A sensational piece of news has come from Donetsk, where shadow privatization celebrated its first and decisive victory. The auctioned-off thermal power plants (TPP) of Donbasenerho, this country’s largest electricity generating company, are to be finally privatized by the Tekhrempostavka firm by the end of next week, Interfax-Ukraine quoted Ihor Smyrnov, chairman of the company board of directors, as saying. As he put it, the new owners have brought and already won a lawsuit against him for the acquired property. As reported earlier, the Luhansk, Zuyivka, and Kurakhova TPPs, until recently part of Donbasenerho, were auctioned off on April 28 last for UAH 208 million as payment of debts sought by the state-run (!) Energy and Fuel of Ukraine Company, a subsidiary of the Ukrainian Gas trading house. On May 5 the Prosecutor General’s Office of Ukraine suspended the transfer of Donbasenerho property to its buyer, the Donetsk-based Tekhrempostavka Company, pending a High Arbitration Court of Ukraine ruling on whether this transaction complies with the law in force. However, on June 27 the court dropped the case on the three Donbasenerho thermal power plants on the grounds that they are outside the court’s jurisdiction.
The State Property Fund (SPF) has announced its intention to bring the three TPPs back into state ownership through a court action, trying to prove that UAH 208 million is an amount underrated several times over. But the National Network of Auctioning Centers, a tender-selected appraiser, has not yet done the job. Yury Hryshan, SPF deputy chairman in charge of appraisals, has said the delays were caused by the absence of a full property inventory at Donbasenerho. In this connection, an extension of the appraisal period was allowed. Now that three of the five Donbasenerho TPPs are being privatized, it is doubtful that the appraisers will be allowed to finish their work. Accordingly, the SPF will not get the decisive argument to win its court case. A brilliantly-executed operation to denationalize the thermal stations at a comical price became possible due to the complete indifference of the authorities. The idea of suspending the alienation of property as payment for debts has remained just an idea. Leonid Kuchma vetoed the law to this effect because of a number of objectionable articles, for example, on the suspension of privatization in the energy sector until the elections. Verkhovna Rada failed to muster the required number of votes on the presidential version of the law. The president did not retaliate, and neither side has taken any actions since. The government has never voiced any clear attitude toward shadow privatization. Minister of the Economy Oleksandr Shlapak asked journalists in late October not to exaggerate the problem. Prime Minister Anatoly Kinakh promised to look into the matter, but everything was limited to giving instructions to clearly overworked First Vice Premier Oleh Dubyna. As a result, foreign investors were shown that now they can hardly hope to buy Ukrainian electricity generation and supply companies, one of which is being privatized absolutely openly by an obscure limited-liability company in plain view of the national leadership and under wide press coverage. Next in line are the Luhanskoblenerho and Donetskoblenerho state companies, also privatized according to the same pattern — for payment of debts — and at a strange price.
All that is so far keeping these facilities from being privatized is the National Energy Regulation Commission, which refuses to grant licenses to the new owners, and the State Commission for Securities and Stock Market, which keeps a register of owners. But the recent atrocious, almost ritualistic, murder of Oleksiy Romashko, member of this commission, had a psychological effect strong enough to make these agencies take a softer stand.
Simple ways of combating shadow privatization were found long ago. Oleksandr Bondar, State Property Fund chairman, said that the only thing needed is a ban on alienating the property put on the privatization list. Nothing else is required, but neither Verkhovna Rada, the Presidential Administration, nor the Cabinet of Ministers seem in any hurry for some reason to make this decision. That this provision could be approved even by a routine government resolution was recently demonstrated by Premier Kinakh’s ban on the sale of Naftohaz Ukrayiny property without the knowledge of company management. Does this mean decisions are made on a selective basis?
The destiny of Donbasenerho is now quite predictable. Donetsk Oblast Governor Yanukovych, who supported from the very beginning the privatization of the three TPPs by Tekhrempostavka, has already surmised that the power plants would simply be leased out to the same Donbasenerho. As a result, the brilliant-headed founders of a limited- liability company will be able to clip coupons without managing the facility, without clearing wage arrears, or updating its obsolete equipment. In other words, without fulfilling the notorious investment obligations generously being imposed on the buyers who went through the official procedure of privatization. It is also doubtful that we will know the new owners’ names, although both the Tax Administration and the Antimonopoly Committee have promised to find out. Moreover, when guns fire, journalists take a reasonable attitude toward official silence.
