IPC*** - producers of bioethanol

IPC*** - manufacturing

areas

Key alcoholic beverages

producers and others

Private owners

Private owners

Private owners

Audit and write off the part of account payableLaw of Ukraine on

privatization of state enterprise "Ukrspyrt"

Sell-off on competitive basis (State Property Fund)

• The estimated cost of 20 state plants - producers of food alcohol – UAH 4.5 billion. The remaining plants may be privatized for about USD 1 billion.

• The gradual decrease in the share of counterfeit alcohol from 33% in 2014 to 9% will result in UAH 10.2 billion of additional tax revenues over four years after the privatization through cooperation with the State Fiscal Service.

• The support of new owners by the prohibition on increase of alcohol production capacity in the industry for a period of 3-5 years. Strict control by public authorities and market participants over the production of illegal alcohol.

Privatization chart

*** Integral property complex* Ministry of Health of Ukraine** State Administration

The estimated revenue of alcoholic beverages producers, UAH billions

2014 1р 2р 3р 4рРоків після реформи

0

0.5

1

1.5

2

2.5

3

3.5

4

0%

5%

10%

15%

20%

25%

30%

35%33%

23%

17%

12%

9%

Акциз ПДВ Доля тіньового ринку, %

+1,4

+2,3

+3,1

+3,5

2012 2013 2014 1р 2р 3р 4рРоків після реформи

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

0.71.6 1.8 2.1 2.4

3.3 2.0

1.1 0.50.4

3.6%

5.0%6.0%

7.0%

8.0%

Виробництво ЛГВ Нелег. спирт Рентаб. виробництва ЛГВ,%


23

Counterfeit alcohol

Years after reform

Production of liqueurs and spirits

Profitability of production of liqueurs and spirits, %

Excise duty VAT Share of counterfeit alcohol at the market, %

Years after reform

1y 2y 3y 4y

1y 2y 3y 4y

Additional tax inflows as a result of reduction of counterfeit alcohol share as compared to 2014,

UAH billions


24

• Creation of a competitive and transparent market in the field of production and sale of alcohol and alcoholic beverages and as a consequence the improvement in the quality of the products and reduce the share of counterfeit goods

• The increase of market operators’ revenues and related tax revenues to budget

• The increase in revenues from state property privatization

• The reduction of state budget costs associated with the need to ensure the control over the activities of state enterprises of alcoholic and alcoholic beverage industry

• The prevention of the privatization of alcohol and alcoholic beverage industry enterprises by people who have no intention to keep productive specialization of these enterprises;

• Withdrawal the production of ethyl alcohol beyond the state monopoly and implementation of competition in this area at the end of a certain "transitional" period.

Expected results

FACTORIES WHICH PRODUCE RECTIFIED ETHYL ALCOHOL

25

Factory

Daily Capacity in 2014,

thousand decalitres

Days/year

Annual capacity, thousand decalitres

Region2015 2016 2017 2018

1 Bershad PA 3.00 305 703.9 915.0 915.0 915.0 Vinnytsya2 Martynivka PA 2.60 305 603.2 Raw alcohol Raw alcohol Raw alcohol Vinnytsya3 Nemyriv PA 8.40 305 2,436.0 2,562.0 2,562.0 Bioethanol Vinnytsya4 Ovechache PA 1.60 305 0.0 Raw alcohol Raw alcohol Raw alcohol Vinnytsya5 Zaluchcha PA 2.00 305 615.0 615.0 615.0 615.0 Ivano-Frankivsk6 Pidgaychyky PA 3.10 305 951.5 945.5 945.5 945.5 Ivano-Frankivsk7 Stadnytsya PA 1.30 305 451.9 451.9 451.9 451.9 Kyiv8 Chervona Sloboda PA 3.62 305 1,049.8 Bioethanol Bioethanol Bioethanol Kyiv9 Velykoliublin PA 2.00 305 0.0 Raw alcohol Raw alcohol Raw alcohol Lviv10 Vuzlove PA 2.70 305 783.0 823.5 823.5 823.5 Lviv11 Storonybaby PA 2.37 305 720.3 722.9 722.9 722.9 Lviv12 Strutyn PA 2.20 305 596.6 671.0 671.0 671.0 Lviv13 Kobylovoloky PA 2.50 305 661.4 762.5 762.5 762.5 Ternopil14 Kozliv PA 4.20 305 1,221.7 1,281.0 1,281.0 1,281.0 Ternopil15 Marylivka PA 7.45 305 2,170.0 2,272.3 Bioethanol Bioethanol Ternopil16 Novosilka PA 3.58 305 927.2 1,091.9 1,091.9 1,091.9 Ternopil17 Lypnyky PA 2.30 305 0.0 701.5 701.5 701.5 Zhytomyr18 Artemivka PA 2.94 305 0.0 0.0 896.7 896.7 Kharkiv19 Karavany PA 4.40 305 15.5 1,342.0 1,342.0 1,342.0 Kharkiv

