Ukraine sets starting price for 75% stake in Volynoblenergo

Ukraine’s Cabinet of Ministers approved the privatization conditions for the state’s 75% stake in power DisCo Volynoblenergo (VOEN UK), the Interfax-Ukraine news agency reported on November 22. The qualifying condition for those eligible to buy the company remained broadly the same as with utility companies sold in 2012 and 2013: over the last three years, tender participants should have to distribute at least 30% of the power that Volynoblenergo did (about 1.5 TWh p.a.). The state set the starting price at UAH 456 mln.

Alexander Paraschiy: The starting price for Volynoblenergo’s stake is something high above the market reality. For instance, the implied MCap of the Volynoblenergo offer (UAH 608 mln, or USD 74 mln) implies 2012 EV/Sales at 0.85x and EV/EBITDA at 17.0x. The last market deal in the sector, the sale of two DisCos by AES to VS Energy (the two companies combined are 5x larger than VOEN in sales), was done at a total price of USD 113 mln, implying 2012 EV/Sales of 0.3x and EV/EBITDA of 3.7x. The latest privatized company, Krymenergo, was sold last year at 2012 multiples: EV/Sales of 0.4x and EV/EBITDA of 3.7x. That said, we see a high chance that a tender for Volynoblenergo will fail this year, and the State Property Fund will have to offer some discounts to sell the stake later.