Ukraine has announced plans to privatize its power sector. According to a presidential decree, the government will sell controlling stakes in seven regional electricity distribution companies, large stakes in twelve other distribution companies and stakes in the four generating companies.

The announcement is significant as it is the first time the government has offered majority stakes in any of its electricity companies. Previously, the government tried to keep control of the sector by selling minority stakes.

This strategy appeared to backfire when the government withdrew an offer last August in which stakes of 20 per cent to 36 per cent were made available. It feared that poor investor interest would lead to a low price. The government will offer 50 per cent plus one share in Vinnytsyaoblenergo, Volynoblenergo, Dniprooblenergo, Zakarpattiaoblenergo, Zaporizhyaobl-energo, Kyivoblenergo and Ribneoblenergo.

Stakes of 45 per cent will be offered in six other regional companies and 40 per cent stakes in a further three. Smaller stakes in another three will also be offered. There are a total of 27 companies in the Ukraine.

In addition, the government hopes to attract investors with stakes of between 25 per cent and 36 per cent in four generating companies. These stakes will be sold via non-commercial tenders to experienced energy management companies.

The new, more positive approach to privatization, is being interpreted as a reflection of the financial position in which the government finds itself. The county has to make major foreign debt payments next year and its reserves are dwindling. The energy sector, perhaps the most financially attractive in its public sector portfolio, should offer swift access to foreign investment – or so it hopes.

In a separate move, the regional energy company Sumyoblenergo reached an agreement to import electricity from Russia. The National Electricity Regulation Commission recently authorised the company to buy power over a short term.

The sale of power was first suggested by Russian nuclear power plants. They will barter the power for equipment from engineering companies in Sumy. Sumyoblenergo is planning to take 180 GWh each month over the period of the deal.