KYIV, October 16, 2000 -- Centrenergo, Ukraine's third-largest electricity generator, announced today that it has signed an agreement with the Bank of New York to issue Level 1 American Depositary Receipts (ADRs).
Dragon Capital, a top Ukrainian investment bank, is acting as Centrenergo's adviser on the ADR program.
"We're very pleased to be offering these securities, as they will give a new group of investors the chance to share in our company's future," said Serhiy Zayets, newly appointed head of the Foreign Economic Affairs Department at Centrenergo.
Under the ADR program, holders of existing Centrenergo shares can convert them to ADRs by depositing them with the Kyiv-based custodian ING Bank Ukraine (a subsidiary of the Dutch ING Bank). Depositary receipts will then be issued by the Bank of New York; each one will represent 50 shares of Centrenergo.
Dragon Capital will make markets in the ADRs, and will arrange their listing on a Western stock exchange. From October 16-20, representatives of Dragon Capital are visiting New York to promote the new securities to the international investment community.
"This program will give Western investors better access to one of Ukraine's best stocks," said Andriy Dmytrenko, a utilities analyst at Dragon Capital. "Centrenergo has continuously produced good operating results, and its management has a consistent policy of openness toward investors. Its shares are very attractively valued right now."
Dmytrenko pointed out that based on Friday's price of USD 0.15, Centrenergo is trading at discounts to its Ukrainian peers of 24% and 23% on the valuation ratios EV/output and EV/capacity. Compared with similar listed companies in Russia, the discounts on Centrenergo shares are even greater, at 66% and 78% respectively.
Dmytrenko added that the Ukrainian government has announced plans to sell more shares in the country's electricity generators next year, as part of the ongoing reforms of the country's energy sector. "We expect that further privatization will give a boost to both the ADRs and the underlying shares," said Dmytrenko.
Centrenergo is one of four electricity generation companies listed on the PFTS, Ukraine's principal exchange, where it trades under the code CEEN (Reuters: CEEN.PFT). In the first half of 2000, Centrenergo produced 7,927 GWh of electricity, at power plants that run on coal, natural gas and oil. This accounted for 9.2% of Ukraine's total output, and about 25% of the listed generators' output.
Dragon Capital is a Kyiv-based investment bank founded in 2000. In August, its first month of operations, it was ranked the number-one broker in terms of turnover on the PFTS.
The ratios cited by Dmytrenko are based on enterprise value (EV, or market capitalization plus net debt), which is widely believed to give a more accurate picture of a company's true value than market capitalization alone. Ratios to capacity and output are used in international comparisons because they disregard the effects of differences in accounting and tax systems, and eliminate the effects of one-off distortions in financial results.