KIEV, July 21 - Ukraine could lower the reserve price in the privatization of a fertilizer plant, the head of the State Property Fund said, after an initial auction was cancelled due to a lack of bidders, Reuters reported.

Odessa Portside Plant (OPZ) is meant to be the star lot in a long-delayed privatization drive, which is a test of the Western-backed government's ability to attract vital foreign investment, but the July sale did not attract a single buyer partly due to a starting price above $500 million.

State Property Fund chief Igor Bilous said he hoped the auction would be rescheduled for the autumn and suggested some compromise could be found on price.

"We need to find an adequate starting price, which suits the majority of the investors," he said in a briefing.

"We believe the fair price for this business really is $500 million, or even more ... Some believe that it's worth $700 million, others $300 million or $150 million because there are many risks in Ukraine," he said.

In June, the International Monetary Fund and European Bank for Reconstruction and Development warned the government that OPZ's valuation process fell short of international standards and risked damaging Ukraine's image.

Foreign participation in the sale would be a welcome vote of confidence in Ukraine in the wake of more than two years of economic crisis and conflict following a pro-European uprising that swept a Russian-backed president from power.

It would also allay fears that the privatization of state-run firms could strengthen the control of Ukraine's powerful oligarchs over strategic industries.

On Monday, the State Property Fund said potential investors in OPZ had been put off by the starting price, as well as by the company's debt, a lack of tax incentives and currency controls relating to the repatriation of dividends.

"Of course, we have to admit that this privatization did not succeed ... (But) I will continue to argue that the sale of OPZ will take place and it will be the flagship privatization in Ukraine. I'm prepared to bet on it," Bilous said. (rt/ez)