Centrenergo bankruptcy cancelation upheld by appellate court

An appellate court in Kyiv has upheld a first-tier
court ruling to cancel the bankruptcy procedure of Centrenergo (CEEN UK), the
Interfax-Ukraine news agency reported on Oct. 15. The bankruptcy case was
opened in 2004, but in August 2019 a local court cancelled it at the request of
the State Property Fund. Commenting on the latest ruling, the fund’s head
Dmytro Sennychenko said it paves the way for Centrenergo’s privatization.

In other news, Centrenergo reported last week that its
management decided it will sell 90% of produced electricity on the day-ahead
market since November. Most of the electricity that the company produced in
September was sold under bilateral contracts, local media reported.

Alexander Paraschiy: Both
developments are positive for Centrenergo’s investment case. Selling
electricity on a transparent day-ahead market will allow the company to achieve
better electricity price, as well as to decrease corruption risks by selling
power at a discounted price on the less-transparent segment of bilateral
contracts. This should improve the company’s profitability in 4Q19, but
nevertheless is unlikely to enable it to finish the year in the black.

Closing the long-lasting bankruptcy procedure
indeed reduces Centrenergo risks, thereby making the company more attractive
for potential strategic investors. In turn, this increases the chance the
company will be put up for privatization. We look forward to hearing any
concrete plans for the company’s privatization, but so far remain skeptical
about its completion in the mid-term.