Government approves sale of six oblenergos

Ukraine’s Cabinet of Ministers approved the privatization of the state’s stakes in six power distribution companies (obleneregos), according to a Feb. 19 press release. The Cabinet has reportedly decided to sell all the state’s stakes in the companies. As we understood the government’s release, the list includes a 60.25% stake in Zaporizhiaoblenergo (ZAON UK), a 60.1% stake in Kharkivoblenergo (HAON UK), a 60% stake in Khmelnytskoblenergo (HMON UK), a 50% stake in Ternopiloblenergo (TOEN UK), a 46% stake in Cherkasyoblenergo (CHON UK) and a 51% stake in unlisted Mykolayivoblenergo.

Alexander Paraschiy: The government resolution is in line with State Property Fund (SPF) privatization plans in the electricity sector for 2013, but it is clearly incomplete. For instance, it’s not clear why the government did not decide anything on the most interesting stories – state GenCos Centerenergo and Donbasenergo. Even if its announced 2013 plans are fully met, the government would still keep 25% stakes in seven power distribution companies. In addition, the future of the state’s 25% portions in GenCos Zakhidenergo (ZAEN) and Dniproenergo (DNEN) is also unclear.

The market value of the six announced oblenergo stakes is about UAH 0.6 bln, which is far below the SPF’s target of raising up to UAH 2 bln from the sale of power distribution companies in 2013. Theoretically, we might see a real competition in the sale of the stakes in two big companies (ZAON and HAON) that potentially would allow the government to raise up to UAH 1 bln. Certainly, much will depend on the tender rules, which were not encouraging last year. The cumulative proceeds from the other four stakes are unlikely to exceed UAH 200 mln, in our view.