KIEV A second attempt to auction Ukraine's state-owned Odessa Portside Plant failed to attract any bids, the State Property Fund said on Wednesday - a major setback for the country's Western-backed push for privatization and reform.
The Black Sea fertilizer plant was meant to be the first big privatization since a 2014 uprising brought in a pro-Western leadership and to prove the government can modernize the economy and tackle entrenched graft.
Ukraine is already struggling to convince its international backers, which include the International Monetary Fund and Western powers, that it has the political will and competence to bring meaningful change to the ex-Soviet country.
The first attempt to sell the Odessa plant in July failed amid warnings from international donors that the government's handling of the sale was deterring credible Western bidders.
The government dropped the floor bidding price by more than half to around $200 million in the latest attempt to sell the plant but still failed to draw any offers.
"Unfortunately no bids were received from potential investors to participate in the auction, although around 10 potential buyers had shown interest in the company," the fund said in a statement.
Analysts said investors were deterred in part by the plant's debt of over $200 million owed to exiled tycoon Dmytro Firtash and an ownership dispute with a Ukrainian group controlled by billionaire Ihor Kolomoisky.
"There's the risk that after (the sale) it would all have to be sorted out in the courts," said Andrei Bespyatov, chief analyst at Ukrainian investment bank Dragon Capital.
The continued influence of powerful vested interests in politics and business, and weak rule of law, are repeatedly cited as key obstacles on Ukraine's path to reform.
Prime Minister Volodymyr Groysman blamed the State Property Fund on Wednesday for the failed sale, saying its handling of the privatization was "mediocre" and the latest results proved the fund was not capable of managing it.
Other planned sales of state-owned firms, including thermal energy company Centrenergo, have been postponed repeatedly, prompting investors to question the authorities' commitment to selling valuable but cash-strapped state assets.
Sevki Acuner, Ukraine director for the European Bank for Reconstruction and Development, told Reuters that Ukraine needed to focus on better preparing state companies for sale.
The lack of privatization revenue has been an extra drag on the state budget. Selling state firms is not an explicit condition of Ukraine's $17.5 billion aid program from the International Monetary Fund, but forms part of the fiscal rebalancing the IMF requires.
(Editing by Matthias Williams/Ruth Pitchford/Susan Fenton)