The Debt Offsetting Process Begins For The Energy Sector.

Dniprooblenergo (DNON: HOLD), Zaporizhiaoblenergo (ZAON: SELL), Centrenergo (CEEN: BUY), Dniproenergo (DNEN: BUY), Energoatom (enat) and the Wholesale Energy Market Operator (WEMO), along with the coal mine Pavlogradvugillia signed four agreements on mutual debt write offs:

USD 0.35 mln will be mutually written off between: DNON – WEMO – enat – DNON.

This means first DNON pays USD 0.35 mln (to repay part of its debt) to WEMO, then WEMO pays enat, which in return pays DNON, as a result each of the companies decreases both payables and receivables by an equal amount – USD 0.35 mln.

USD 1.59 mln – between DNON – WEMO – CEEN – DNON

USD 0.99 mln – between ZAON – WEMO – DNEN – ZAON

USD 0.26 mln – between DNEN – Pavlogradvugillia – DNON – WEMO – DNEN

Concorde Capital: As a result of these mutual debt repayments:

DNON will decrease its payables and receivables by USD 2.2 mln

ZAON – by USD 0.99 mln

DNEN – by USD 1.25 mln

CEEN – by USD 1.59 mln

Although the amounts to be written off are less than 1% of the debts the companies need to offset, such contracts are the first steps of the first stage of energy sector’s debt problem solving, which was launched by the Parliament back in June 2005 (See our Energy reports from September and December of 2005 for details on the process). We expect the process of debt offsetting to accelerate in the nearest future.