OREANDA-NEWS. July 9, 2008. The Higher Arbitration (Economic) Court of Ukraine took the decision to annul the ruling of the Zaporozhye Economic Court of Appeal on declaring invalid all the decisions of the shareholders meeting of Dniproenergo OJSC dated August 27, 2007, including the one to increase the authorized capital of the generation company.

‘The Higher Arbitration Court of Ukraine annulled the ruling of the Zaporozhye Economic Court of Appeal and sent the case for new consideration by the Economic Court of Zaporozhye Region’, said Dmitriy Tevelev, the Executive Director and Board Member of Dniproenergo in his interview to the Interfax-Ukraine agency.

He noted that the decision of the HACU would allow the case to be heard regarding the legitimacy of the generation company’s shareholders meeting, which made some decisions aimed at the financial rehabilitation of the company with all stakeholders being involved therein, including the investors Pavlogradugol OJSC and Komsomolets Donbassa Mine OJSC.

‘Today, the company’s management is doing its best not to slip back into the bankruptcy procedure we have managed to get out of to the ultimate benefit of both the state and Dniproenergo itself. We have been carrying out continuous negotiations with the investors and we see their interest and aversion to throw the generation company back into yet another financial crisis’, explained D. Tevelev.

‘The odious resolution of the Supreme Court of Ukraine, which upheld the ruling of the Court of Appeal standing, raised a number of points as to the company’s future. Today, the HACU has clearly demonstrated that the consideration of the case with the court of appeal, which was directly affecting the interests of the investors, was done with gross violations of the legislation’, added the Executive Director of Dniproenergo.

As it had been informed, in 2001, the Economic Court of Zaporozhye Region commenced a case on the bankruptcy of Dniproenergo. In late 2003, the Creditors Committee of the generation company initiated the financial rehabilitation of the company and, in December 2006, welcomed offers from creditors and would-be investors to restore the solvency of the generation company.

In January 2007, the two best offers were announced from two creditors – Pavlogradugol and Komsomolets Donbassa Mine, the beneficiary of which is the well-known businessman Rinat Akhmetov. The coal mining companies expressed their willingness to repay the debt of Dniproenergo to an amount of UAH 1 bln 51.929m in exchange for the company’s shares with a face value of UAH 51.8585m.

Pavlogradugol and Komsomolets Donbassa Mine proposed establishing the Investment Company Ltd. on a parity basis, provided with funds to an amount of UAH 1 bln 51.929m, with the latter then joining Dniproenergo by exchanging the authorized fund of this limited liability company for 2.43434 million of the additionally issued shares of the energy company with a face value of UAH 25.

Amendments to Dniproenergo’s financial rehabilitation plan, approved in 2005, meant that for the implementation of these proposals, agreement was required with the State Department on Bankruptcy of the Ministry of Economy, the Ministry of Fuel and Energy, the Ministry of Finance, the State Property Fund and the then management of the Energy Company of Ukraine.

In June 2007, the Economic Court of Zaporozhye Region approved these amendments to the rehabilitation plan and, in August 2007, the general shareholders meeting of Dniproenergo made a number of decisions required to hold an additional issue and to merge the ‘Investment Company’ to the generation company.

In the autumn of 2007, Dniproenergo held an additional issue of shares, which was registered with the Ukrainian Securities and Stock Market State Commission in October last year. Later, the ‘Investment Company’ was added to Dniproenergo.

In October 2007, the Economic Court of Zaporozhye Region approved an amicable agreement between the generation company and its creditors and closed the case on the company’s bankruptcy. By mid November 2007, Dniproenergo completely repaid its debts to its creditors in bankruptcy proceedings at the expense of the funds obtained from the investors.

Meanwhile the registrar of the generation company – the Financial Company Ukrnaftogaz, associated with the joint owners of PrivatBank (Dnepropetrovsk), had still not made changes related to the increase in the authorized capital of the company in its shareholders register. The minority shareholder of Dniproenergo – the limited liability company Investment Company ‘Business-Invest’ (Dnepropetrovsk) challenged the legitimacy of the decisions, made by the generation company’s shareholder meeting in August 2007, in court.

In November 2007, the Economic Court of Zaporozhye Region disallowed the claim of the IC Business-Invest. Then, the company filed an appeal with the Zaporozhye Economic Court of Appeal, which, in December last year, declared the meeting’s decisions invalid. Dniproenergo did not accept the ruling of the Court of Appeal and filed a cassation appeal with the HACU, which, in January, annulled this court’s ruling.

Thereafter, the IC Business-Invest filed a cassation appeal with the Supreme Court of Ukraine (SCU), which, in April 2008, allowed the appeal and held the ruling of the Zaporozhye Economic Court of Appeal standing. Following this, Pavlogradugol and Komsomolets Donbassa Mine, which, at first, had not taken part in the court proceedings initiated by the IC Business-Invest, applied to the HACU with a cassation appeal against the ruling of the Zaporozhye Economic Court of Appeal.

Dniproenergo is one of the largest energy generating companies in Ukraine that owns and operates Pridneprovskaya, Krivorozhskaya and Zaporozhskaya thermal power plants (25 power generating units) with a total installed electric capacity of 8.185 GWh.