Ukraine prosecutors question validity of DTEK-Dniproenergo privatization

8 апреля 2015 года
Конкорд Капитал

Днепрэнерго (DNEN), Донбассэнерго (DOEN)

The Prosecutor General’s Office (PGO) of Ukraine filed a lawsuit on Apr. 3 to question the validity of the privatization of power GenCo Dniproenergo (DNEN UK) and power DisCo Zakarpatoblenergo (ZOEN UK), the office reported via a press-release on Apr. 7. According to the release, a court is also considering the general prosecutor’s petition to cancel the results of the privatization of Donbasenergo (DOEN UK). It is possible that the PGO is referring to the claim filed in February 2014. The PGO comments that the invalidation of privatization results will allow the re-privatization of companies at higher price, possibly with the involvement of international investors.

The PGO grounds its claim on the unfair conditions at privatization tenders which have limited a circle of potential buyers and led to the absence of competition at the auctions. That undermined the key goal of State Privatization Program, which, according to the PGO, was the maximization of economic effects from the sale of state property.

To point out the inefficiency of privatization tenders, the PGO recalled that the selling price of Zakarpatoblenergo (at a February 2012 tender, when a 50% stake was sold for UAH 141 mln) was just 4% higher than the starting price of the stake. At the same time, the selling price of Dniproenergo (when a 25% stake was sold to DTEK in March 2013) was just 0.48% higher than the starting price.

Dniproenergo is one of the biggest assets of DTEK (DTEKUA) with a 32% share in the holding’s total electricity generation in 2014.

Alexander Paraschiy: This news could be seen as deeply negative to DTEK, but, we believe, not this time. With such “arguments” the PGO has little chance to succeed in questioning the chosen privatization tenders. The fact that something was sold with “too little” premium at the starting price (the price that’s too subjective, by itself) is a very poor argument. Moreover, in the case of Dniproenergo, there was no tender at all – the deal price was defined by an independent appraiser. On top of that, it is not clear why the PGO limited its list of questionable tenders to only the above mentioned companies. For some reason, the prosecutors forgot to include DTEK-Zakhidenergo (ZAEN UK) and Ukrtelecom (UTLM UK) which were privatized under Dnirpoenergo’s scenario; or Vinnitsaoblenergo (VIEN UK) which was privatized on the same day, under the same conditions, and with the same “premium to the starting price” as Zakarpatoblenergo.

All in all, we agree that the privatization tenders’ conditions for Donbasenergo, Dniproenergo and Zakhidenergo were discriminative and that they limited the number of tender participants. But it does not necessarily mean that with the other tender conditions we would have seen radically different privatization results at the time. Moreover, given the current risks that now exist in the Ukrainian energy sector, Ukraine not necessarily will be able to sell the questioned companies at a better price at possibly new tenders.

Needless to say, such initiatives of the Prosecutor General’s Office might undermine the Ukrainian government’s privatization plans for 2015. Prices of Ukrainian assets, given all the geopolitical risks, cannot be high this year, so any privatization tender winner might face a risk of revision of tender results in the future.

Источник: Конкорд Капитал


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