February 9, 2023
A girl passes through PrivatBank ‘s place of job in downtown Kyiv on Dec. 15, 2021. (Volodymyr Petrov)

Editor’s Notice: That is factor 63 of Ukrainian State-Owned Enterprises Weekly masking occasions from Jan. 29 – Feb. 4 2022. The Kyiv Unbiased is reposting it with permission.

Company governance in SOEs

Ukraine has too many SOEs with unconventional criminal bureaucracy.

The State Statistics Carrier of Ukraine reported adjustments within the choice of state unitary enterprises (SUEs), budget-supported entities, and municipal firms in Ukraine.

As of Jan. 1, there have been:

  • 3,664 criminal entities registered as SUEs (in comparison to 3,713 as of Jan. 1, 2021);
  • 30 criminal entities registered as budget-supported enterprises (in comparison to 32 as of Jan. 1, 2021);
  • 14,188 criminal entities registered as municipal firms (in comparison to 14,174 as of Jan. 1, 2021).

In line with the OECD Pointers on Company Governance of State-Owned Enterprises, the governments will have to simplify and standardize the criminal bureaucracy underneath which SOEs function.

When standardizing the criminal type of SOEs, governments will have to base them, up to conceivable, on company legislation this is similarly appropriate to privately-owned firms and keep away from growing a particular criminal shape. The state will have to turn out to be all state unitary enterprises, budget-supported entities, and municipal firms into both restricted legal responsibility firms or joint-stock firms.

Ukrainian SOEs make Hr 3.1 billion ($110 million) in income within the 3rd quarter of 2021 (unaudited).

The Financial system Ministry revealed the Unified Tracking of the Potency of State Belongings Control for the 3 quarters of 2021. The SOE Weekly workforce has analyzed the information.

The state owns 3,323 entities (diminished through 8 SOEs from 3,331 within the first part of 2021). Of those, just one,382 (41.5% of all the SOE portfolio) are working, in comparison to 1,405 working SOEs on the finish of the primary part of 2021.

The overall (unaudited) benefit of SOEs stood at Hr 21.3 billion ($760 million) for the primary 9 months of 2021. Within the first part of 2021, SOEs earned Hr 18.2 billion ($650 million).

Some of the working SOEs, 862 are winning (833 within the first part of 2021).

The possession of those firms is dispersed amongst 88 entities. There are 693,222 full-time workers (diminished through 4,810 workers from 698,032 on the finish of the primary part of 2021).

SOEs have Hr 1,715 billion ($61 billion) in property (larger through Hr 47 billion from Hr 1,668 billion on the finish of the primary part of 2021).

Please notice that the result of 9 months of 2021 are simplest in accordance with intermediate, unaudited reporting. The once a year audited effects will supply a extra dependable image, which would possibly vary from the only produced through the intermediate effects.

In earlier problems with the SOE Weekly, we revealed the result of the Unified Tracking of Potency of State Belongings Control for:

  • the primary part of 2021 (see Factor 51);
  • the primary quarter of 2021 (see Factor 38);
  • the 12 months 2020 (see Factor 35).
  • The state supplies Hr 65.1 billion ($2.32 billion) in mortgage promises to SOEs and Ukravtodor in 2021. In line with the State Treasury Carrier of Ukraine, in 2021, loans for state promises have been equipped for a complete of Hr 74.2 billion ($2.65 billion), of which Hr 36.1 billion (49%) have been won through SOEs. Ukravtodor, the rustic’s state-owned highway development company, won some other Hr 29 billion (39.1%). The rest of Hr 8.1 billion (10.9%) have been equipped to make stronger small and medium-sized enterprises.

70% of state promises have been equipped for foreign currency echange loans.

