Donetskoblenergo Seeks to Restructure Debt Over 47 years

Power distributor Donetskoblenergo (DOON: N/R) has asked the Council of the Wholesale Energy Market (CWEM) to approve restructuring the company’s debt over 47 years (with a two-year grace period). With total payables of USD 0.85 bln, Donetskoblenergo wants to restructure USD 0.73 bln, which implies an annual repayment of USD 13 mln. The company is also asking for a corresponding increase in tariffs so that it will be able to generate annual profit equal to its annual payment. Alexander Paraschiy: It is not clear at the moment, who is initiating Donetskoblenergo’s proposal for debt restructuring. If the initiator was DTEK (the company highly interested in taking over the company), then this restructuring plan has a good chance to be approved because DTEK has lobbying power in the CWEM. Though, it barely relates with DTEK’s strategy to accumulate Ukrainian energy assets at the cheapest price: in the event of debt restructuring, Donetskoblenergo’s privatization price will grow significantly. If the initiators were not related to DTEK, restructuring has little chance to be approved. Still, if approved, the debt restructuring might set a positive precedent for other Oblenergos burdened with debt.