It took about 20 minutes for the State Property Fund to sell a majority stake in one of the nation’s top thermal energy generating companies to a firm founded just two months ago.
The 60.773 percent of Donbasenergo was auctioned off on Aug. 21 for Hr 718.92 million – about 12 percent over the starting price.
The sale of Donbasenergo has been the biggest privatization auction this year. But the auction itself, broadcast over the Internet, was lackluster, with government officials casually flipping through the proposals of two companies that offered their bids.
The result was equally uninspiring, industry and experts say.
“The price looks too low, despite the fact that the privatization price was exactly double the market price of (Donbasenergo’s) shares on the stock exchange,” Alexander Paraschiy, head of research at Concorde Capital investment bank, told Interfax news agency.
He said the purchase price per unit of power produced was far below the price paid during previous auctions for Dniproenergo and Zakhidenergo, similar state companies auctioned off in previous years. The price paid for Donbasenergo was $75 per kilowatt of energy it produces, while similar companies were sold for $110 per kilowatt of energy.
The auction fueled speculation that the outcome of the sale was pre-determined in favor of a brand-new Donetsk-based company Energoinvest Holding. It was registered on June 20. The State Property Fund has failed to provide any information about company’s assets, however, but has denied accusations of insider deals.
Donbasenergo is one of the nation’s top six thermal generators, according to a 2012 report by DTEK, the nation’s biggest energy holding that belongs to Rinat Akhmetov, Ukraine’s richest man.
Donbasenergo owns Starobeshivska and Slovyanska thermoelectric power stations in Donetsk region that provide energy for heavy industry there. It produces 4.6 percent of the nation’s electric energy, according to company’s web-site. In 2012 it posted Hr 5.57 billion in revenues and a net profit of Hr 30.98 million.
The early 2013 numbers were even better: its net profit in the first six months was Hr 465.2 million.
But the company needs investment badly as its assets are worn by 70 to 90 percent, according to the company’s own estimates. Energoinvest Holding plans to invest up to Hr 18 billion by 2025, according to the company’s statement following the privatization auction.
The government needed cash from privatization to cover the budget deficit and inch closer to its privatization revenue target of Hr 10.9 billion. During the first seven months it only hit 1.67 percent of the estimated annual revenues.
The government also hopes to solve other problems of the energy industry through the sale of Donbasenergo.
“This company (Donbasenergo) really needs investments. (But) privatization also has to solve the issue of Ukrainian coal sales. That’s our principle — the company should go to someone who is in the field of coal mining here in Ukraine. It is necessary to provide jobs and wages to Ukrainian miners,” Oleksandr Ryabchenko, head of SPF, said earlier this year.
According to the conditions of the sale, the new owner of Donbasenergo has to make sure that 70 percent of coal supplies used by Donbasenergo come from Ukrainian mines. There are also a number of investment and social commitments, such as saving the jobs for all of its 6,164 employees.
Dmytro Marunych, an independent energy expert, says that the new owner is unlikely to hold the new asset for a long time, and will probably resell it in the same way Ukrtelecom, a state telecoms monopoly, was resold two months ago after its privatization in 2011.
“I think, it may be an issue of resale, but it is also unclear to whom, as major players in the market for various reasons refrained (from taking part in the auction),” Marunich says.
The new owner of Donbasenergo
The company that bought one of Ukraine’s biggest thermal energy generators, Energoinvest Holding was registered just two months ago, on June 20, in Donetsk. The company was founded by Krasnolymanske LLC that in mid-2012 was owned by businessman Ihor Humeniuk and three other people, including energy minister’s advisor Serhiy Kuzyara. Forbes Ukraine previously suggested that Kuzyara has ties with Viktor Yanukovych’s elder son Oleksandr.
Energoinvest Holding changed hands right before the auction, on Aug. 8. It currently belongs to a Netherlands-based Energoinvest Holding B.V. It also now owns more than half of its former mother company, Krasnolymanske LLC. This company manages a mine with the same name.
Soon after the privatization auction, when online media started coming out with headlines suggesting that a major energy asset was taken over by a murky company with unclear ownership, Energoinvest Holding released a press statement saying Humeniuk remains its major shareholder.
Humeniuk, 52, is a Donetsk-born businessman and ex-lawmaker from the Party of Regions. In 2002-2005, when Viktor Yanukovych was prime minister, Humeniuk was his advisor. He also managed ARS company which controlled a number of mines, among other assets.
According to Forbes Ukraine, his main business now is in real estate. In 2012 his Investycii ta Rozvytok (Investments and Development) company was named by Forbes the biggest rentier in Donetsk and second biggest in Ukraine.
Energoinvest Holding’s challenger at the auction, TekhNova, has more of a track record in Ukraine’s energy sector. It rents a number of generation facilities in Cherkasy, Chernihiv and Sumy. Ukraine’s media and the expert community have reported that this company is at least partly controlled by ex-lawmaker from Nasha Ukraina party Anatoliy Shkriblyak, who is TekhNova’s deputy director.
Kyiv Post staff writer Kateryna Kapliuk can be reached at [email protected].
