Ukraine court cancels DTEK 2012 sale of GenCo stake

Kyiv Economic Court ruled on July 30 to cancel the 2012 privatization by energy holding DTEK (DTEKUA) of a 25% stake in power GenCo Dniproenergo (DNEN UK), the Ukrainian News agency reported the same day. In its court claim, the Prosecutor General of Ukraine argued the privatization occurred with violations and the deal brought losses to the state. A month ago, the same court refused to satisfy a similar claim made by private company Biznes-Invest, controlled by tycoon Igor Kolomoisky.

DTEK purchased a 25% stake in Dniproenergo in March 2012 for UAH 1.18 bln (implying a multiple of EV/Capacity of USD 101/kW), the price that had been set by an independent appraiser. An appraisal was needed as DTEK was the only bidder at the Dniproenergo privatization tender held in November 2011.

Dniproenergo, which operated three coal-fired power plants in central Ukraine, is an integral part of DTEK now. In 2014, it generated 16.5 TWh of electricity, 31% of DTEK’s total.

Alexander Paraschiy: In our view, this ruling will be easily overturned by a higher court. It would be hard to prove that Ukraine suffered losses from the 2012 deal, we believe. This ruling looks not only ill-grounded, but it also sets a dangerous precedent for the government launching its latest wave of privatizations. It’s apparent that any Ukrainian asset cannot be priced high currently and any privatization deal is potentially loss-making for the state.

The Prosecutor General’s Office should instead concentrate on another Dniproenergo privatization, which dates back to late 2007. At that time, DTEK affiliates acquired a 29% stake in Dniproenergo (via a dilutive capital increase of the GenCo) for UAH 1.05 bln (or USD 78/kW). That deal was cancelled by Ukraine’s Supreme Court in 2009. If the Prosecutor General indeed wants to question DTEK’s ownership in Dniproenergo, it would be much more straightforward to start with that case.