Archive for October 24th, 2012

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Combined Heating and Power plant privitisation – Ukraine

October 24, 2012

This year, the combined heating and power plants (CHP’s) for Odessa, Kharkiv, Dnepropetrovsk and Kherson are all due to be privatised.

None of which seems likely between now and the end of the year due to the tender process and the clauses within the tenders.

Amongst the clauses are the conversion of the plants from being gas fired to coal fueled.   There are also requirements to increase output, in some cases quite considerably, within 3 years, as well as to overhaul and modernise the plants.

Not withstanding that, any purchaser must also repay all overdue debts within 6 months of acquisition.

Any purchaser must produce a feasibility study, and build, new heating networks relating to the region in  some cases.

If that was not enough, any entity taking part in the tenders must have a license for subsoil production in Ukraine which holds a minimum of 1 billion cubic meters of gas reserves – insuring (and committing to) sufficient gas reserves pending conversion to coal.

If that has not put off or disqualified most interested parties, there is then the tender costs to consider with the initial bid cost at UAH 3.5 million and a starting full purchase price for each CHP of about UAH 330 million – discounting the hidden costs of putting together feasibility studies and tenders themselves etc – which is very expensive in and of itself.

Immediately one tends to think of Dmitry Firtash as the most likely to go for this, but it appears he doesn’t really know what’s what – yet.

“I didn’t know that CHPs would be sold. Therefore, I can’t say anything now. If there was a sale, we would definitely take part. But it should be understood what will be tendered and what will be sold. There’s no sense in only buying. You have to know what it is.”

If what he says is true, and he doesn’t know what’s what – then it is a foregone conclusion nobody else will.  Thus I have serious doubts any CHPs will manage to be privatised before the end of 2012.

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