Large-scale privatization is unblocked
The Verkhovna Rada adopted Draft Law No. 4543 in the second reading, paving the way for large-scale privatization, which the parliament had blocked for a year due to the coronavirus pandemic. Head of the State Property Fund Dmytro Sennychenko said that privatization can add Hr 12 billion ($400 million) to the state budget, create new jobs, and grow the tax base.
https://www.epravda.com.ua/news/2021/03/30/672461/
- Draft law excluding state assets from privatization passed in first reading. Not all state assets can be privatized. Draft Law No. 4020, approved in the first reading with 289 votes, lists 659 enterprises that must remain in state hands:
- Joint-stock companies, no less than 50% + 1 share of which must be owned by the state, including Naftogaz, Artem, Ukrposhta, Ukrzaliznytsia, and others (Annex 1);
- Companies and associations that must be 100% owned by the state, including Energoatom, Ukrhydroenergo, Ukrenergo, Gas Transmission System Operator of Ukraine, Chornobyl Nuclear Power Plant, and others (Annex 2);
- Cultural and sports facilities, including the National Circus of Ukraine, National Centre of Oleksandr Dovzhenko (production facilities for film studios), National Publishing House of Children’s Literature “Veselka”, National Reserve Khortytsia, Taras Shevchenko National Museum, and others (Annex 3);
- Enterprises that are not subject to privatization, but may be transformed into business companies, including Rubin, Kharkiv Plant of Special Machines, Lviv Armored Plant, and others (Annex 4);
- Forestry assets, including Yalta Mountain and Forest Reserve, Shatsk National Nature Reserve, and others (Annex 5).
However, in our view: (i) the rationale for state ownership should be part of the law; (ii) the list of SOEs, prohibited for privatization, should be based on such a rationale; and (iii) there should be a timeline for privatization for the remaining SOEs.
It is unclear what the rationale is for the state ownership for many of these SOEs, e.g., the “Veselka” publishing house. There are several private publishing companies in Ukraine, from which the state can procure the necessary services.
It is also unclear what the difference is between the SOE groups in Annex 2 and Annex 4. The SOEs on both lists are banned for privatization. The definition for Annex 4 SOEs explicitly allows for corporatization, while there is no explicit prohibition for corporatization for SOEs in Annex 2.
Moreover, in our opinion, the state should aim at abolishing such legal forms as state unitary enterprise and standardize the legal forms for SOEs and their private competitors. Many of the SOEs in Appendix 2 are currently registered as state unitary enterprises. – SOE Weekly.]
https://www.epravda.com.ua/news/2021/03/30/672455/
First billion from privatization in 2021
Head of the State Property Fund Dmytro Sennychenko announced that the state has earned its first Hr 1 billion from privatization in 2021. [In 2021, total proceeds from large-scale privatization are expected to hit Hr 12 billion ($400 million) after the adoption of Draft Law No.4543. – SOE Weekly.]
Corporate governance in SOEs
Ukrspyrt looks for a new CEO
The Ministry of Economy has announced the start of a competitive selection for the position of Ukrspуrt’s CEO. Applications are accepted until 6 pm Kyiv time on 9 April. Serhiy Bleskun, as the acting CEO, invited everyone who feels capable to submit their applications. Bleskun did not specify whether he will take part in the competition.
In SOE Weekly (Issue 11), we reported that, according to Bleskun, the company announced a procurement notice for executive search consultants who will select a full-fledged CEO. On 19 January, requirements for executive search consultants were posted to the ProZorro website. Ukrspyrt last had a permanent CEO in 2014, and the company has been led by various “acting” CEOs since.
https://www.epravda.com.ua/news/2021/03/26/672356/
Issue 11 on Ekonomichna Pravda: https://www.epravda.com.ua/rus/publications/2021/01/23/670293/#2
Ex-CEO of PrivatBank put on the wanted list
According to the acting head of the Specialised Anti-Corruption Prosecutor’s Office (SAP), Maksym Hryshchuk, the Office put a warrant out on the former CEO of PrivatBank, Oleksandr Dubilet. He is suspected of being involved in the embezzlement of UAH 8 billion of the bank before its nationalisation in late 2016. As we reported in SOE Weekly (Issue 16), Volodymyr Yatsenko, the former first deputy CEO of PrivatBank, was detained at Boryspil airport. He is suspected of embezzling property on a large scale. On Feb. 25 , a company whose name the court may not disclose, deposited Hr 52 million, and Yatsenko was released on bail. According to the Prosecutor General’s Office, on Feb. 23, former CEO of PrivatBank, Oleksandr Dubilet, was charged in absentia with embezzlement in the amount of Hr 136 million. In SOE Weekly (Issue 19), we reported that Prosecutor General Iryna Venedyktova signed new charges against former PrivatBank officials, including former CEO Oleksandr Dubilet, his deputy Volodymyr Yatsenko, and the head of interbank operations. They are suspected of embezzling UAH 8 billion.