Total 62.26 5,795 13,907.0 15,158.0 13,782.4 11,220.4

26

Factory


thousand decalitres

Days/year


Region2015 2016 2017 2018

1 Khorostkiv PA 20 300 1,740 6,000 6,000 6,000 Ternopil2 Luzhany PA 3 300 0 900 900 900 Chernivtsi3 Kosari PA 12 300 0 3,600 3,600 3,600 Cerkasy4 Chervona Sloboda PA 12 300 3,600 3,600 3,600 Kyiv5 Marylivka PA 12 300 3,600 3,600 Ternopil6 Nemyriv PA 12 300 3,600 Vinnytsya7 Zarubyntsi AF 6 300 1,800 1,800 1,800 Ternopil8 Gaysyn AF 15 300 4,500 4,500 4,500 Vinnytsya9 Naumivka AF 4 300 1,200 1,200 1,200 Sumy10 Ivashky FA 6 300 1,800 1,800 1,800 Kharkiv11 Chervone FFP 3 300 900 900 900 Житомирська12 Popivka EF 6 300 1,800 1,800 Sumy13 Bar FA 6 300 1,800 Vinnytsya14 Zhovtneve FA 10 300 3,000 3,000 Poltava15 Kamyanka FA 12 300 3,600 3,600 3,600 Cherkasy16 Trostyanets FA 12 300 3,600 3,600 Vinnytsya17 Lokhvytsya FA 4.5 300 1,350 Poltava

Total 155.5 5,100 1,740 27,900 39,900 46,650

FACTORIES WHICH PRODUCE BIOETHANOL(BLENDING AGENT)

FACTORIES WHICH PRODUCE TECHNICAL FLUIDS

27

Factory


thousand decalitres

Days/year


Region2015 2016 2017 2018

1 Thorivka PA 2.1 300 174 642.0 642.0 642.0 Kyiv3 Voyutychi PA 1.5 305 0 448.4 448.4 448.4 Lviv

Total 3.6 605 174 1,090.4 1,090.4 1,090.4

FACTORIES WHICH PRODUCE INDUSTRIAL ALCOHOL

28

Factory


thousand decalitres

Days/year


Region2015 2016 2017 2018

1 Dovzhok PA 3.7 300 1,073 1,110 1,110 1,110 Khmelnytskyi 2 Uladivka AF 3.8 300 0 1,140 1,140 1,140 Vinnytsya3 Myshkovytsi PA 2.4 300 720 720 720 720 Ternopil4 Ivankiv PA 2.0 305 0 0 610 610 Cherkasy5 Borshiv PA 2.8 305 812 854 854 854 Ternopil6 Yurkivtsi AF 1.6 300 480 480 480 480 Vinnytsya7 Andrushchivka AF 4.8 300 1,425 1,425 1,425 1,425 Zhytomyr

Total 21.1 2,110 4,030 5,729 6,339 6,339

FACTORIES WHICH PRODUCE RAW ALCOHOL

29

Factory


thousand decalitres

Days/year


Region2015 2016 2017 2018

1 Kovalivka PA 2.20 300 191.4 660 660 660 Ternopil2 Zalozhtsi PA 2.95 300 256.7 885 885 885 Ternopil3 Myshkovytsi PA 2.40 300 208.8 720 720 720 Ternopil4 Ovechache PA 1.60 300 480 480 480 Vinnytsya5 Velykoliublin PA 2.00 300 600 600 600 Lviv6 Martynivka PA 2.60 300 780 780 780 Vinnytsya7 Chechelnytskyi FA 2.00 300 600 600 600 Vinnytsya8 Zirnenskyi FA 2.25 300 675 675 675 Rivne9 Shpanivskyi FA 2.40 300 720 720 720 Rivne10 SE “Sumyspyrt” 1.69 300 507 507 507 Sumy11 Vashkivskyi FA 1.50 300 450 450 450 Chernivtsi12 Kholmynskyi FA 1.12 300 335 335 335 Chernivtsi

Total 24.71 656.9 7,412 7,412 7,412

FACTORIES, PROPOSED TO ELIMINATE

30

1 SE “Brailiv Juice Factory”2 Kalynivka Experimental Plant on fractionation of oil and fat3 SE “Vinnytsya ” ДП "Вінницький liqueur and spirits factory"4 SE “Trylissya Alcohol Factory”5 SE “Ukrspyrtpostach”6 SE “Trade House “Sivershchyna”7 SE “Novosukhanivka Alcohol Factory”8 SE “Malovyskivka Alcohol Facory”9 Chernivtsi State Regional Association of alcohol and liqueur industry

10 Gnizdychiv state alcohol factory11 SE “Buchach maltose factory” 12 SE “Gannopil alcohol factory” 13 SE “Uman liqueur and spirits factory”14 SE “Karpachiv alcohol factory”15 SE “Ichnya alcohol factory” 16 SE “Kryskivskyi alcohol factory” 17 SE “Shabalynivka alcohol factory”

competitive bid regarding the strategic development plan for the state enterprise “ukrspyrt” for...

Economy & Finance