Two leading Western power companies enter final stages of negotiations to acquire stakes in up to seven Ukrainian electricity distributors
seven Ukrainian electricity distributors from a secretive Russian business group.
Informed sources first told the Post last fall that Dutch-registered VS Energy International, a company controlled by a Russian business group, was offering a handful of mostly Western power companies the option of acquiring majority shareholdings in at least five Ukrainian electricity distributors, and minority stakes in others.
Interested buyers at the time included United States power giant AES Corporation; CEZ, the largest power company in the Czech Republic; Italy’s ENEL; and Russia’s state-controlled power holding, United Energy Systems. Analysts said the power distributors, called oblenergos in Ukraine, could sell for as much as half a billion dollars all together, marking the single largest investment in Ukraine’s power sector. The sale would also mark the continued advance of Western power companies onto Ukraine’s energy market, which remains largely controlled by less transparent Ukrainian and Russian business groups.
Informed sources now say that negotiations are winding down, with AES and CEZ in contention over the power companies, with other bidders less interested.
A top CEZ official told journalists last week that his company was hoping to expand into Ukraine and that negotiations are expected to be completed within two months.
Meanwhile, AES Vice President Garry Levesley, who manages the American corporation’s business in Ukraine, said his company is a serious contender.
“AES is interested in the oblenergos owned by VS Energy International … we are very much still in the hunt,” Levesley said.
AES acquired two Ukrainian electricity distributors – Kyivoblenergo and Rivneoblenergo – for some $70 million during a 2001 privatization tender.
VS Energy International bought controlling stakes in Khersonoblenergo, Kirovohradoblenergo, Sevastopolenergo and Zhytomyroblenergo for about $90 million during the same privatization tender. The Russian investors acquired stakes in other utilities, including Odessa-
oblenergo, on the secondary market through other deals.
AES claims to have an advantage over CEZ, having entered Ukraine earlier.
“Given our existing sizable presence in the country and our proven track record in owning and managing oblenergos over the past five years, I think we are well-positioned to expand our position,” Levesley said.
With assets around the globe, Virginia-based AES is one of the world’s largest power companies. The company claims to have invested millions of dollars into making Kyivoblenergo and Rivneoblenergo profitable, turning them into role models on Ukraine’s power market.
Ukrainian and Russian press reports have linked VS Energy to Russian Duma deputy Alexander Babakov, chairman of the right-wing Rodina party.In a July 2005 interview with Russia’s Vedomosti daily, Babakov admitted representing the interests of investors behind VS Energy, but he did not identify them.