https://www.epravda.com.ua/news/2021/03/29/672410/
Issue 16 on Ekonomichna Pravda: https://www.epravda.com.ua/publications/2021/02/27/671468/#2
Issue 19 on Ekonomichna Pravda: https://www.epravda.com.ua/publications/2021/03/20/672142/#2
PrivatBank’s appeal hearing to unblock СEO selection postponed
The Northern Court of Appeal postponed the hearing of PrivatBank’s appeal against the Commercial Court of Kyiv’s decision suspending the competitive selection for the position of the bank’s CEO. The grounds are unknown. In SOE Weekly (Issue 16), we reported that the Commercial Court of Kyiv suspended the competitive CEO selection, satisfying the claim of PrivatBank’s trade union, which demanded to cancel the competition altogether. The court reasoned that, in case the results of the competitive selection are declared illegal, it may lead to new lawsuits.
https://www.epravda.com.ua/news/2021/03/31/672488/
Issue 16 on Ekonomichna Pravda: https://www.epravda.com.ua/publications/2021/02/27/671468/#2
Case against the National Bank of Ukraine’s first deputy governor handed over to the National Anti-Corruption Bureau of Ukraine
On March 25, the Prosecutor General’s Office handed over its investigation into possible embezzlement of Hr 900 million during PrivatBank’s nationalization to NABU. The investigation was opened against First Deputy Governor of the National Bank of Ukraine (NBU) Kateryna Rozhkova and several other NBU officers.
The Prosecutor General’s Office clarified that it was only investigating embezzlement, not high treason as reported earlier.
In SOE Weekly (Issue 19), we reported that the NBU’s First Deputy Governor Kateryna Rozhkova and several NBU officers who worked on the investigation and nationalization of PrivatBank in 2016 are under investigation by the Security Service of Ukraine (SBU) and the State Bureau of Investigation (DBR).
The Kyiv Post said that, according to a document from the Prosecutor General’s Office seen by the newspaper, they might face charges of high treason and embezzlement on the ground of sharing information with the forensic company Kroll Inc., consulting firm AlixPartners, and the law firms Hogan Lovells and Asters.
All of the above are companies that Ukraine had officially hired to investigate or help nationalize PrivatBank, which had $5.5 billion missing at the time of nationalization in 2016. Its former owners, Ihor Kolomoisky and Hennadiy Boholyubov, allegedly embezzled money from the bank with fraudulent loans and money laundering.
Rozhkova told the Kyiv Post that she was not aware of any pending charges against her but that attacks against the NBU’s co-operation with the foreign companies are nothing new.
Rozhkova also commented on her Facebook page that internal investigations into their co-operation with Kroll and legal advisers are already underway within the NBU. She stated that the NBU and Kroll had played a key role in identifying the fraudulent schemes inside PrivatBank and those responsible for their implementation.
Kyiv Post sources who were not authorized to talk to the media said that the investigation has been revived either by the current NBU governor, Kyrylo Shevchenko, or someone in the Presidential Office.
https://www.epravda.com.ua/news/2021/03/31/672495/
Issue 19 on Ekonomichna Pravda: https://www.epravda.com.ua/publications/2021/03/20/672142/#2
SOE updates
Banks
Paris Court of Appeal overturned the $1.3 billion award to Oschadbank. The Paris Court of Appeal ruled in favor of the Russian Federation, which had been ordered to pay $1.3 billion to Oschadbank by the Permanent Court of Arbitration seated in Paris.
According to Russia’s Ministry of Justice, the court of appeal ruled on March 30 that the arbitration tribunal had no jurisdiction to consider the dispute. Oschadbank called the decision erroneous and contrary to established case law both in France and other European countries. The bank intends to challenge the ruling.
According to Oschadbank, the Paris appellate court did not take into account the specifics of investor protection under international agreements and the remedies offered by arbitration. In addition, the bank is considering whether procedural law and the scope of the appellate court were applied correctly.
