"The sooner the privatization of power facilities takes place, the less problems the consumers will have," say experts

12 December 2016

How to attract investments in the energy sector and use privatization mechanisms most effectively? This was discussed by members of the Parliament, experts and representatives of the international financial institutions during the round table on the topic "Prerequisites for Privatization: Reality and Investors' Expectations" held on December 9.


The event took place with the support from the Committee of the Verkhovna Rada of Ukraine on Fuel and Energy Complex, Nuclear Policy and Nuclear Safety and with the assistance of the British Government.


This is the second event in a series of discussions regarding the prospects of privatization in the energy sector of Ukraine. The first such discussion consisted in the committee hearings on the topic "Ways of Improving Privatization Process and Attracting Private Capital to the Fuel and Energy Complex of Ukraine", held on October 11 in the premises of the Verkhovna Rada.

Oleksandr Dombrovskyi, Acting Chairperson of the Committee of the Verkhovna Rada of Ukraine on Fuel and Energy Complex, Nuclear Policy and Nuclear Safety, said: "Privatization is not a process whose effective realization we currently need. This is a guarantee of improving the investment climate. If no transparent rules of the game are established in the country, no investor will come to us. We must have positive results: there is just no other way."


According to Olga Belkova, Deputy Chairman of the Committee of the Verkhovna Rada of Ukraine on Fuel and Energy Complex, Nuclear Policy and Nuclear Safety, the privatization should not be delayed in anticipation of perfect laws: "Of course, right laws are important, but the process must start now, without waiting for perfect legal framework. According to the results of 2016, we have failed to gain a lot of money from privatization, but we have learned a lot and will use this knowledge in the future."

Dmytro Vovk, Head of the NCEPUR, added: "The sooner the privatization takes place, the less problems the consumers will have, and the less pseudo-rallies will take place. However, we must remember that Ukraine needs an adequate investor-practitioner and not a theoretician. Then there will be the results."


 Oleksii Shalaiskyi, Editor in Chief of "Nashi Hroshi", in his turn, said that the current legislation is designed in such a way that a western investor has no chance to participate in the bidding (tender): "We have now a very narrow market of bidders and competition can only be expanded due to foreign investors. However, all these tenders are designed in such a way that foreign investors have just no time to submit their documentation. Thus, we can make it clear that the most corrupt tenders in the energy sector of Ukraine are held on the basis of the applicable laws," added Oleksii Shalaiskyi.

Maryna Petrov, Deputy Director of the EBRD in Ukraine, said: "Everyone says that everything is bad, but I would like to say that we also have people who know how to do it [ carry out the privatization effectively - U. E.], who have done it before and done it well. Our main problem is that there are no clear rules of the game and trust on the part of investors. We may adopt new laws, but the main thing is that we have to prove to investors that they will be implemented and followed."

Andrii Favorov, Managing Director of Energy Resources of Ukraine, added that one of the problems for investors is the starting price of energy facilities, which is too high: "Overstated price at the initial stages does not attract but pushes investors off. It leads to the lack of buyers."

The same opinion is expressed by Andrii Haidutskyi, Deputy Head of the State Property Fund of Ukraine: "We need to move away from a method of forming inflated prices by independent experts. They are just afraid that they will be dragged through the courts for lowering the price of state-owned enterprises. In fact, the majority of energy assets in Ukraine are very old: they are from 50 to 150 years old, and they are in a very bad condition. And we put the prices as if we were selling premises in Khreshchatyk," said Mr. Haidutskyi.


Besides, the experts listed the following conditions required for effective privatization:


- Clear and stable rules of the game for investors.


- Independent operation of the regulator, which is now possible thanks to the adopted draft law. According to Maryna Petrov, investors are currently waiting for signals to evidence that the regulator has become really independent of the political will and interests of certain business groups.


- Introduction of stimulating tariff-setting which will allow companies that work efficiently and reduce their costs to have an extra income.


- Investors should expect a fair resolution of conflicts should they arise, and therefore, a fair judicial system is required.


Materials of "Ukrainian Energy"

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