Dniproenergo starting privatization price set at +19% to market

The Cabinet of Ministers approved conditions for the privatization of a 25% stake in Dniproenergo (DNEN UK) and 40.06% stake in Donetskoblenergo (DOON UK) in a decree signed on November 2, which became public yesterday. The starting price for the Dniproenergo stake was announced at UAH 1,174 bln (UAH 787 per share, 19% premium to the market), and for the Donetskoblenergo stake at UAH 0.45 bln (UAH 17.1 per share). The requirements for bidders are identical to planned privatization auctions for Zakhidenergo (ZAEN UK) and Kyivenergo (KIEN UK). The State Property Fund has yet to make an official announcement of the auction and date, but this is usually done the Wednesday following the release of a relevant decree from the Cabinet. On Monday, an SPF spokesperson estimated the auction would take place on December 30, 2011. Yegor Samusenko: Both companies are of interest to DTEK (DTEKUA), the largest private energy holding in Ukraine, which already has operational control over both companies. We expect little competition from other bidders because only non-controlling stakes are being offered the only company that can increase its stake to controlling via privatization is DTEK (it already holds 47.5% of Dniproenergo and 30% of Donetskoblenergo). Our view is that following privatization, most minorities will accept a buyout offer from DTEK (which must be announced if a majority shareholder changes), and as result liquidity would decrease from currently low levels to almost zero.