The NBU expressed concern about the appellate decision and emphasized the importance of proving that Russia’s actions against Ukraine were unlawful on an international level.
https://www.epravda.com.ua/news/2021/03/30/672470/
Energy sector
Energoatom increases its revenues for the second quarter in a row. According to the results of the first quarter of 2021, Energoatom received a net revenue of Hr 16.4 billion.
Compared to the fourth quarter of 2020, Energoatom’s net revenue increased by Hr 3.7 billion (or by 29%); compared to the first quarter of 2020, by Hr 1.8 billion (or by 13%).
https://www.epravda.com.ua/news/2021/04/1/672518/
AMCU fines Privat group petrol stations, Ukrnafta’s petrol stations included. The Antimonopoly Committee (AMCU) recognized that the Privat group’s gas stations colluded with one another and fined them for a total of Hr 4.7 billion.
The investigation established that the petrol retailers used a system of non-cash payments with scratch cards and Avias brand fuel cards to engage in anti-competitive behavior. Approximately 1,625 gas stations took part in the scheme, AMCU said. Ukrnafta is on the list. (Ukrnafta operates 537 petrol stations.)
Ukrnafta announced that it plans to appeal the penalty in court, claiming that it has no legal or economic logic.
https://www.epravda.com.ua/news/2021/03/31/672475/
Infrastructure
Increases in tariffs and wages at Ukrzaliznytsia. A cooperation decision was signed between Ivan Yuryk, Ukrzaliznytsia’s acting CEO, and Vadym Bubnyak, the leader of the Trade Union of Railway Workers and Transport Builders of Ukraine, to increase wages for railway workers by 10% from June 1. The parties also agreed that, provided that the key income indicators are met, the second stage of the wage increase will take place on Oct. 1, 2021. The increases will apply to employees who make less than Hr 30,000. In SOE Weekly (Issue 19), we reported that the chair of the Temporary Commission of Inquiry of the Verkhovna Rada, Yulia Hryshyna, announced that Ukrzaliznytsia’s trade union is planning a large-scale strike to halt all transportation. [Notably, this was announced by Hryshyna rather than unions themselves. However, neither Hryshyna nor the unions gave any reason for the upcoming strike. The strike had not taken place yet. – SOE Weekly.]
https://www.epravda.com.ua/news/2021/03/30/672438/
Issue 19 on Ekonomichna Pravda: https://www.epravda.com.ua/publications/2021/03/20/672142/#4
Ukrzaliznytsia expects Hr 3.6 billion in profit in 2021. At a meeting on March 31, the Cabinet of Ministers approved Ukrzaliznytsia’s financial plan, which forecasts Hr 3.6 billion in 2021. The company’s total revenues are expected to be Hr 93 billion, with Hr 24.7 billion expected to be allocated to the state budget and state target funds. In 2021, the company will spend Hr 27 billion on capital investments. According to Yuryk, the main projects include large-scale electrification of railways, purchase of a large consignment of passenger cars with funds allocated from the state budget, modernisation of locomotives and repair of freight cars.
https://www.epravda.com.ua/news/2021/03/31/672501/
The Ministry of Social Policy agrees to raise the tariff for pensions delivery by Ukrposhta
The Ministry of Social Policy has agreed to Ukrposhta’s request to increase the tariff for the delivery of pensions from Hr 60 to Hr 100.
According to Maryna Lazebna, Ukrposhta issued an ultimatum that would stop the delivery of pensions to 3.5 million people. She said that although some retirees’ pensions can be transferred to a bank card, one and a half million people are low-mobility groups and residents of villages where there are no banks.
The minister said that, despite the ministry’s acquiescence with Ukrposhta’s demand, it will try to get as many retirees as possible to be serviced by banks instead. In her interview, Lazebna said that the government is considering an alternative to Ukrposhta in the future. Negotiations are under way, in particular, with Oschadbank.
The minister said that it is not possible to cover all Ukrposhta’s costs at the expense of retirees. She added that the company has other sources of revenue to cover its expenses.
