Oil Report

UPDATE 1-Ukraine to sell stakes in four electricity firms

(Adds details, background)

KIEV, March 21 (Reuters) - Ukraine’s government said on Friday it would sell stakes of 60 percent plus one share in four electricity firms, including the country’s largest electricity producer, Dniproenergo.

The privatisation of the four firms, which also include Donbassenergo, Zapadenergo and Centrenergo, are in addition to the government’s intention to sell six other, smaller regional energy companies, for which it hopes to get $600 million.

The government gave no further details, and it is up to the State Property Fund, a privatisation agency, to draw up the conditions of the tenders and set starting prices.

It is unclear when and how exactly the government could go ahead with Dniproenergo’s privatisation, as a court case over its shareholder structure is in progress.

Ukraine’s richest man, Rinat Akhmetov, owns a stake via a chain of subsidiaries of his System Capital Management holding company.

Last year, under the previous government of Viktor Yanukovich, with whom Akhmetov has close ties, Dniproenergo shareholders voted to increase its share capital, which effectively diluted the government’s stake to 50 percent plus one share and raised Akhmetov’s stake to possibly 40 percent.

Prime Minister Yulia Tymoshenko, then in opposition, criticised the deal and since coming into government after a September election, a regional court annulled it, a decision the country’s highest financial court is now reviewing.

Tymoshenko hopes to reap much more than the planned $1.6 billion in revenues from privatisation.

Also on the block are Ukraine’s dominant fixed-line telecoms company Ukrtelekom, which officials said may go for as much as $7 billion, and leading chemicals producer, the Odessa Port plant, which could sell for $1 billion.

But the privatisation process in Ukraine has been blighted by political fighting, accusations of corruption and court cases that have suspended auctions.

One such case halted the announced tender of the Odessa Port plant last year, and the government received just $475 million in privatisation revenues in 2007, well short of the $2.1 billion it had budgeted for.

The government wants private investors to buy into the electricity firms because their infrastructure dates from Soviet times and needs heavy expenditure for modernisation.

Maksym Tymchenko, the head of Akhmetov’s energy concerns, DTEK, said last month that the group would be interested in participating in energy sell-offs.

DTEK is planning to invest $650 million into the electricity producers it owns and has been looking into issuing a Eurobond to raise funds for modernisation. (Reporting by Sabina Zawadzki; Editing by Will Waterman)