GenCo and Oblenergo stakes to be transferred for privatization, decree

The Cabinet of Ministers asked the National Energy Company of Ukraine (NC ECU) to transfer its stakes in three electricity generation companies (GenCos) and eight electricity distribution companies (Oblenergos) to the State Property Fund for subsequent privatization, Yuriy Boyko, minister of Energy and Coal Industry said yesterday, citing a decree approved at a Cabinet meeting. On April 13, the Cabinet included those stakes on this year’s privatization schedule: 25% of Dniproenergo (UX: DNEN UK), 45.1% of Zakhidenergo (UX: ZAEN UK) and 25% of Kyivenergo (UX: KIEN UK). The government is planning to retain 25% stakes in all three GenCos. In the electricity distribution segment the list includes 50% of Vinnytsyaoblenergo (UX: VIEN UK), Dniprooblenergo (UX: DNON UK), and Zakarpatoblenergo (UX: ZOEN UK); 45% of Krymenergo (UX: KREN UK) and Chernivtsioblenergo (UX: CHEN UK); 40% of Donetskoblenergo (UX: DOON UK) and 26% of Ternopiloblenergo (UX: TOEN UK). Yegor Samusenko: This step precedes the two final steps before privatization: an optional independent valuation of the value of these stakes in order to determine the starting price and the official publication announcing the privatization auction (posted 75 days before the auction). We do not expect independent valuation of these stakes as we believe the state is eager to complete the sale this year. Thus, the first auction announcement could come as early as next Wednesday or the week after, implying an auction date of early August. We stick to our view that both Zakhidenergo and Dniproenergo will be auctioned this year while Kyivenergo`s privatization could lag due to uncertainty regarding its lease/concession of its heating and generation assets. As only DTEK, a minority shareholder in all three companies has showed interest in those stakes, we anticipate a high likelihood of privatization taking place close to the starting price. We expect some downside pressure on the stock prices in the short term, as market prices have been used in the past as a reference for determining auction starting prices.