Ukraine sets USD 73 mln starting price for Kharkivoblenergo

Ukraine’s privatization agency, the State Property Fund (SPF), has finalized the privatization conditions for one of the largest Ukrainain power DisCos, Kharkivoblenergo (HAON UK), First Deputy Economy Minister Yulia Kovaliv reported on social media on Aug. 5. The starting price of the state’s 65% stake in the company has been set at about USD 73 mln (or about UAH 1.81 bln), she said.

Kharkivoblenergo reported net revenue of UAH 4.94 bln and EBITDA of UAH 0.31 bln in 2015. It had no debt outstanding and had UAH 9 mln in cash as of end-2015. The starting price, therefore, implies the 2015 EV/EBITDA multiple of 8.9x.

Alexander Paraschiy: An EBITDA multiple of 9x-10x looks fair for Ukrainian power DisCos, while we expect the final price at the privatization tender for Kharkivoblenergo could be much higher. The company operates in one of the most industrialized regions of Ukraine and has the cleanest balance sheet among the biggest companies on the 2016 privatization list. On top of that, a pending reform of the Ukrainian power distribution sector, aimed at implementing the regulatory asset base (RAB) approach in price-setting for companies, will uncover a large value growth potential in the asset. This potential is well-known to Ukrainian tycoons, who seem to be the main candidates in acquiring the company. All in all, Kharkivoblenergo is an excellent candidate to become a privatization star in 2016.