OREANDA-NEWS. On June 27, 2008 the resolution of the Supreme Commercial Court of Ukraine has overruled the resolution of the Appellate Commercial Court of Zaporozh’ye Oblast, reported the press-centre of SCM.

As the result it becomes possible to consider the case on the legitimacy of the shareholders' meeting, which made the decision on OAO "Dniproenergo" financial recovery, considering the interests of all the stakeholders, including the company's investors. 
 
On January 26, 2007, the Creditors' Committee of OAO "Dniproenergo" approved two Ukrainian coal mining companies, OAO "Komsomolets Donbassa" Mine and OAO "Pavlogradugol" as the investors of the energy company. They developed changes and amendments to the OAO "Dniproenergo" rehabilitation plan. These changes were also approved at the meeting of shareholders of OAO "Dniproenergo" on August 27, 2007. The company implemented all the activities within the framework of the rehabilitation plan. As the result the company paid out its billion debts and stopped the bankruptcy procedure.
 
The government did not make any claims against rehabilitation of OAO "Dniproenergo". The results of the meeting and the decisions made by the meeting were contested by a minority shareholder of the power generating company IC "Business Invest", which owns 0.0065%.

However, Zaporozh’ye Appellate Court violated the law as they considered the case without involvement of third parties - investors of the power generating company. Today the Supreme Commercial Court has overruled the decision on the case and sent it for consideration to the first instance court. This will bring together the interests of OAO "Komsomolets Donbassa" Mine and OAO Pavlogradugol, which helped the Company out of bankruptcy and invested significant funds into development of social programs and production facilities.
 
The Executive Director and a member of the Board of "Dniproenergo" Dmitriy Tevelyev said: "Today the management of the Company is making every effort not to get in the bankruptcy procedure again, which they previously managed to overcome to the benefit of both, the state and "Dniproenergo". We are in constant talks with the investors and we see that they are not interested to get the power generating company into another financial crisis.

The odious resolution of the Supreme Court of Ukraine upholding the resolution of the Appellate Commercial Court of Zaporozh’ye Oblast brought a number of questions about the fate of the company. Today the Supreme Commercial Court of Ukraine proved that the Appellate Court had grossly violated the law when considering the case, which directly involved the interests of the investors. OAO "Komsomolets Donbassa" Mine and OAO "Pavlogradugol" got a possibility to participate as third parties in consideration of the case on legitimacy of the decisions of the "Dniproenergo" shareholders' meeting, which had made far-reaching decisions for the power generating company and ended the financial crisis of the company. 
 
Short profile of the Company:
On January 26, 2007, the Creditors' Committee approved two Ukrainian coal mining companies, OAO "Komsomolets Donbassa" Mine and OAO "Pavlogradugol" as the investors of the energy company.  They developed changes and amendments to the OAO "Dniproenergo" rehabilitation plan.
 
The rehabilitation of OAO "Dniproenergo" was open and transparent and fully complied with the Ukrainian legislation. On May 20, 2005 the Commercial Court of Zaporozh'ye Oblast approved the rehabilitation plan of OAO "Dniproenergo", which is valid as of today. According to the plan the rehabilitation was to last until November 28, 2006.

Upon the Law of Ukraine "On measures aimed to ensure continuous operation of the Fuel-and-Energy Complex enterprises” coming into force the rehabilitation period of "Dniproenergo" was prolonged until January 01, 2008. As the previous efforts to turn the company round were unsuccessful, the only way to avoid bankruptcy of the energy-generating company and keep it as an integrated property complex was to engage an efficient investor.

The open proposal to engage investors to participate in the rehabilitation plan was made public on December 29, 2006 in the newspapers "Uryadovy Kuryer" (#247, December 29, 2006) and "Golos Ukrainy" (#249, December 29, 2006). "Alfa Bank" and OAO "Pavlogradugol" together with OAO "Komsomolets Donbassa" Mine(creditors and partners of "Dniproenergo" for many years) submitted the official applications. These two companies are the largest suppliers of steam coal at "Dniproenergo" and thus they are interested in further development of the energy-generating company.

The applications were considered at the meeting of the Creditors' committee, whichselected the investor who had offered the most efficient rehabilitation plan.
 
OAO "Dniproenergo" will be able to settle a number of financial, production and social problems with the help of the investors' funds.

The investor  committed himself to pay off the accounts payable (1 bn. UAH.) and invest min. UAH 1 bn. into development of the company. The funds were allocated as follows:

- modernization and reconstruction of production facilities;

- solution of serious environmental problems caused by lack of financing for environmental programs;

- solution of the company's major social problems  – providing housing for employees and settling the brain drain problem.
 
The rehabilitation plan offered by OAO "Pavlogradugol" and OAO "Komsomolets Donbassa" Mine allowed to keep the stock of shares owned by the state and transferred to the Charter Capital by NAK "Energy Company of Ukraine" in the amount 50%+1 share. As the result the state and NAK Energy Company of Ukraine (100% state owned company) maintained control over OAO "Dniproenergo", formed the management bodies and can execute control over their activity.

The changes and amendments to the rehabilitation plan specified repayment of OAO "Dniproenergo" accounts payable and reestablishment of solvency at the expense of the funds received from the investors OAO "Komsomolets Donbassa" Mine and OAO "Pavlogradugol" as the result of the joining the economic company created by the investors.
 
The decision of the Creditors' Committee was based on the fact that OAO "Pavlogradugol", "Komsomolets Donbassa" Mine and "Dniproenergo" have long-lasting production relations; the mines provide fuel to energy-generating facilities; and the investors' potential gives grounds to talk about stable operation of the company in the future.

The investor  extracts over 12 million tonnes of basic group coal and more than 2 million tonnes of coke coal (anthracite group), which fully satisfies the needs of "Dniproenergo" in coal fuel. The type of coal extracted by the investor is the design coal for "Dniproenergo" TPP. This is the only coal, which can be used to get the design efficiency indexes (efficiency factor, fuel specific consumption per unit of produced power energy or thermal power.

The availability of a good-functioning chain "operating company -coal consumer" makes it possible to optimize the logistic flows and provide coal to "Dniproenergo" TPP at due time and thus reduce the share of more expensive types of fuel.