[We support the idea of a competitive selection for pension delivery services, but it should be duly compensated by the Pension Fund. Cross-subsidisation of such costs from Ukrposhta’s or a state-owned bank’s other revenues violates the Organization for Economic Cooperation and Development’s principle of a level playing field, among others. – SOE Weekly.]Ihor Smilianskiy, CEO of Ukrposhta, responded that the minister’s statements were false and defamatory to Ukrposhta and called for an apology. He said that the real increase in tariffs is 11% in 2021, while Ukrposhta has had to deal with a 37% minimum wage hike and other costs. Smilianskiy also said that the minister does not know the subject, since the cost of receiving a pension-equivalent transfer in branches of Nova Poshta is 2% + Hr 25 per transaction, while Ukrposhta asked for a 1.3% delivery tariff. On March 31, the Cabinet of Ministers increased the tariff for pension delivery from 2.3% to 2.65% of the total amount in villages and from 1.15% to 1.3% in cities starting 1 April.
https://www.epravda.com.ua/news/2021/03/31/672508/
https://www.epravda.com.ua/news/2021/03/30/672429/
UkSATSE reported about Hr 1.5 billion in losses for 2020
According to the financial results of 2020, Ukrainian State Air Traffic Services Enterprise (UkSATSE) received net losses worth Hr 1.5 billion. According to the consolidated report on the fulfillment of the company’s financial plan, the difference between income from the sale of air navigation services and their cost over the past year amounted to Hr 664.4 million.
UkSATSE explained that this was due to the effects of the COVID-19 pandemic. The financial result was also negatively affected by the arrears from the private airline Ukraine International Airlines (UIA), which at the end of 2020 owed UkSATSE over HR 1.3 billion. The ultimate beneficiaries of UIA include Aron Mayberg and Ihor Kolomoiskiy. In 2019, UkSATSE also reported HR 1.12 billion in losses. During 2020, UkSATSE attracted a long-term loan of 25 million euros from the European Bank for Reconstruction and Development, as well as HR 200 million financial assistance from the Ukrainian Seaport Administration (USPA).
[It is unclear why one SOE (USPA) provides financial assistance to another SOE (UkSATSE), and what the business relationship between these two SOEs is. Both USPA and UkSATSE are controlled by the Ministry of Infrastructure. – SOE Weekly.]From the previous years, UkSATSE has a loan worth € 10.1 million from the EBRD, € 9.8 million euros from the European Investment Bank (EIB), and a financial leasing agreement with a Cyprus-based company Stilbay Holdings Limited for € 3 million.
[According to the Cyprus government’s register of companies, Stilbay Holdings Limited was in a state dissolution due to completion of voluntary liquidation. – SOE Weekly.]https://www.epravda.com.ua/news/2021/04/2/672569/
Other sectors
Export Credit Agency recapitalized by the state for Hr 1.8 billion
On March 31, the Cabinet of Ministers increased the authorized capital of the Export Credit Agency (ECA) by Hr 1.8 billion, bringing its total authorized capital to Hr 2 billion.
[It is unclear what kind of services ECA will provide. On the one hand, the ECA was supposed to provide insurance to cover country risks, when such insurance is not available from the market. At the same time, according to the news on its most recent co-operation with the state-owned Oschadbank, it intends to offer insurance for loans not sufficiently backed by collateral. As such insurance may be available from private insurance companies, this type of activity may be considered as state aid or an implicit state guarantee for loans.In addition, ECA, although registered as a company, does not fall under the general regulatory framework for insurance companies. – SOE Weekly.]
Minister of Economy Ihor Petrashko said that, according to his ministry’s estimates, ECA’s recapitalization will allow Ukraine to increase its total exports by 2-3%. The ECA’s authorized capital will be increased by the issue of new shares, with 100 percent of the shares kept in the state’s ownership.
[Note that ECA is registered as a private joint-stock company rather than a government agency. – SOE Weekly.]The Ministry of Finance will release state bonds in the amount of Hr 1.8 billion with a term of 15 years and interest rate of income to 9.3 percent annual in exchange for an additional issue of ECA.
[Note that this will increase the government debt accordingly. – SOE Weekly.]https://www.epravda.com.ua/news/2021/04/1/672542/
Procurement Notices — powered by ProZorro
Together with ProZorro, we selected procurement notices announced by the top 15 Ukrainian SOEs and four state-owned banks from March 25-31 with an expected value of more than Hr 1,000,000. State Food and Grain Corporation, Automobile Roads of Ukraine, and PrivatBank are not subject to the requirement to use ProZorro by law and have not used it in the past two years.
Ukrainian SOE Weekly is an independent weekly digest based on a compilation of the most important news related to state-owned enterprises (SOEs) and state-owned banks in Ukraine. Editorial team: Andriy Boytsun, Mariia Kramar, Dmytro Yablonovskyi, and Oleksandr Lysenko. The SOE Weekly is produced and financed by Andriy Boytsun. Communications support is provided and financed by CFC Big Ideas. The SOE Weekly is not financed or influenced by any external party.
© 2020–2021 Andriy Boytsun, all rights reserved.
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