The loans won through SOEs come with:

  • Ukrenergo – Hr 21.5 billion, or 59.6% of the entire quantity of state promises equipped to SOEs (for Eurobonds); Hr 4.7 billion, or 13% of the entire for the programme, to extend the reliability of substations and Hr 1.1 billion, or 3% of the entire, to make sure the fulfilment of debt duties underneath an unspecified mortgage.
  • Ukrzaliznytsia – Hr 5.1 billion, 14.1% of the entire for an electrification building mission).
  • Ukrposhta – Hr 1.9 billion, or 5.3% of the entire quantity of state promises equipped to SOEs for a logistics community building mission.
  • Shostka plant “Impulse” – Hr 819 million, or 2.3% of the entire (the guidelines at the goal of the mortgage is classed, most likely as a result of Impulse is a protection corporate).
  • The Fear of Radio Broadcasting, Radio Verbal exchange and Tv – Hr 490 million, or 1.3% of the entire to make sure the fulfilment of debt duties underneath an unspecified mortgage.
  • Antonov – Hr 400 million, or 1.1% of the entire to make sure the fulfilment of debt duties underneath an unspecified mortgage.

In SOE Weekly (Factor 52), we reported that in step with Ekonomichna Pravda, in early November, Ukrenergo positioned state-guaranteed Eurobonds price $825 million at 6.7% in line with annum to pay remarkable money owed to inexperienced power manufacturers.

Ukrzaliznytsia’s board chair elected

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The supervisory board of Ukrzaliznytsia elected Gebhard Hafer as its chair, with Serhiy Leshchenko as deputy chair.

Gebhard Hafer is the vice-chancellor of the College of Carried out Sciences and a professor of logistics and international provide chain control. Hafer served as Director of Deutsche Bahn AG for Central and Jap Europe for 5 years.

Serhiy Leshchenko is a member of Ukrzaliznytsia’s supervisory board since December 2019. He’s a former member of Ukraine’s parliament, serving from October 2014 to August 2019. Up to now, he used to be an investigative journalist at Ukrayinska Pravda.

In SOE Weekly (Factor 60), we reported that on Dec. 29, the Cupboard of Ministers licensed new individuals of the railway operator’s supervisory board. Anatoliy Amelin, Alexander Doll, Jakub Karnowski, and Gebhard Hafer was impartial individuals of the supervisory board, whilst Serhiy Leshchenko, Serhiy Moskalenko and David Lomjaria will function state representatives at the board.

The federal government eliminates Havva from Ukrhydroenergo’s supervisory board.

On Dec. 2, the Cupboard of Ministers canceled the contract of Oleksandr Havva, state consultant on Ukrhydroenergo’s supervisory board, and appointed him as appearing CEO on the state-owned endeavor Marketplace Operator.

Now, Ukrhydroenergo’s supervisory board is composed of six individuals out of 7 required.

Previous, Roman Sutchenko used to be appearing CEO of the Marketplace Operator. He used to be brushed aside on 24 November 2021.

Appearing CEO of Ukrspyrt resigns.

Serhiy Bleskun introduced his resignation on Fb.

In line with Bleskun, he received the aggressive variety for the location of Ukrspуrt’s CEO in August 2021, however used to be by no means appointed (which would possibly give an explanation for Bleskun’s resignation).

Right through Bleskun’s time period, Ukrspуrt’s 26 distilleries have been effectively privatized, producing a income of Hr 1.5 billion ($53.5 million) for the state funds. In 2020, underneath Bleskun, Ukrspуrt demonstrated the most efficient monetary efficiency within the corporate’s historical past. Previous to his appointment, the distilleries have been loss-making and engaged is very large corruption and crime.

In line with Taras Melnychuk, the federal government consultant within the Verkhovna Rada, the Cupboard of Ministers briefly assigned Vitaliy Zhadobin as appearing CEO of Ukrspyrt.

Up to now, Vitaliy Zhadobin controlled the criminal division of Ukrspyrt.

Ukrspyrt ultimate had an enduring CEO in 2014, and the corporate has since been led through more than a few “appearing” CEOs.

G7 Ambassadors suggest for clear privatization, compliance with OECD Pointers at Ukrainian SOEs.

G7 Ambassadors’ Give a boost to Crew for Ukraine revealed detailed priorities of its team for 2022. Those come with clear privatization of SOEs and state-owned banks and the development of company governance of the ones closing underneath state keep watch over in keeping with OECD Pointers.

SOE updates

Banks

The 4 state-owned banks earned a benefit of Hr 11.5 billion ($410 million) within the 3rd quarter of 2021, with 83% of this quantity generated through PrivatBank.

