Oblenergo blocks to hit auction block this summer; controlling stakes starting 4Q10

The State Property Fund intends to put its ~25% stakes in four privately-controlled Oblenergos (Poltava, Prykarpattya, Sumy and Odesa) back up for sale on local stock exchanges this summer, SPF head Oleksandr Ryabchenko said at a press conference yesterday. Ryabchenko said the SPF will accept bids for the full stakes and accept the highest bid. However, if there are no such bids; it will simultaneously accept bids for 1-5% stakes and auction those small packets off.  Ryabchenko also said the SPF is planning to sell a controlling stake in 15 Oblenergos each quarter beginning in 4Q10. Yegor Samusenko: We think at least three of the four 25% Oblenergo stakes will be sold this summer and recommend portfolio investors look at Poltavaoblenergo (UX: POON UK) and Sumyoblenergo (UX: SOEN UK), where the announced starting prices promise fat 65%-75% upsides, reasonably compensating for regulatory risks. As with GenCos, we believe the privatization of controlling stakes in Oblenergos can only be successful given strong commitment to sector reform. We see little logic in currently announced desire to sell one Oblenergo per quarter and expect the SPF to reveal its more detailed plans for these Oblenergo stakes in 2H10.