Energy Privatization 2016-2017: Calendar and Process

Igor Bilous Chairman of the State Property Fund of Ukraine

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What is SPFU?

•  Privatization of all state property:

•  SOEs

•  Real Estate

•  Movable Property

•  Lease of state property

•  Management of SOEs (only those transferred to SPFU)

•  Regulator to whole valuation methodology and appraisers activity

State Property Fund of Ukraine – the authority responsible for management of the state owned assets and entities in Ukraine

Main goals of SPFU: 1

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New Privatization Program 2015 - 2016

• Reduce state subsidies • Attract foreign investors •  Increase transparency •  Improve company

performance • Reform legislation for

privatization to international standards

• Chemicals • Electricity Generation • Electricity Distribution • Combined Heat and Power • Engineering

Goals of the Program Target Industries 2016

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SPFU can hire investment advisors

Sale of control stake in privatization

Foreign-state-owned companies are welcomed

International arbitration is possible

Financial disclosures from buyers down to ultimate beneficiary owner

No bidders from aggressor countries

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•  Advisors hired for OPP, GenCos/DisCos

•  Advisors from USAID for OPP / Oblenergos

•  Transparent DD and marketing process for SOEs

•  Sale of entire state stake to auction winner

Legislation Changes for Foreign Investors

Results in 2015-2016

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SPFU Principles of Privatization

Process •  Run privatizations in accordance

with Ukrainian law •  Active SPFU role in management of

SOEs and bidder outreach •  Personal assistance to each bidder

Competitive •  Equal treatment to all bidders •  Open access to all information •  No constraints to participate

Transparent •  Public information disclosures •  Clear negotiation for SPA and NDA •  Engaging investors + stakeholders •  Extensive due diligence on SOEs

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Ternopiloblenergo (51%)

Mar Feb July Aug Sept Oct

Khmelnitskoblenergo (70%)

Mykolaivoblenergo (70%) Kharkivoblenergo (65%)

Cherkasyoblenergo (71%) Zaporizhyoblenergo (60%)

Nov Dec

Announcement Publication Auction Day Closing Period

Jan

2016 2017

DisCos & GenCo Timeline for Privatization

Centrenergo (78%) TBD

* (%) - state stake for sale

Expected Time for:

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Khersonska CHP (99%)

Mar Feb July Aug Sept Oct

Odeska CHP (99%)

Dniprodzerzhinska CHP (99%)

Mykolaivska CHP (99%)

Nov Dec

Announcement Publication Auction Day Closing Period

Jan

2016 2017

CHP Timeline for Privatization

* (%) - state stake for sale

Expected Time for:

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4 CHPs: - Odesa CHP - Mykolaiv CHP - Dniprodzerzhynska CHP - Kherson CHP

6 DisCos: - Khmelnitskoblenergo - Ternopiloblenergo - Mykolaivoblenergo - Kharkivoblenergo - Cherkasyoblenergo - Zaporizhyoblenergo

Advisor: Targets: Key Workstreams:

•  Pre-privatization advice •  Review of Contracts and

Obligations •  Energy Privatization

Communication Strategy •  Privatization Advisory •  VDD and Data Room •  Teasers & Information

memorandums

Role of Advisors in Energy Privatization

•  Pre-privatization advice •  Data Room •  Teasers & Information

memorandums

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Visit Data Room, Q&A with advisors

Sign NDA 1 to start DD

Meet with State Officials & SOE Management

Revise SPA draft and prepare all

package documents (KYC etc.)

Request permission from AMC & pay

guarantee deposit (5%)

Participate & Win

the Auction

Closing Period

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Review Announcement to know Auction Day

Sign NDA 2 for SPA draft

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Ukraine Energy

Conference

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up to 45 days from Announcement to Auction Day

Investors’ next steps

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SPFU’s next steps

Step Expected Timeframe

Importance

Negotiate NDA 1 July 2016 •  NDA 1 gives access to preliminary due diligence info and info memo

Form Tender Commission

Q3 2016 •  Stakeholder group from GOU and SOE •  Creates fixed conditions for sale

Draft Privatization Documents

Q3 2016 •  Fixed Conditions detail obligations of buyer and seller, including investments

•  Share Purchase Agreements negotiated between buyers and SPFU before auction

Approve Auction Date, Starting Price

Q3-Q4 2016 •  Sets starting price sets floor for auction •  Announcement starts 45-day window

Negotiate 2nd NDA Q3-Q4 2016 •  NDA 2 gives buyers access to SPA, FC, company management and full VDR

Qualify bidders Q3-Q4 2016 •  Bidders submit financial disclosures, no technical pre-qualification

Host Auction Q4 2016 •  Bidders give sealed bid, one per bidder Determine Winner Q4 2016 •  Price-only evaluation Close Sale Q4 2016/Q1 2017 •  2 months to negotiate final sale

45 d

ays

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Thank you for your attention!

Contact details: igor.bilous@spfu.gov.ua +38 (044) 200-33-93