Ukraine cabinet plans privatization of Centrenergo, Odesa Portside

Ukraine’s Cabinet of Ministers has included the privatization of power GenCo Cenrtrenergo (CEEN UK) and fertilizer producer Odesa Portside in its priority plan for 2017, Interfax-Ukraine reported on April 24, citing Cabinet’s resolution adopted on April 3. The privatization list also includes stakes in power DisCos Mykolayivoblenergo, Ternopiloblenergo (TOEN UK), Khmelnytskoblenergo (HMON UK), Kharkivoblenergo (HAON UK) and Zaporizhiaoblenergo (ZAON UK). Privatization is scheduled for 2Q17-3Q17. The sale of these sites will take place “to fulfil the memorandum with the IMF,” the plan said.

In the Ukrainian government’s memorandum with the IMF, published on April 4, Ukraine committed itself to privatizing Odesa Portside in 2Q17, as well as Centrenergo, some power distribution companies (with no explicit list) and power engineering company Turboatom (TATM UK) in 3Q17.

Alexander Paraschiy: The government’s privatization plan does not fully correspond to what was committed in the signed IMF memorandum. Namely, it doesn’t include Turboatom’s sale (committed to the IMF), while the list of power DisCos is incomplete (with state-controlled Cherkasyoblenergo omitted). We do not know whether this is intentional sabotage, a lack of coordination between those preparing the memorandum and cabinet plan, or just carelessness. In any scenario, we do not believe the government will be able to meet the listed deadlines. Moreover, we do not believe it’s a good time to offer controlling stakes in power distribution companies now, ahead of a possible reform for DisCos that may significantly increase their value.