The State Property Fund failed to trade shares of energy companies

Photo: Ukrinform

The experiment of the State Property Fund of Ukraine (SPFU) on selling minority stakes in energy supplying companies via stock trading ended in a failure. On Friday, June 13, the SPFU failed to sell one security from the 5% stake in KhakivOblEnergo and KhmelnytskOblEnergo at the reserve price of UAH 75.6 mn and UAH 18.2 mn respectively. The same is the story with another energy supplying company MykolaivOblEnergo with a 5% stake priced at UAH 14.5 bn. In addition to that, a 6.873% share package in the Dniprodzerzhynsk Thermal Power Plant was not sold. The trading did not take place for a sole reason – there were no bids, according to the SPFU press service. Interestingly, the SPFU failed to sell the shares of MykolaivOblEnergo for the second time. The first trading for a minority stake in the company was suspended due to a mistake in the name of the depository made in the publication announcing the trading.

Reasons for failures

The share of the state in KhmelnytskiyOblEnergo and MykolaivOblEnergo is 70%, in KharkivOblEnergo – 65%. These assets were included in the privatization schedule last year, but on condition that 5% of the stakes would be sold through stock exchanges and the rest through competitive bidding. Chair of the SPFU Oleksandr Ryabchenko says that everything is envisaged by the law: if a 5% stake can be deducted from the state-owned stake and the remaining stake is not lower than the majority stake, the minority stake should be traded at an exchange. Only three of the six oblenergos, which were prepared for privatization, met these criteria. Before the start of Friday trading, experts questioned by Capital claimed the chances of selling minority stakes were quite low.

This particularly applied to the most expensive asset – KharkivOblEnergo, the price of which, according to preliminary estimates of the SPFU, could be as high as UAH 1.5 bn. “If Ukraine had a developed stock market, such an operation would make sense. However, putting up a stake for sale in the current situation, when the share liquidity of KharkivOblEnego is approaching zero, is not quite appropriate. There is sense in selling the whole state-owned stake to a strategic investor,” says Denys Sakva, a senior analyst at Dragon Capital.

The securities of the Kharkiv company, as well as those of the two other companies, were not interesting also for financial investors in terms of their further resale, which only confirms expert opinions. Failures of the past week should be taken into consideration, when the SPFU puts up for sale on the stock exchange a 46% stake in CherkasyOblEnergo at the reserve price of UAH 98.7 bn. The sale was planned for March on the Innex stock exchange, but was postponed until after the change of government.

Member of the Supervisory Board at the Institute of Energy Strategies Yuriy Korolchuk believes the Ukrainian stock market is underdeveloped to be able to adequately accept such a stake. The best chance is to sell the shares quickly at an auction, says the expert. On the other hand, the sale of this company’s stake on the stock exchange was a condition agreed upon by the Finance Ministry and the owner of another 25% stake – the Ukrainian Energy Saving Service Company.

To sell in time

It is yet unclear whether the government will reconsider the terms of sale of the majority stakes after the minority stakes have not been sold. Taking into account the privatization plans envisaged in the government budget of 2014, that would look rather strange, to say the least. The SPFU is already behind schedule. As Capital wrote earlier, the State Property Fund had to temporarily suspend the sale of state-owned assets after amendments were made to the budget as to the proceeds the government plans to receive from privatization in 2014, to be specific – UAH 17 bn. Sources of the newspaper say the fund is completing the procedure of approval of the list of assets for privatization by the corresponding ministries. Nonetheless, the already approved industrial assets, SumyKhimProm being one of them, will be the main sources of fulfillment of the privatization program.

The reserve price of the 92.75% stake in SumyKhimProm is UAH 405-406 mn, according to the SPFU.
On Thursday, June 12, the SPFU also tried to sell a 7.2% stake in the company on the East European Stock Exchange, but suspended the trading after the Business-Invest company accused stock exchange employees of intentional blocking of their participation in the privatization auction.

On Friday, June 13, DG Group announced that “the real reason for suspending the trading was pressure of one of the bidders on the organizers of the trading and the seller of the shares”.

If the SPFU does not speed up and start selling state-owned property, it may repeat last year’s story, when the Cabinet of Ministers was forced to revise the threshold of privatization proceeds to the government budget from UAH 10.9 bn to UAH 1.45 bn in December. Only then, such a trick helped fulfill and even “over-fulfill” the privatization program.