You're reading: Akhmetov inches closer to monopolizing thermoelectric power business

DTEK is sole bidder in Zakhidenergo privatization tender.

Thanks to the newest round of uncompetitive privatization tenders, Ukraine’s richest man is closer to amassing monopolistic control over Ukraine’s multi-billion-dollar thermoelectric power generation business.

Late on Nov. 17, it was revealed that Rinat Akhmetov’s DTEK power holding was the sole bidder in an upcoming privatization tender for a 45 percent stake in generator Zakhidenergo in western Ukraine.

Separately, DTEK is one of two bidders for a blocking stake in Kyivenergo, the capital’s power supplier. The other bidder’s identity was not immediately clear.

The starting prices for both – respectively $241 million and $50 million – were announced on Sept. 22, Akhmetov’s 45th birthday.

DTEK is also mulling whether to bid for other energy companies that are to be auctioned off by the government soon. Ukraine’s State Property Fund announced on Nov. 16 that it plans to sell a 25 percent stake in local power generator Dniproenergo and a 40 percent stake in regional power distributor Donetskoblenergo on Jan. 11, with starting prices set at $147 million and $56 million, respectively.

If it wins all the tenders, then DTEK will succeed in boosting its blocking stakes to majority ones at prices described by some analysts as fire sale, and with limited competition.
Citing stock prices on Ukraine’s illiquid securities market, some investment banks argue that the starting prices in these tenders are above the current market price.

However, Kyiv-based investment bank ICU wrote in a note to investors that they represent a considerable discount to what could be obtained for cash-starved budget coffers if the markets functioned properly. “In the current, stressful market environment, the privatization of these two strategic assets will be an example of selling state-owned property at a fire-sale price,” ICU wrote.

Alexander Tolkach, a spokesperson at DTEK, disagreed. “The initial starting price was already high. It was higher than the market price when the tender started. Considering the investment obligation, the price was high. Let’s wait and see the outcome of the tender,” he said.

Tender conditions for Zakhidenergo and Dniproenergo require participants to be involved in the electricity business, to have less than 25 percent state ownership, and to guarantee 70 percent coal burned by the generators is of domestic origin.

Through previous privatization tenders, Akhmetov snapped up some of the nation’s most prized coal mines.

Asked about allegations that the tenders were not competitive and were tailor made, Tolkach added: “We don’t want to respond to such allegations.”