Anti-corruption detectives are probing the financial dealings of an investment firm closely linked to President Petro Poroshenko, according to a March 1 court order.
Investigators with the National Anti-Corruption Bureau got access to documents from Investment Capital Ukraine, the firm which was hired to sell Poroshenko’s Roshen confectionery firm – and failed.
ICU is under investigation over its purchase – and later sale at a stunning profit – of Eurobonds issued by DTEK, the country’s privately owned heat generation monopoly. Investigators suspect ICU of buying the company’s debt at a low value while having inside information that a high coal benchmark price would be set, spiking the firm’s revenue and increasing the value of its Eurobonds.
“ICU, as a law-abiding group, acts in strict accordance with the legislation of all countries in which it is registered and conducts corporate operations,” the firm told the Kyiv Post in a statement. “ICU always scrupulously provides documents needed in connection with duly received requests, and is interested in objective, apolitical, and unbiased process of determining the truth.”
The docs that NABU wants include information about the eurobonds’ purchase from March 2015 to March 2016, and then about their sale from March 2016 to December 2017. Over that period of time, their par value nearly tripled.
The coal benchmark price in question is known in Ukraine as the Rotterdam+ formula. It sets the price of coal at its cost in Rotterdam, plus transit to and from the Netherlands. The formula has been immensely profitable for power and thermal generation in Ukraine, allowing the sector to raise rates for commercial heating.
NABU is investigating the case under charges of abuse of power, alleging that the National Energy Regulator Council Chairman and former ICU trader Dmytro Vovk abused his position to increase energy generation profits in a bid to help his old employer.
The case has elicited anger from Ukrainian civil society, and from the oligarch-run businesses that it hurts. Viktor Pinchuk’s Interpipe, for example, expects to see millions in losses thanks to the pricing formula.
The formula’s defenders point out that before its creation, there was no benchmark for coal pricing in Ukraine. The lack of a set price allowed for market manipulations, while the Rotterdam+ benchmark constitutes a first step towards creating a commodities futures market in Ukraine for coal, which would allow for transparent price discovery, the formula’s defenders say.
Allegations of corruption in Rotterdam+’s creation were first exposed by former National Energy Regulatory Commission member Andriy Gerus, who filed a civil lawsuit against the group.
