SPF Proposes Selling Small Oblenergo Stakes.

Valentina Semenyuk, chairwoman of the State Property Fund, said she had formally proposed to the Cabinet a plan to sell “small” stakes in several regional electricity distribution companies (Oblenergos) in order to fulfill the privatization plan for 2006 and fill the state budget. Semenyuk said only stakes in Oblenergos where the state had control would be offered, if the Cabinet endorses the plan. Alexander Paraschiy: The state controls 60.06% to 75% stakes in 12 Oblenergos. Since a 60% stake is enough to make most decisions and a 75% stake gives complete control, the SPF is likely to sell down its stakes that are already less than 75% while ensuring that none of its stakes are reduced to less than 60%, in order not to lose influence over the companies. However, since all the stakes are included in the charter fund of the National Energy Company of Ukraine (NC ECU), any sales of state stakes should be preceded by a change in the NC ECU charter, which could be a long process. Thus, it would not be easy to sell the stakes before the end of the year. Moreover, this is not the best time to sell electricity companies: high indebtedness and over-regulation, which are both expected to change soon, significantly decreases Oblenergos’ values. In our opinion, it would be more efficient to sell the state’s 25-27% stakes in five Oblenergos where there are conflicts among the private shareholders (see our Oblenergo report of Dec. 15, 2005). The state would not lose any influence over those companies, as it already has none, and the conflicting parties would be ready to pay significant premiums for the state’s stakes.