The privatisation of one of Ukraine’s largest electricity and energy producers is now underway.
On 23 October 2018, the Ukrainian government published long-awaited Resolution No. 576-r (the “Resolution”) launching the final stage of the privatisation of Public Joint-Stock Company “Centrenergo”.
Centrenergo is Ukraine’s leading state-owned electricity and energy producer, which currently operates the Trypilska and Zmiivska coal-fired power plants with a total capacity of 4,200 MW. These coal-fired power plants are the sole remaining facilities in state ownership. The rest of the coal-fired power plants with the capacity over 18,448 MW are owned by DTEK Energo, which is part of DTEK group of companies.
Because Centrenergo’s privatisation is the result of years of preparation, interested investors, hotly anticipating this announcement, warmly welcomed the news.
Key privatisation terms
The Resolution approved the following key terms and conditions of the Centrenergo’s privatisation:
- The privatisation package is comprised of 289,205,117 shares or 78.289% of the charter capital of Centrenergo.
- The starting purchase price is UAH 5,984,992,000 (circa. EUR 185,019,491).
- The privatisation auction will take place if at least two bidders participate.
- The compensation mechanism for the buyer provides that the state will compensate losses incurred by the buyer after signing the privatisation sale and purchase agreement (the “SPA”) if these losses resulted from events or court decisions that took place/were initiated before the privatisation.
- The new owner must, among other things:
- ensure the reserve stock of coal at all Centrenergo’s power plants;
- use coal of Ukrainian origin, if possible;
- take measures to achieve the synchronisation of the Ukrainian power grid with European ENTSO-E, according to the synchronisation plan;
- preserve the current operating capacity of all Centrenergo’s power plants, unless a decrease of capacity is agreed upon by the Ukrainian government or occurs due to scheduled maintenance, repairs or emergencies;
- refrain from dismissing Centrenergo employees for six months following the date of transfer of the privatisation package (except in cases of dismissal for cause, as provided for in the Labour Code of Ukraine); and
- pay dividends to the state budget in the amount of 30% from Centrenergo’s profit for the 2018 financial year.
The privatisation auction is scheduled for 13 December 2018 at 10:00 a.m. Before the auction date, potential bidders (upon signing a non-disclosure agreement) may receive a set of documents with detailed information on Centrenergo’s assets, submit its comments on the draft SPA and apply for participation in the privatisation auction.
Qualification requirements for bidders
Both individuals and legal entities (whether Ukrainian or foreign) can participate in the privatisation auction. The following persons, however, are banned from participating:
- state bodies, state enterprises, owned by Ukraine, state business associations, state holding companies, state joint-stock companies, their subsidiaries, employees of the state privatisation bodies;
- legal entities incorporated in offshore jurisdictions (as defined by the Ukrainian government, whose list currently includes the Isle of Man, BVI, Guernsey, Cayman Islands, to name a few) whose ownership structure is not transparent (where ultimate beneficial owners are not fully disclosed), and buyers originating from a state recognised by the Ukrainian Parliament as the state-aggressor (currently, the Russian Federation);
- a state recognised by the Ukrainian Parliament as the state-aggressor and legal entities where such state has a participatory interest, or the entities, controlled by them;
- legal entities, at least 10% of the shares of which belong to, or an ultimate beneficial owner of which, are residents of a state recognised by the Ukrainian Parliament as the state-aggressor (except for legal entities which shares are traded at certain foreign stock exchanges (as defined by the Ukrainian government) unless such legal entities are residents of the state-aggressor);
- individuals or legal entities that are residents of a state recognised by the Ukrainian Parliament as the state-aggressor;
- legal entities registered within non-cooperative jurisdictions (as defined by the Financial Action Task Force) and legal entities where former own directly or indirectly ≥50% of the charter capital;
- legal entities which have not disclosed their ultimate beneficial owners as the Ukrainian legislation prescribes;
- individuals and legal entities, or the related persons of which, are subject to sanctions imposed according to the Ukrainian legislation;
- entities that have been parties to the privatisation SPA which has been terminated on account of its breach by such entity;
- external advisers that have been engaged in preparation of the asset for privatisation, etc.
The official announcement of the Centrenergo privatisation is available here in Ukrainian and English.
Please also note that the State Property Fund of Ukraine has published the Instruction on preparing the documentation for participation in the auction, addressed to a potential buyer, which is available here in Ukrainian.