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Ukraine: Foreign Investors Prepare For International Tenders

Kyiv, 18 December 1997 (RFE/RL) -- Foreign investment banks are displaying cautious interest in a government tender in Ukraine to determine who will broker the sale of shares in one of the country's most potentially lucrative enterprises. But they are wary of a battle raging between the Ukrainian Parliament and the state privatization agency.

Parliament last week forbade going forward with a planned series of international tenders. It was the latest salvo fired between lawmakers and the president over control of the State Property Fund (SPF).

President Leonid Kuchma and SPF acting Chairman Volodymyr Lanovy in the past have ignored similar parliamentary resolutions. Most prospective bidders for the right to manage the sale of a 24-percent stake in Donbasenergo, the country's largest power generating company, expect the tender to go ahead and are continuing to prepare their bids for tomorrow's (Dec. 19) deadline.

CS First Boston's Investment and Banking Department in Kyiv and several other investment banks told RFE/RL that they were going ahead. But Oleg Salmin, Kyiv representative of Renaissance Capital, a large Russian financial group, says his company remains undecided whether to participate.

When imposing the latest privatization ban, lawmakers claimed Kuchma had violated legislation decreeing that only the SPF may authorize the sale of state property. Although the constitution authorizes Kuchma until June 1999 to issue economic decrees, such decrees are valid only if parliament fails to block them within 30 days.

SPF officials declined to comment directly on the parliament's ban on the tenders, but said the Donbassenergo sale would go ahead. The first on the SPF's list of enterprises to be sold on international markets, Donbassenergo generates 15 percent of the electricity produced in Ukraine through its five large thermal power plants. Donbassenergo officials say the company needs the equivalent of 675 million dollars in investment in order to turn a profit.

The current legislation bans privatization contracts until lawmakers approve a permanent chairman of the fund. Some legal experts contend that companies which lose tenders held under the acting chairman's stewardship may have legal grounds to challenge the SPF's decisions.