Alternative energy complex emerging in Donbas?
The scandalous history about the attempt to carry out the gray privatization of the country’s largest electricity producer, Donbasenerho, has taken an unexpected turn in recent weeks. At last a high-ranking official who supported the sell-off of three thermal power plants came out into the open. Let it be recalled that, following a court decision on Donbasenerho’s bankruptcy, the Luhanska, Zuyevska, and Kurakhivska thermal power plants were sold at auction on April 28. The plants were bought for UAH 208 million by hitherto unknown Tekhremontpostavka Ltd. Generating 15% of Ukraine’s total electricity, Donbasenerho is a strategically important enterprise and, as such, not subject to privatization. Hence, the Prosecutor General’s Office has stepped in, blocking the sale of three power plants to private investors. In a quite surprising move on September 10, Donetsk Governor Viktor Yanukovych actually made it clear that he wants Tekhrempostavka to remain owner of a part of Donbasenerho assets, the Ukrainian Financial Server reports. Addressing a press conference in Donetsk, Yanukovych declared, “The oblast state administration is satisfied that the new owner of the power plants is based in the Donetsk oblast. This fact will foster the creation of a regional energy complex.” Moreover, the governor did not rule out that the privatized power plants will again become part of Donbasenerho as leased assets, stating, however, that it was premature to define the pattern of work for Donbasenerho and its three former plants.
The governor’s words acquired a special flavor in the wake of continued investigation by the Prosecutor General’s Office aimed at establishing the persons behind the shadow sale of the three power plants. Pending the end of the investigation, the PGO suspended transfer of property to Tekhremonpostavka. Mr. Yanukovych, however, was quick to declare, “The Prosecutor General’s Office has so far revealed no major violations in Donbasenerho’s sell-off.”
Yet, strangely enough, the National Electricity Regulatory Commission did find such violations. The fact is that, under the law, any sell-off of state-owned assets of power plants is subject to NERC clearance and no such clearance has been given. All this, however, did not stop the Donetsk Arbitration Court from ruling on June 23 that the sale of Donbasenerho was perfectly legal. Strangely enough, the Supreme Arbitration Court which considered the issue four days later following the Ministry of Energy appeal failed to pass a final ruling, citing the Donetsk court decision and recommending forwarding the case to the ordinary court. “We will sue not the executive, but the court bailiff,” Donbasenerho’s executive director Viktor Larionov declared, saying the case is far from being settled.
Meanwhile, Donbasenerho stock plunged on the market. The PFTS Stock Trading System decided to drop Donbasenerho from its listings due to the lack of information on its assets. There is nothing unexpected in the whole issue, for, having owning five thermal power plants and losing the three best, Donbasenerho found itself in a position such that the real value of its stock can not be evaluated.
In a move to retain Donbasenerho assets as state property, the State Property Fund of Ukraine has announced an audit of the company’s assets. The tender for evaluators was won by the state-run National Network of Auction Centers Company. Interestingly, in line with a NERC official declaration made to PGO, the real value of the three thermal power plants, which have been sold for debts, is several times higher than UAH 208 million. If this fact is proved in court, the whole deal could be voided.
In this context, the declarations by the Donetsk governor appear, if anything, ambiguous. It is surprising to hear the state’s head representative in the oblast talking about the creation of a separate fuel and energy sector in the region and actually accepting the sale of strategic enterprises. Earlier, part of Donbasoblenerho power grids and the almost complete power grids and other infrastructure of Luhanskoblenerho had been similarly sold to pay off debts. Has this property also become part of an alternative fuel and energy complex?
It is worth mentioning that the temporary ban imposed by President Kuchma on sales in the electricity sector is still in force. The ban was put into effected by the chief executive on the heels of a series of privatization scandals. As the president then stressed, it is necessary to study the consequences of such transactions, recommending no hurry with privatization in the sector. Still, the shadow purchase of state-owned property has not been halted. On the contrary, it seems that those interested in putting electricity stations under their control, flouting the normal procedure of buying enterprises from the SPF, are not even trying to conceal their plans. If the country’s leaders do not urgently react at least to the public actions initiated by these forces, this will cast doubt on the state’s integrity and sincerity in managing state- owned property in accordance with the law and public interest.
