OREANDA-NEWS. April 08, 2008. Donbass Fuel-Energy Company, the largest private shareholder of Dneproenergo, is expressing its protest against the decision of the Supreme Court of Ukraine (SCU), which sends the generating company back to bankruptcy and gives start to endless corporate conflicts to threaten the energy security of our country, reported the press-centre of Donbass Fuel-Energy Company.

Unfortunately, in this case the court was guided not by the letter of the law, but acted in favour of the Privat Group, which had organized a wide-scale raider attack on Dneproenergo.
 
Inviting investors through an open tender and the approval of Dneproenergo’s financial rehabilitation actions at the shareholders meeting was the only right solution to have made it possible to take the company out of the bankruptcy procedure. As a result of the rehabilitation, the demands of the creditors, mainly represented by state-owned institutions and companies, were satisfied.

The state retained the control over the generating company while having significantly replenished the national budget. Over UAH 2 billion of investment was raised including the funds for equipment modernization and social programmes implementation. The company was granted the possibility for normal development; it improved its investment attractiveness, and the value of the state controlling stake increased several times.

The rehabilitation plan was approved by the shareholders, courts of several instances, the Anti-Monopoly Committee of Ukraine, the National Electricity Regulatory Commission, the State Property Fund; an amicable settlement agreement was entered into; an investment agreement was signed.
 
The today’s decision of SCU has postponed the start of the large-scale investment programme to an uncertain term and has become a part of a thoroughly prepared raider attack. Several companies of the Privat Group – Business Invest, Gambit and UGOK (Southern Ore Mining and Processing Integrated Plant) initiated a number of claims challenging the legitimacy of the rehabilitation. The claims were replicated by having the shares sold to individuals who were applying to different district courts of Ukraine.

The basis for the whole scheme was the Registrar – Ukrneftegaz – controlled by the above mentioned group, which refused to make amendments in the Register of Dneproenergo’s shareholders. The actions of Ukrneftegaz, which is the monopolist in the market of registrar services for energy companies, have already given rise to strong censure.

The representatives of generating and energy supply companies are outraged by the actions of this registrar disrupting shareholders meetings and interpreting the law at its own will. The Securities and Stock Market State Commission (SSMSC) took the decision to withdraw its license and the Public Prosecutor’s Office is making an investigation with regard to the criminal case against the officials of Ukrneftegaz.

United in its actions and luring some officials from ECU and the Ministry of Fuel and Energy to support them, the raiders pursued one goal - to bring Dneproenergo back to bankruptcy and, in disguise of claims about protecting state interests, to put managers loyal to the Privat Group on the management boards of the generating company.
 
At present there is not a single claim made on behalf of the state challenging the rehabilitation of Dneproenergo. The attempts have been and are being made by Privat-controlled company Business Invest holding 0,0065% shares in the generating company to cancel the decision taken by 92% of the shareholders.

The decision of the Supreme Court of Ukraine may set a precedent entailing bonanza raider schemes when minority shareholders would be able to block the operation of a whole company to please some financial and industrial groups. It will send a negative signal to the whole investment community, which will be a serious obstacle to the implementation of the Ukrainian government’s plans to denationalize the energy facilities.
 
At present, the actions of SCU have perfectly demonstrated the imperfection of our court system. DTEK, as an efficient owner of the energy enterprises in Ukraine, appeals to the President, Government, General Prosecutor’s Office, and the Verkhovna Rada of Ukraine to pay attention to the outrageous violation of the Law for the sake of raiders, which have no concerns at all over the future of Ukrainian energy sector and the energy safety of the country. We expect the decision of the SCU to be challenged in European courts, which are not subject to the pressure and influence of and protected against the lobby of financial and industrial groups.