More than a dozen companies around the world have shown interest in buying Ukraine’s highly indebted state-owned energy assets in 2017.
Speaking in Kyiv on March 2 at the Ukrainian Energy Forum, organized by the Adam Smith Institute, State Property Fund Deputy Chairman Andrey Gaidutsky said that the government has signed confidentiality agreements with 17 potential investors.
And he believes that the number will grow once auction dates are announced.
Gaidutsky said companies from Japan, India, Canada and Poland are among the interested buyers looking at the assets.
Two of the 17 parties are Ukrainian.
But whether the fund will succeed in divesting the state of the assets in 2017 will depend on whether the government is able to take a number of measures, including the adoption of the electricity market law and set the regulatory asset base tariff, Gaidutsky said.
The fund is seeking to privatize in 2017 a number of energy assets, including the Pervomaiska hydroelectric power station, six oblenergo regional power companies, and four combined heat and power plants.
Gaidutsky said power generator Centrenergo was currently going through due diligence with consulting firm Deloitte, who are working with the fund on privatisation of state assets.
He said they would seek an advisor to work with Deloitte, and prepare the company for privatization for the end of 2017 or beginning of 2018.
“If the RAB (regulatory asset base) tariff and the electricity law had been adopted last year, we would have been able to conduct this privatisation in September, November 2016,” he said.
“From the side of the State Property Fund, everything is 99 percent ready.”
The electricity market law passed its first reading in September last year, but it is yet to be fully adopted by parliament.
Once the regulatory asset base and electricity market law are adopted, the fund expects asset prices to increase between 50 and 250 percent at auction, compared to the 10 percent growth seen during the 2011 and 2012 auctions.
It also expects post-privatization oblenergo profits to increase by 15 to 20 percent, making the purchase more attractive for investors.
However, that’s not the government’s only hurdle in its once-again-postponed sales of energy assets.
Gaidutsky said every company was either in debt or bankrupt, which severely decreased their attractiveness to investors.
“We have a wonderful investor from Sweden, interested in the Kherson power plant. But he says you want me to pay Hr 150 million and then after I will have Hr 400 million in debts. Then this company costs Hr 600 million,” he said. “That’s 90 percent of our company’s privatization situation, and that’s the answer to why the privatization is going so slowly.”
The fund has repeatedly come under fire for privatization failures, which is among the conditions of Ukraine’s compliance with the European Union’s Third Energy Package – a package of legislation governing the EU’s internal gas and electricity markets.
The government set out to sell hundreds of state assets last year, expecting to net $623 million in 2016, but managed to only sell two hydroelectric plants and a bank.
Centre for Energy Studies Director Alexander Kharchenko said that today there was no privatization going on in the energy sector.
