Editor’s Note : This is the issue 152 of Ukrainian State Owned Enterprises Weekly. It covers events from October 13-24, 2024. The Kyiv Independent reposts it with permission.
Corporate Governance of SOEs
Updated IMF Memorandum The International Monetary Fund published a revised Memorandum of Economic and Financial Policies on October 18, after its fifth review of the Extended Fund Facility for Ukraine.
Ukraine’s key commitments in relation to state-owned banks and enterprises are as follows:
* All banks with a majority state ownership remain under the responsibility of Finance Ministry. Nationalized non-systemic bank will be immediately transferred to Individuals Deposit Guarantee Fund for resolution (Continuous Structure Benchmark).
As we reported in Issue 116 of the magazine, foreign investors are interested in purchasing Ukrgasbank (Sense Bank) and Ukrgasbank (Sense Bank).
* Completing the formation of Ukrenergo’s full supervisory council (seven members), where independent members constitute the majority (New Structural Benchmark, end-December 2024).
As we reported in Issue 146 on September 2, Ukrenergo’s supervisory board voted to dismiss Volodymyr Krytskyi as CEO of the company by a majority. The board appointed executive member Oleksii Breksht as acting CEO and decided to conduct a competitive selection process for a new CEO.
Daniel Dobbeni, independent member and chair of the supervisory board, and Peder Andersen (independent Member) both announced on the same day that they had submitted their resignation notices. See Issue 146 for more detail.
Roman Pionkowski, the last independent member of Ukrenergo’s supervisory board, is currently the only one left. He was appointed along with other independent board members in December 20,21, which means that his term is expected to end in December 2024.
As we reported in Issue 148 on September 20, the Energy Ministry in its capacity as Ukrenergo’s general shareholders meeting decided to hold a competition for the selection of three independent members for the company’s supervisory board.
The ministry said that the fourth independent member would be elected in parallel, under a procedure already launched.
Three weeks later the Economy Ministry announced that the SOE Nomination Committee had approved the requirements for candidates and announced the competitive selection of three board members. (See Issue 151).
The selection of the entire board — four independents and three state representatives — should be completed by December 9. For more information, please refer to Issues 129 & 151.
UDI has a new CEO. Ukrainian Defenze Industry announced on October 21 that Oleg Gulyak had been appointed as the new CEO of the company by its supervisory board, following a selection process involving over 20 applicants.
As we reported in Issue 146 of the UDI Journal, Herman Smetanin, CEO, resigned from his position on September 4 to replace Oleksandr Kamyshin as Minister for Strategic Industries.
The supervisory board of UDI appointed Oleg Gullyak as acting CEO, and announced it would soon launch a competition to select a new CEO.
According to UDI Gulyak served in the Armed Forces of Ukraine from 1993. He was the commander of the Logistics Forces of Armed Forces of Ukraine in 2021-2024. Since July 1, he is a military advisor to the CEO of UDI, strengthening the company’s ties with Defense Forces. See Issue 146 for more detail.
As we reported in Issue 148 on September 19, UDI’s supervisory board began a competitive selection process for the CEO position. Candidates could apply between Sept. 20 and Oct. 4.
Energy
The company’s press department reported that Naftogaz Group had paid Hr 67 Billion ($1.6 billion) as taxes between January and September 2024. The company’s press office announced on Oct. 16 that Naftogaz Group paid Hr 67 billion ($1.6 billion) in taxes between January and September 2024.
Naftogaz Group has paid Hr 5.8 Billion ($140 Million) in state taxes in September alone.
As we have reported, Naftogaz Group has paid the following taxes in 2024 to the state and local budgets:
* Converted using the average exchange rate of the National Bank of Ukraine for the respective period. Calculations by SOE Weekly.
In Issue 115 we reported that Naftogaz Group will pay Hr 83.4 Billion ($2 Billion) in taxes to state budgets and another Hr 6-8 billion ($164 Million) to local governments budgets by 2023.
The Group reported that it had made a net profit of Hr 23.1 (US$ 559 million) for 2023. This is a significant improvement from the Hr 79.1 (US$ 1.9 billion) loss recorded in 2022. See Issue 131 for more detail.
In Issue 149 we reported that Naftogaz Group had a net profit of Hr 24.4 billion (EUR 578 million at the average rate of exchange over the period) for the first six months in 2024.
The company’s Press Office announced on October 15 that Ukrhydroenergo had cancelled an auction to hire lawyers to seek compensation for Kakhovka HPP.
The company stated that this decision was taken to ensure that its actions are in line Ukraine’s national strategy. This strategy aims at holding Russia accountable for damage to critical infrastructure, and ensuring compensation for destruction.
