DTEK purchases two Ukrainian power DisCos from Russians

Ukraine’s biggest energy and utility holding DTEK
announced on Jan. 4 that its subsidiaries signed an agreement to acquire a
94.0% stake in power DisCo Kyivoblenergo and a 68.3% stake in power DisCo
Odesaoblenergo (ODEN UK).

The acquirers are DTEK Oil&Gas LLC and NGR B.V.,
companies that belong to DTEK Group, but are not consolidated by the group’s
Eurobond issuer DTEK Energy (DTEKUA). The deal’s value was not announced.

Currently, the controlling stakes in Kyivoblenergo and
Odesaoblenergo are held by VS Energy Group, which controls five other power
DisCos in Ukraine. VS Energy purchased a 89% stake in
Kyivoblenergo from U.S.-based AES Corp. (AES US)
in 2013 and acquired a 35% stake in Odesaoblenergo at a privatization tender in
1998.

VS Energy is controlled by a group of Russian
investors that includes Aleksandr Babakov, a member of the upper house of the
Russian parliament who has been included in the sanctions lists of the U.S. and
EU for his involvement in Russian aggression against Ukraine.

Alexander Paraschiy:
Kyivoblenergo and Odesaoblenergo are VS Energy’s biggest distribution assets
(54% of the group’s total power distributed in 11M18) and among Ukraine’s
biggest power DisCos (ranked 6th and 7th by energy transmitted out of 33
total). Their divestment by VS Energy implies the group has decided to
significantly scale down its exposure to Ukraine, or even leave the country,
which looks logical taking into account the political risks that this group
faces in Ukraine now.

Once the acquisition is completed, DTEK Group will
boost its total share in Ukraine’s power distribution to about 46% from 36%
currently. The deal will have no positive impact on DTEK Energy (which
officially divested all its power DisCos in late 2018) and its Eurobonds, and may even have
a negative impact, as DTEK Oil&Gas is among the biggest debtors of DTEK
Energy.