DTEK acquires largest Ukrainian Oblenergo for USD 82 mln

DTEK (DTEKUA) won yesterday’s privatization auction for a 50% stake in Dniprooblenergo (DNON UK). It offered UAH 660 mln for the stake (UAH 220/share, within the market spread), 10% above the auction’s starting price. As with previous privatization auctions of power distribution companies, DTEK’s only competitor was LEO, which is related to businessman Konstantin Grigorishyn. Dniproenergo is the largest Ukrainian power distribution company, accounting for 14% of Ukrainian power distribution and supply (purchased 24 TWh from the wholesale market) in 2011. By size, the company’s power distribution is comparable to the entire Slovak Republic.

Alexander Paraschiy: Now that DTEK has purchased control of Dniprooblenergo, it controls the four largest power distribution companies in Ukraine (of 28 total) and accounts for more than 30% of Ukraine’s power retail market. Despite low competition at the auction, we regard Dniprooblenergo’s auction price as high: P/E 2011 is 31x, and EV/EBITDA (adjusted for UAH 1.7 bln in debt to Energorynok) is 8.9x (4.0x unadjusted).