Ukraine cancels privatization of 25% stake in two power DisCos

Ukraine’s State Property Fund decided to cancel
privatization auctions of 25% stakes in power DisCos Odesaoblenergo (ODEN UK)
and Sumyoblenergo (SOEN UZ), Interfax-Ukraine reported on Mar. 19, citing its
sources in the fund. The reasoning for cancellation is the fund’s intention to
sell the stakes in full accordance of the newly adopted law on privatization of
state property. Cancellation of Odesaoblenergo auction was confirmed by the
Ukrainian Exchange on Mar. 20.

The privatization auction of Odesaoblenergo was
scheduled for Mar. 20 with a starting price for the 25% stake being UAH 149 mln
(or 76% discount to the starting price at the failed August 2017 auction). The
Sumyoblenergo auction was scheduled for Mar. 30 with the 25% stake’s price of
UAH 106 mln (71% discount to the August price).

Alexander Paraschiy: This is a wise move by the fund that will prevent accusations that it
inflicted economic damage to the state. In particular, assuming the companies
will shift to RAB-based regulations, the government will be able to generate
much more in annual dividends than it can earn from the sale of the state
stakes at the starting price. In case the companies will shift to RAB
regulation and pay 50% of their regulated profit in dividends, the fund will
receive annually over UAH 200 mln in dividends from its stake in Odesaoblenergo
and over UAH 170 mln from Sumyoblenergo. Clearly, it is not a good idea to sell
any stakes in power DisCos before clarity emerges about their shift to RAB
regulation.