The government’s advisor on the sale of its regional electricity distribution companies (oblenergos) says that energy sector structural reforms should be completed before additional sales are conducted.
Oleksandr Bazarov, president of Credit Suisse First Boston Ukraine says the country will likely obtain higher prices from the sale of state share packages in the next 12 oblenergo if the government completes planned reforms.
CSFB served as the consultant to the State Property Fund for the sale of the first six oblenergos, completed last month.
The government had planned to net $250 million from sale of the first six oblenergos, but only brought in $150 million. The sale was hindered by the government’s failure to increase electricity rates and the fact that it only partially wrote off the oblenergos’ debts.
Nevertheless, Bazarov said, the privatization fulfilled its primary task by proving that transparency can be ensured in Ukraine.
Bazarov said the fact that buyers paid “significantly more” than the companies’ actual value pointed to the buyers’ hope of seeing future reforms implemented.
“Investors did not pay for the companies as much as they paid for the chance that structural reforms will be implemented,” he said.
Bazarov also said that, “after this sale, it is very difficult to return to the previous standard, where everything was decided under the table.”
The transparency with which the first sales were conducted will reassure potential investors, Bazarov said.
Bazarov added that the sale had been negatively influenced by the nation’s tense political situation.
Meanwhile, the Slovak firm that snapped up four of the six oblenergos sold last month says it has an appetite for more.
Jozef Bojtos, head of Vychodoslovenske EnergetickeZavody (VEZ), said his firm has its eyes on Zakarpattyaoblenergo.
Bojtos says the company will finance its acquisitions with funds from lenders based in the United States, Great Britain and the Czech Republic.
PFTS on ice
The dismissal of the Yushchenko government has put the Ukrainian stock market on ice, traders say. With cavernous gaps between bid and ask prices, few trades are taking place, and traders said they expect that the markets are unlikely to revive until a new government is appointed.
The PFTS share price index fell to 51.88 by April 27, its lowest point this year and one of its lowest levels in recent years.
“The market has suffered significant losses not only in terms of prices, but also in terms of liquidity,” said Serhy Chernenko, a broker with Kinto.
“Nobody is willing to buy,” echoed Vitaly Bondarchuk, a broker with Ukranet trust.
A key to any prospective rebound, analysts say, is how fast a new prime minister is named, and how the markets react to a new government. A government perceived as being hostile to the markets could keep trading sluggish until elections are held next year.
While insiders deny that they expect a significant fall in the market anytime soon, they are not optimistic about the near term.
Secondary markets
On April 25, the Cabinet authorized state metallurgy concern Ukrainsky Polimetally to sell 25 percent of the shares in Poltava Ore Enrichment Plant, along with share packages in Ordzhonykydzevsk Ore Enrichment Plant and Marhanets Ore Enrichment Plant. The shares will be auctioned on the PFTS. Half of the sales proceeds will go to the budget and Ukrainsky Polimetally will retain half.
The Cabinet also instructed the State Tax Administration to organize control over the activity of Ukrainsky Polimetally and its subsidiaries.
Ukrainsky Polimetally has been actively selling its holdings this year. It sold a 25 percent share package in the Ordzhonykydzevsk Ore Enrichment Plant on the PFTS for Hr 22.1 million on March 11. On April 13, it sold a 25 percent share package in Marhanets Ore Enrichment Plant for Hr 16.2 million.
The company plans to direct the funds from the sales to expanding the extraction of titanium and gold.
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Alfa Capital has announced plans to sell a 49 percent stake in Ukraine’s largest tire producer, Ukrainian-Irish joint venture Rosava, on behalf of an undisclosed client.
The starting price for the share package, to be sold on the PFTS, is Hr 103.9 million.
The Rosava joint venture was created in January 1999 by Ukraine’s Rosava tire plant and Ireland’s Tabistron.
