The privatisation of the Ukraine’s state-owned distribution companies has stalled, and looks unlikely to resume this year. The country has 27 distribution companies in total. Stakes in six were sold this spring to strategic investors but three others were also forced into involuntary bankruptcy after creditors demanded the liquidation of assets to pay debts.

The spring sales were designed to be transparent sales to strategic enterprises, with offshore companies and Russian buyers excluded from the tender process. Only internationally recognised energy companies were permitted to make bids. However the plan, devised by former prime minister Viktor Yushchenko, appears to be in disarray. He is no longer in power and a US company which purchased stakes in two of the distributors – AES – is accusing his successor of failing to fulfil a promise to raise the ceiling on electricity tariffs to make the distribution businesses economical.

The Ukraine president, Leonid Kuchma, froze further sales in May after three energy distributors, Donet-skoblenergo, Luhanskoblenergo and Donbasenergo were forced into involuntary bankruptcy by major creditors. Analysts have been critical of the subsequent sales of assets from the companies and an investigation was launched but this has now stalled. Privatisation looks unlikely to continue until it has been completed.

AES, which paid almost $70 million for controlling stakes in Kylvoblenergo and Rivneoblenergo, was planning to invest a total of $100 million in the two companies. It has warned that if tariffs are not raised soon it will have to consider cutting these plans. Slovakian company Vychodoslovenske Energeticke Zavody, which purchased the other four distribution companies this spring is also reported to be seriously upset by the delay.