Cabinet To Integrate Coal and Energy Companies?

According to the daily Kommesrant, the Cabinet is considering combining state-controlled coal and energy assets into the Ukrainian Fuel and Energy Concern to increase the efficiency of the sector. Two scenarios are being considered: creation of a nation-wide state holding, or separate regional holdings that would combine coal producers, power generators and power suppliers. Alexander Paraschiy: Copying the structure of the vertically integrated private Donbas Fuel and Energy Company (DTEK), on a nation-wide level, under state control, will hardly benefit any of the companies that might be included, except to decrease some transaction costs. Moreover, this contradicts the reform plans of the wholesale energy market, as it will lead to monopolization in the sector. For example, Russia’s reform in the energy sector lead to the separation of generation, distribution and supply businesses and increased competition. We believe the government’s idea has little chance to be realized. The only part of this idea that might be implemented is the integration of small coal mines in Western Ukraine with the generation company Zakhidenergo (ZAEN: HOLD) – this plan has been under consideration for a couple of years.