Government Developing Conditions for Privatization of GenCos

According to the Deputy Minister of Fuel and Energy Serhiy Luchnikov, his ministry will prepare conditions for the privatization of stakes in Ukrainian power generation companies and present them to the Cabinet of Ministers by April 8, 2008. Alexander Paraschiy: Ten months ago, the Fuel and Energy Ministry worked out a conception on the privatization of fuel and energy companies (refer to out note of May 29, 2007), but the conception was not approved by the previous government. The key reason, in our view, was the absence of consensus on the distribution of privatization proceeds: the Ministry proposed to redirect 50% to the energy companies, while the Ministry of Finance wanted to direct more to the budget. With the current government, approval of the documents seems to be even harder if the Fuel Ministry insists on reinvestment of the proceeds. The state can raise more than USD 5 bln by privatizing all GenCos, which is more than 10% of this year’s state budget spending – definitely a large temptation for a social-oriented government. We do not expect approval of the GenCos’ privatization plan in 2008.