The Ukraine government has announced plans to restart the privatization of its regional energy distribution companies after the procedure ground to a halt in early April.
The process will be restarted under new conditions. The main aim is to make the companies more attractive by revising conditions for tenders and increasing revenues available from the privatized companies.
However local analysts have suggested that the renewed effort to sell the companies will fail if the government decides to raise the base prices of the companies. Some said the prices were already too high; raising them further will stifle the demand for shares.
A further problem with the sale of the distribution companies has been the government’s rule prohibiting investors from reselling their stakes within five years. The investors are also required to have experience in the energy sector. Together, these stipulations are thought likely to deter many potential Western investors.
Ukraine’s energy companies were owed $2 billion as of 1 April 1998, but they owed their suppliers more than $2.5 billion. As a consequence, most of the distributors recorded an annual loss last year. Electricity rates were raised by 20 per cent to try and reduce the losses.