Ukraine to sell three GenCo, Odesa Portside stakes in late December

Обзоры по компаниям и отраслям 04.12.2014 The State Property Fund (SPF) of Ukraine published on Dec. 3 its privatization schedule for stakes in three power generation companies (GenCos), as well as fertilizer producer Odesa Portside Plant. The tenders are scheduled for Dec. 24-30 and the stakes have a total starting value of UAH 1.81 bln. The Fund is planning to offer a 10% stake (out of the state’s 78.29% total stake) in power GenCo Centrenergo (CEEN UK) at a starting price of UAH 257.6 mln on Dec. 24. The starting price per share is UAH 6.97, or an 8% discount to the stock market. On Dec. 25, the SPF will offer the state’s remaining 25% stake in power GenCo Donbasenergo (DOEN UK) for UAH 281.9 mln (UAH 47.7/share, or a 51% premium to the market). The starting price per share is 5% below the price gained at the privatization tender in August 2013, when 60.8% of the company was sold. On Dec. 30, the state’s remaining 25% stake in power GenCo DTEK Dniproenergo (DNEN UK) will be offered for UAH 1,230 mln (UAH 824/share, or 27% premium to the market). The starting price per share is 4% above the price at which DTEK privatized a 25% stake in the company in March 2012. The SPF will also offer a 5% stake (out of the state’s 100% holding) in the Odesa Portside Plant for UAH 39.9 mln on Dec. 24. The implied starting capitalization, UAH 799 mln, represents a deep discount to the UAH 5,022 MCap offered by the winner of the September 2009 privatization tender. At that time, the SPF cancelled the deal, claiming that the offered price was too small. Alexander Paraschiy: The scheduling of the privatization tenders should be considered negative for the bondholders of DTEK (DTEKUA) and minority shareholders of Donbasenergo and Dniproenergo. The timing of the massive privatization, which falls during the western Christmas holidays, gives the appearance of rigged tenders. It could limit the participation of Western investors in the tenders for Centrenergo and Odesa Portside, whose starting prices look very low. Also, it’s not clear why the Fund overlooked a possibility to sell the state’s remaining 25% stake in power GenCo DTEK Zakhidenergo (ZAEN UK), for which it could ask for at least UAH 1,070 mln, based on its privatization experience. The future winners of the Donbasenergo and Dniprenergo tenders look clear, given that the companies already have majority private shareholders. The core question is how much they will pay for the state’s remaining stakes. In particular, intense competition might emerge at the tender for Dniproenergo, whose shadow privatization by DTEK in 2007 was met by fierce resistance from Biznes-Invest, a company linked to Privat Group (Biznes-Invest actively sued to nix the deal). The same company was noticed in active participation in last week’s tender for power DisCo Zakarpatoblenergo, in which it managed to inflate the tender’s price by 3.8 times (the winner was the majority shareholder there). Igor Kolomoiskiy, a controlling partner in Privat who has a tough rivalry with DTEK’s owner Rinat Akhmetov, might inflate the price at the Dec. 30 tender as well, under the Zakarpatoblenergo scenario. Even without that threat, such a tender, if it happens, will play to increase the cash deficit of DTEK, which is still considering whether to repay smoothly its USD 200 mln Eurobond in April 2015. For the minority shareholders of Donbasenergo and Dniproenergo, the sale of the state’s remaining stakes in these companies would mean the end of their dividend stories. As the companies with state stakes, they are obliged to pay at least 30% of their annual profit in dividends. This made Donbasenergo, which paid a DPS of UAH 6.74 this April to yield 14%, the biggest local dividend story this year and one of the most liquid stocks on the local market. Donbasenergo is likely to stop doing so with no explicit dividend obligation after its complete privatization. Centrenergo will remain a dividend story next year because the state will retain a 68% stake, even in the case of a successful privatization on Dec. 24. However, it never has been as solid a dividend payer as Donbasenergo due to its smaller profitability.