Ukraine cancels Centrenergo privatization tender

Ukraine’s State Property Fund reported on Dec. 11 that
a privatization tender of a 78.3% stake in power GenCo Centrenergo (CEEN UK)
will not be held on Dec. 13. Only two contenders have signed up for the tender
(deadline was Dec. 5), including Ukraine-based Ukrdoninvest and Belarusian
Neftebitum Plant, according to the fund’s head, Vitaliy Trubarov. He stated
that both contenders were disqualified as they supplied incomplete packages of
documents, thus having breached the rules of the privatization tender.

Recall, the government was planning to hold a
privatization tender for Centrenergo on Dec. 13, with the starting price set at
UAH 5.98 bln (about USD 215 mln). In late November, five companies officially declared their potential interest
in participating. At least two participants had to officially register,
including at least one foreign competitor, according to the tender rules.

Alexander Paraschiy: The
cancellation is in line with our expectation that the probability of successful
tender is no more than 50%. Unfortunately for the government, both making a
tender with the two above-listed participants, and its cancellation, are
damaging to Ukraine’s image.

In particular, the reputation of Ukrdoninvest and its
beneficiary owner, Vitaliy Kropachev, is poor, having been widely identified by
media and experts as representing the interests of the Poroshenko entourage.
Therefore, the presence of only two contenders (with one being a clear
outsider) prompts observers to claim the privatization tender had been tailored
to serve the interests of Ukraine’s power brokers.  The failure of the
long-expected privatization looks also negative, but we believe the fund acted
wisely in pre-empting this losing situation.

In any case, it looks like privatization on any
sizable asset won’t happen under a Poroshenko presidency, which was not the
case for his two predecessors.