Tigipko government to earn UAH 10 bln from privatization

Sergiy Tigipko, a vice-prime minister, said yesterday at an investment conference in Kyiv that the government’s budget draft envisions earning UAH 10 bln via privatization this year, vs. UAH 900 mln in 2009. Tigipko said objects to be sold include power generation and distribution assets, machine building plants such as Luhanskteplovoz (UX: LTPL UK) and Ukrtelecom (UX: UTLM UK).  Yegor Samusenko: We remain cautious on political announcements about the privatization of GenCos and Ukrtelecom, because they have been floated at various points already for the last ten years. However, we note three fundamental factors that favor privatization in late 2010-2011: 1) the ~5% budget deficit in 2010E is second highest in the last decade and motivates government to increase proceeds from privatization; 2) the absence of political opposition to the privatization of GenCos: contrary to 2006-2007 attempts which were thwarted by President Viktor Yushchenko; and 3) the lack of state funding to finance the modernization of GenCos (privatization is an attractive way to attract funding for this). We note that both GenCos and Ukrtelecom require 6-18 months of preparation for privatization even with strong government will to privatize these entities, while Luhanskteplovoz’ sale could take place as soon as June 2010, and Oblenergos could go up for sale in 2H10.