Ukraine court reaffirms DTEK’s claim to Dniproenergo stake

The Kyiv Appellate Economic Court ruled on Oct. 22 to cancel the ruling of the Kyiv Economic Court that declared invalid the privatization of a 25% stake in power GenCo Dniproenergo in March 2012, which was won by power giant DTEK (DTEKUA). The ruling was made public on Oct. 28 to the Ukrainian media. Recall, DTEK was the only bidder at privatization tender convened in November 2011. According to single-bidder rules, the stake was evaluated by an independent appraiser at UAH 1.18 bln (about USD 100 per kW of installed coal-fired capacity) and sold at that price to DTEK in March 2012. On June 30, 2015, a Kyiv court satisfied a request by Prosecutor General to cancel that deal.

The Appellate Court recognized that the privatization process was convened in accordance with Ukrainian legislation and no arguments were offered by prosecutors that the privatization price was too low. The latest court ruling could be questioned in a higher court.

Alexander Paraschiy: Although it’s clearly not the final chapter in this story, we remain confident that DTEK’s position in this case is much stronger than the complaint originally filed by the state to cancel the sale. We agree that the conditions of the latest Dniproenergo privatization tender didn’t allow for open competition. But had they been different, that wouldn’t have changed neither the list of bidders nor the price of Dniproenergo’s stake, in our view. If no political pressure is placed on a higher court from the president’s entourage, DTEK’s ultimate victory in this case looks unavoidable.

At the same time, DTEK’s control of Dnirpoenergo does not look secure. In particular, there was another, much more flagrant, privatization of Dniproenergo by DTEK in late 2007. That deal, which resulted in the effective increase of DTEK’s stake in Dniproenergo by 29%, was even cancelled by Ukraine’s Supreme Court in 2009. But that court ruling wasn’t executed, for some reason that was likely the result of backroom deals. If the prosecutors were sincere in their attempt to return Dniproenergo to the state, instead of acting out made-for-television scripts, they would have started with this older case, we believe.