Ukraine court blocks government's attempt to change power generation major's managers

A court in Ukraine court has ruled to prohibit the State Property Fund (SPF) that owns 78.3% of the shares of power generator Centrenergo from dismissing any member of its management board, including acting CEO Volodymyr Potapenko, the company reported on its website on February 28.

Last week, Prime Minister Oleksiy Honcharuk announced the appointment of a new top manager at Centrenergo, while local media reported that this manager was barred from entering the company’s offices by protestors linked to oligarch Ihor Kolomoisky. Potapenko, appointed as Centrenergo's top manager in July 2019, was characterised by tycoon Ihor Kolomoisky in an August interview as a “professional and understandable” person.

Kolomoisky previous controlled the management at Centrenergo which is Ukraine’s most attractive power generating company and one of the crown jewels slated to be privatised by the government.

There were reports over the weekend that Honcharuk had submitted his resignation for a second time this week, but the prime minister denied them on Monday and asked for a meeting with Ukrainian president Volodymyr Zelenskiy. The resignation reports are now believed by some to be linked to the scandal over Centrenergo’s management.

“This is important. And part of the current reshuffle feud could be linked to this story (Honcharuk government had been moving in recent months to sack Centrenergo managers linked to Kolomoisky),” tweeted bne IntelliNews contributor Fabrice Deprez from Kyiv.  

According to last week's media reports, President Zelenskiy criticised PM Honcharuk’s decision to remove the Kolomoisky-controlled manager at Centrenergo, triggering a conflict between the top officials that led to the president’s decision to initiate the cabinet's replacement this week.

Centrenergo is among the companies that the government has been considering privatising over the last decade. Ukraine was close to selling Centrenergo in late 2018, when it offered its 78.3% stake for a starting price of about $215mn. In December 2018, the government cancelled the privatization tender as two potential bidders for the stake had doubtful reputations In February, Kyiv's business court annulled a ban on possible preparation for the privatisation of Centrenergo. The move followed January's ruling by the same court to ban the company's privatisation. The ruling was published following a lawsuit of Kyiv-headquartered company Ukrdoninvest, controlled by Vitaliy Kropachev, former close associate of the team of ex-president Petro Poroshenko.

In responce, the nation's Prosecutor Office, controlled by Zelenskiy, opened criminal proceedings on making the deliberately illegal decision to ban the privatisation of Centrenergo by a judge of the business court of Kyiv.

Meanwhile, the State Property Fund said in late January, the fund had started the procedure of selecting investment advisors for the privatisation of Centrenergo and is attracting an audit company with an impeccable reputation to conduct an audit of the enterprise for 2019. "In February, procedures to prepare a number of other large facilities for the privatisation will be launched," the SPF said in a statement.

Alexander Paraschiy at Kyiv-based consultancy Concorde Capital wrote in a note on March 3 that Concorde "was too optimistic last week to expect any changes in Centrenergo top management and the company’s policy, primarily because we did not expect that Zelenskiy will resist the cabinet’s initiative to replace the Kolomoisky-controlled management".

"That said, we are sticking with our negative view on Centrenergo's fundamentals and its near-term privatization prospects, expressed in our September note on the power generator," he added.