In line with the Ministry of Finance, state-owned banks larger their benefit through 4.5% over the primary 3 quarters of 2021.

  • PrivatBank earned Hr 9.6 billion within the 3rd quarter. Within the first 9 months of 2021, the financial institution made a benefit of Hr 21.2 billion, which is 0.3% lower than in the similar length the former 12 months.
  • Ukrgasbank earned Hr 1 billion within the 3rd quarter. Within the first 9 months of 2021, the financial institution reached a benefit of Hr 1.7 billion, a 155.1% building up from the similar length ultimate 12 months.
  • Ukreximbank earned Hr 627 million within the 3rd quarter. Within the first 9 months of 2021, the financial institution earned Hr 1.7 billion in comparison to 2020, when the financial institution misplaced Hr 2.24 billion in the similar length.
  • Oschadbank earned Hr 337 million within the 3rd quarter. Within the first 9 months of 2021, the financial institution earned Hr 849 million, a fivefold lower in comparison to Hr 4.7 billion within the first 9 months of 2020.

The proportion of internet property of state-owned banks within the banking sector diminished to 47.5% on the finish of the 3rd quarter from 52.5% at first of the 12 months.

In line with the similar file, the state-owned banks diminished their holdings of presidency bonds through Hr 60 billion ($2.14 billion) from Hr 402 billion ($14.4 billion) at first of the 12 months to UAH 342 billion ($12.2 billion) on the finish of the 3rd quarter.

In SOE Weekly (Factor 62), we reported that the state-guaranteed debt owed to Ukrainian banks larger from Hr 7.85 billion in 2020 to Hr 32.11 billion ($1.14 billion) in 2021, an building up of Hr 24.26 billion ($867 million). The 4 state-owned banks accounted for Hr 22.5 billion (93%) of this building up.

Municipalities actively borrow from state-owned banks in 2021.

In line with the Ministry of Finance, municipalities borrowed a complete of Hr 18.2 billion, together with:

  • 61.5% (Hr 11.2 billion) from state-owned banks;
  • 29.6% (Hr 5.4 billion) from global monetary establishments (IFIs);
  • 5.0% (Hr 0.9 billion) from personal banks;
  • 3.9% (Hr 0.7 billion) from the Ministry of Finance.

Out of the loans equipped through the state-owned banks:

  • 39% (Hr 4.3 billion) used to be equipped through Oschadbank;
  • 34% (Hr 3.8 billion), through Ukreximbank;
  • 27% (Hr 3 billion), through Ukrgasbank.
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PrivatBank used to be simplest state-owned financial institution that didn’t lend to municipalities.

Municipalities would possibly borrow cash for public items, correcting for marketplace screw ups. For instance, they’ll take loans for the street development or different infrastructure initiatives when the collateral isn’t to be had, and the banks don’t seem to be ready to provide such loans another way.

Then again, there’s no reason why to depend only on state-owned banks for such loans. A heavy mortgage focus is also an indication of particular prerequisites, violating the extent enjoying box, or political meddling, which dangers intruding into the banks’ company governance.

Political meddling would possibly lead to instances when loans are equipped to native government in alternate for political loyalty.

Notice that two individuals of the SOE Weekly workforce, Andriy Boytsun and Dmytro Yablonovskyi, revealed a coverage paper titled “What will have to the state do with its banks?” in 2017. They concluded that the hazards of state possession of banks in Ukraine outweighed the advantages, suggesting that every one state-owned banks will have to be privatized. The state can download the similar services and products from personal banks or global building finance establishments.

Oschadbank’s 2021 benefit drops to simply over one billion hryvnias (unaudited)

In line with Oschadbank, its internet benefit in 2021 used to be Hr 1.1 billion. That is 2.5 instances lower than in 2020.

Oschadbank’s working benefit amounted to Hr 5.6 billion, whilst the buying and selling consequence used to be unfavorable (a lack of Hr 4.4 billion). Oschadbank attributed this to the strengthening of the hryvnia and the indexation of securities within the financial institution’s portfolio.

The financial institution won Hr 13.4 billion in internet passion source of revenue, which is 1.7 instances (Hr 5.4 billion) greater than in 2020. Web fee source of revenue is Hr 6.2 billion. In comparison to 2020, this determine larger through Hr 1.2 billion, or 24.9%.

