Court Finds Luganskteplovoz Privatization Illegal.

The Kyiv Economic Appeals Court ruled in favor of an appeal by the Proscutor Gernal’s Office (PGO) which claimed the company’s privatization was illegal. The state put a 76% stake in Luganskteplovoz (LTPL), Ukraine’s monopoly producer of locomotives, up for sale in 2001. AvtoKrAZ (KRAZ: BUY) was the only bidder, but the State Property Fund refused to register it as the winner, and claimed that AvtoKrAZ did not qualify as industrial investor. During its investigation the PGO found several violations how the privatization was carried out. Concorde Capital: The court’s ruling on the legality of LTPL’s privatization is bad news for AvtoKrAZ, as it supersedes those of the other courts, which earlier acknowledged KRAZ as the winner of the tender. AvtoKrAZ is interested in Luganskteplovoz as it intends to include it in its machine-building holding, which will consolidate AvtoKrAZ, Stakhanivsky Carriage Building, Zaliv Ship Building, Kyivsky Ship Building and Repair, Uzhgorodsky Turbogaz and Berdychivsky Progres. The structure of the holding is to be decided in 1Q06. In the related news, the Lugansk Oblast authorities have voiced support for the privatization of Luganskteplovoz, and have stated that investments are necessary to decrease the company’s energy consumption. However, the authorities have said nothing in support of AvtoKrAZ, noting only that Transmashholding (Russia) and a Canadian company (allegedly, Bombardier) have expressed interest in LTPL.