Eight months after a modest Slovakian energy company paid $90 million for four Ukrainian electricity distributors on behalf of undisclosed investors, some details about the companies behind the cash are slowly emerging.
undisclosed investors, some details about the companies behind the cash are slowly emerging.
Still, as with many of Ukraine’s privatization efforts, the parties involved want their involvement to remain secret.
Controlling stakes in six electricity distributors, or oblenergos, were sold this spring under the supervision of former Prime Minister Viktor Yushchenko. At the time, Yushchenko’s government tried to prevent so-called Ukrainian and Russian oligarch groups from participating in the tenders.
As a result, the six oblenergos were purportedly sold to Western investors and the tenders were dubbed by many as some of the most transparent in Ukraine’s history.
In reality, a prominent Western investor bought only two oblenergos. AES Washington Holding, a U.S.-based energy company that operates utilities worldwide, bought them.
The other four – Khersonoblenergo, Kirovhradoblenergo, Zhytomyroblnergo and Sevastopoloblenergo – were picked up by Vychodoslovenske Energeticke Zavody, a state-owned Slovak energy company that itself lacked the funds for the purchase.
At the time of the sale, VEZ representatives admitted that they did not contribute the cash to the deal, but fulfilled the tender’s requirement that a strategic investor with experience in the industry be involved. They would not, however, reveal the identities of their partners.
Now – more than half a year later – VEZ has identified its Western investor as Ukrainian Energy Partners I, a limited liability partnership registered in the U.S. state of Delaware.
Two of the partners are investment firms: Fondelec, based in the United States and ECM Holdings, a Czech firm. The third partner is Sandos Electric Power Ltd., a company believed to be based in Bristol, England.
The Kyiv-based First Investment Bank advises the partnership, and VEZ manages the power companies for the partners. Information about the partnership began to emerge after VEZ published some of the details on its corporate Web site.
As with many of Ukraine’s opaque privatization sales, the parties involved prefer to remain silent, leaving many questions unanswered.
One such question is which of the investment firms in the partnership supplied the funds used to pay for the oblenergos. Another is what stake each company has in the partnership.
Fondelec and VEZ deny having invested any cash in the partnership. With First Investment Bank acting solely in an advisory capacity, either ECM or Sandos, or both, are the likely source of the $90 million used to buy the oblenergos from Ukraine.
ECM Director Peter Fellegi would not disclose who paid for the purchase and provided few details about the partnership. ECM claims to have been working in Ukraine since 1996.
Fondelec Chairman George Sorenson said his firm has yet to invest in the partnership but has an option to do so.
“We have a commitment to put money into the consortium, but have not yet done so,” Sorenson told the Post. “We are only a fund manager. It’s up to the investors in the end, including the EBRD.”
Fondelec, which says it manages more than $350 million, participated in the consortium through its Dexia-Fondelec Energy Efficiency and Emissions Reduction Fund. The fund raised $100 million from Dexia, a bank partially owned by the European Bank for Reconstruction and Development, which opposed the investment at the time the consortium was being formed.
“The EBRD advised the fund not to participate in the consortium because we did not see VEZ as playing the role of a strategic investor,” an EBRD spokesperson told the Post.
Sorenson said it remains to be seen if his fund will exercise its option to invest in the consortium. He said the government’s decision last month to increase electricity tariffs for the energy companies is a positive sign, but a final decision will have to wait until after a concrete business plan for the partnership is developed.
The Post was unable to contact Sandos. Neither Fondelec nor ECM representatives would provide contact information for the firm, which is not listed on Internet telephone or business directories.
The Slovak government intends to privatize VEZ early next year. ECM’s Fellegi said a VEZ sale would not affect the partnership.
