OREANDA-NEWS.  March 31, 2008. Donbass Fuel-Energy Company, as the owner of over 46% of shares in Dneproenergo, is concerned with the current situation concerning the power generating company, which threatens the stability of the energy market and the energy security of Ukraine in general.

Just recently, Dneprenergo has managed to escape bankruptcy. Thanks to the investments received, the company could face the new prospects of large-scale reconstruction of its generating capacities and development of its social programmes. Yet the whole country has witnessed the actions of the Privat Group aimed at destabilizing the situation at the company. The goal is, despite the claims for protecting state interests, to grab control of the energy company, to restore the bankruptcy procedure and achieve a bargain sale of the bankrupt company’s assets.

On March 21, 2008, representatives of the Privat Group, challenging the procedure of the generating company’s financial rehabilitation in court, and some officials of the Energy Company of Ukraine NJSC, made an attempt to raid the company. They were supported by a private security firm. Only the coordinated actions and the neutral position of state law-enforcement bodies prevented the situation from getting violent. The representatives of Privat justify their actions as a way to restore state control over the generating company. The state has just recently acquired the power to control the energy company after the successful completion of Dneproenergo’s rehabilitation procedure, when the authority was transferred from the Creditor Committee of the former bankrupt company to the Supervisory Board and Management Board of the company.

DTEK supports the position of Dneproenergo’s Management Board, which has done its best to hold a shareholders meeting on a legitimate basis. Yet without the registration of the owners of the shares in Dneproenergo, which Ukrneftegaz FC, controlled by the Privat Group, is refusing to hand over, the Management Board took the decision to postpone the meeting. Moreover, the state officer of justice had given the Chairman of the Management Board a notice banning the shareholders meeting. The representatives of the Securities and Stock Market State Commission clearly indicated that the meeting had not taken place.

In view of the above, a matter of concern is the position of ECU NJSC that approves of holding an illegitimate meeting, which, under the version of Privat’s representatives, had allegedly taken place ‘in immediate proximity’ to the office of Dneproenergo OJSC. It is inadmissible when state officials openly support illegal actions, thus discrediting the whole Cabinet of Ministers of Ukraine. The Prime-Minister has repeatedly said that the government is guided purely by law and respects court decisions. Without waiting for a verdict from the Supreme Court of Ukraine, which will dot the i's and cross the t's in the situation at Dneproenergo, and being afraid of a negative decision for them, the representatives of Privat are trying to seize the power company by lobbying their position through some state officials.

Once again, we stress that the company’s shareholders meeting is an important tool for management and the functioning of the generating company but all actions of the Management Board, Supervisory Board and shareholders of Dneproenergo are to be in strict compliance with the law of Ukraine. After the license of the previous registrar of the energy company, Ukrneftegaz FC had been cancelled, within a legally eligible period until the next meeting the Management Board of Dneproenergo concluded a contract for keeping the registration of shareholders with an independent registrar Prominvestbank JSC, which has not been linked to any corporate conflicts. Nevertheless, Ukrneftegaz FC, regardless of the repeated requests to pass the registration to the new registrar, has given an unmotivated refusal to do so. The fault for failure to hold the meeting on 22.03.2008 rests fully with the officials of the previous registrar, against whom the General Office of the Public Prosecutor opened a criminal case and an investigation with regard to license terms violation and court decisions non-performance is being held. The same registrar creates all the prerequisites to disrupt the meeting of Dneproenergo shareholders planned for 27.03.2008. As the largest private shareholders of the energy company, we are interested in holding this meeting but only on legal grounds in order to avoid further destabilization of the situation within the company.

We officially address the representatives of Ukrneftegaz FC with a request to pass the register to the new registrar, which the generating company has concluded the contract with. This will be a guarantee for the successful meeting of Dneproenergo shareholders on 27.03.2008. 
 
Ukrainian and international investors are keeping a careful watch over the situation around Dneproenergo. The corporate conflicts in the energy sector initiated by Privat with the help of controlled registrars and state officials with ‘unclean’ hands significantly reduce the investment attractiveness and value of the energy companies and of the industry as a whole and prejudice the success of future privatization initiated by the Government of Ukraine. DTEK understands the importance of power sector denationalization, formation of a competitive market and conditions to attract investment and appeals to the President of Ukraine, the Prime Minister and the Chairman of the Verkhovna Rada to pay attention to the irresponsible actions of some state officials. Further development of this strategically important industry will become impossible in conditions when the officials of ECU NJSC and the Ministry of Fuel and Energy take part in raider attacks of the Privat Group.