Ukrhydroenergo said that in this context, additional consultations will be held with the Cabinet of Ministers, and other key stakeholders, to determine the best course of action, coordinated with Ukraine’s allies internationally.
Ukrhydroenergo announced on June 6, 2023 that the Kakhovka Hydroelectric Power Plant was destroyed beyond repair after the Russians ignited a massive explosion inside the engine room. See our Issue 91 for more detail.
In Issue 135, we reported that on June 6, Ukrhydroenergo notified Russia that it had initiated an arbitration procedure for investment with Russia to compensate the damages caused by the destruction HPP. The preliminary estimate was $2.5 billion.
In August 2024, we reported (Issue 143) that Ukrhydroenergo had announced a tender for the procurement of lawyers. The tender was scheduled to take place on October 17. The expected value of the tender was Hr 365 millions ($8.8million).
Privatization
Twelfth attempt to sell Bilhorod-Dnistrovskyi port to be made. According to Prozorro.Sale, the State Property Fund of Ukraine (SPFU) scheduled an auction for the sale of the Bilhorod-Dnistrovskyi trade seaport for Oct. 31.
The starting price for the property is Hr 178 millions ($4.3 million).
In the previous attempt (which we reported in Issue 148) the starting price was Hr. 89 million ($2.1million). It is not clear whether the asset, whose starting price has doubled, will be able attract bidders again.
This will be the 12th attempt to sell a port.
The first privatization auction for Bilhorod-Dnistrovskyi in March 2023 failed as no one registered.
The second auction saw the seaport sold for Hr 220 millions (around EUR5.6million at the time) by Ukrdoninvest LLC to Vitaliy Cropachov, a Ukrainian businessman. Ukrdoninvest, however, decided to not make the payment. As we reported in Issue 85 of April 2023, the company stated that it had backed out during the negotiation of the terms of the SPFU regional office in Odesa oblast and Mykolaiv.
In June 2023, SPFU announced that it would put Bilhorod-Dnistrovskyi up for privatization for a third time, another attempt that failed (see Issue 93). In Issues 99 & 100, we reported on the following failed attempts at selling the port.
As we reported in August 2024 (Issue 144) the former Deputy Minister for Infrastructure Viktor Dovhan suggested on Facebook that Polish investors were considering participation in the privatization.
However, the ninth attempt to sell Bilhorod-Dnistrovskyi also failed (see Issue 147), as did the tenth and eleventh (see Issue 148).
CASE Ukraine reports that despite the attractiveness, the asset is not being bid on because the port owes Hr 151.3 millions ($3.6 million). The winner would have to pay 20% VAT on the purchase price. According to CASE Ukraine, the winning bidder will have to pay a total of at least Hr258 million ($6.2million).
With the starting price now doubled, this would mean that the total amount to be paid for Bilhorod-Dnistrovskyi would amount to Hr 365 million ($8.8 million at the current exchange rate).
For more information, please see SOE Weekly Issues 74-148.
SPFU offers seized AEROC for privatization. On October 15, the Cabinet of Ministers ratified the terms of the privatization of construction materials producer AEROC. The starting price is Hr 965 millions ($23 million).
The SPFU announced the date for the auction the next day. The auction is scheduled for December 18.
SPFU, as we reported earlier, planned to privatise AEROC. AEROC was owned by the sanctioned Russian oligarch Andrei Molchanov. For more information, please see our Issues 97-110.
As we reported in Issue 141, on July 12th, the Cabinet added AEROC (Aerospace Engineering and Research Corporation) to the list of large-scale privatization.
According to Economichna Pravda and PRO-Consulting AEROC is the largest aerated cement producer in Ukraine. The company owns and operates two plants, located in Obukhiv (Kyiv Oblast) and Berezan. These plants have been closed since July 2022. These plants have a capacity of more than 1 million cubic metres per year. The total aerated cement production in Ukraine was 4 million cubic metres in 2020.
EP also added that AEROC has an unfinished facility in Stryi, Lviv oblast.
Ukrainian SOE Weekly is a weekly independent digest that compiles the most important news about state-owned enterprises in Ukraine (SOEs).
The Ukrainian SOE Weekly editorial team is solely responsible for the content of this publication.
Andriy Boysun produces and finances the SOE Weekly. CFC Big Ideas provides and finances communications support. The SOE Weekly has not been influenced or financed by an external party.
Editorial team: Andriy Boysun, Oleksiy Pavlysh, Dmytro Yablonovskyi and Oleksandr Lisenko.
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