Notice that the above effects are in accordance with unaudited monetary reporting. The audited annual effects will supply a extra dependable image, which would possibly vary from those reported through the financial institution.

In SOE Weekly (Factor 47), we reported that the Cupboard of Ministers licensed Oschadbank’s building technique for 2021-2024. Oschadbank should succeed in a projected internet benefit of about Hr 4.2 billion, about 15% go back on capital, and prices to source of revenue ratio of lower than 65%.

Power sector

State Bureau of Investigation searches properties, workplaces of Naftogaz’s former most sensible executives

Those searches have been carried out on the house of Naftogaz CEO Andriy Kobolyev, in addition to the workplaces of Ukrtransgaz and different personal firms.

In line with Ekonomichna Pravda, the searches are because of Ukrtransgaz moving 300 million cubic meters of gasoline to a pool of businesses in 2020, allegedly inflicting Naftogaz to lose Hr 2.2 billion.

The present appearing CEO of Ukrtransgaz is Serhiy Pereloma.

In line with the Bureau, after being approached through Ukrtransgaz, control of Naftogaz licensed an amicable settlement with industrial firms with out suitable powers and grounds. Kobolyev signed off at the switch with out the consent of Naftogaz’s supervisory board. The pre-trial investigation is ongoing.

It sounds as if, the State Bureau of Investigation refers to paragraph 31 of the clause 70 of Naftogaz’s constitution. In line with that paragraph, the unique competence of the supervisory board of Naftogaz contains initial approval of the manager board’s choices regarding the actions of the industry firms absolutely owned through Naftogaz, specifically relating to approval of important transactions and related-party transactions of such industry firms.

Kobolyev denied the allegations. He stated that within the strategy of resolving this drawback, which befell greater than twenty years in the past, Naftogaz and Ukrtransgaz have been guided through the pursuits of those firms and averted unlawful an write-off of about Hr 2 billion, together with returning greater than Hr 200 million that had already been written off.

In SOE Weekly (Factor 03), we reported that Ukrtransgaz requested the Industrial Court docket of Kyiv to approve a agreement to switch 300 million cubic meters of gasoline to a pool of businesses. After courtroom approval, personal corporate Fin-Make investments had to go back Hr 226 million in price range withdrawn from the Ukrtransgaz accounts in accordance with a prior courtroom resolution, whilst Ukrtransgaz used to be to switch greater than 304 million cubic meters of gasoline to the corporate.

In SOE Weekly (Factor 33), we reported that Naftogaz’s subsidiary Ukrtransgaz is tough a reimbursement from Naftogaz for returning 305 million cubic meters of herbal gasoline to Profi Gaz LLC.

The corporate claimed that, in 1999, Naftogaz illegally equipped 305 million cubic meters with out the consent of the gasoline’s proprietor, Ukrenergozbut. This compelled Ukrtransgaz to faucet into its personal reserves to go back the gasoline to Ukrenergozbut (now known as Profi Gaz LLC), following a call through the Arbitration Court docket of Kyiv on 12 July 2020.

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Naftogaz denied that it had disposed Ukrenergozbut’s gasoline with out permission. Naftogaz argued that, throughout the disputed length, the corporate didn’t have the authority to distribute gasoline. Naftogaz additionally said that it has no legal responsibility to go back 305 million cubic meters of gasoline to its subsidiary.

Different sectors

The Ministry of Social Coverage proposes to introduce a funded pension at SOEs

In line with the media, the Ministry of Social Coverage proposed to introduce a funded pension in enterprises with a state percentage of over 50%.

The initiative would see pension contributions of two% of workers’ salaries to non-public pension price range. SOEs will have to come with the price of paying those pension contributions for no less than part of the workers of their monetary plans for 2023.

It’s unclear why the Ministry of Social Coverage didn’t deal with the non-public firms with any such proposal.

The state can pay $87.6 million to a Chinese language state financial institution to hide SFGC’s mortgage instalment.

In line with Ekonomichna Pravda, the Ministry of Finance transferred Hr 2.5 billion to the Export-Import Financial institution of China as an alternative of the State Meals and Grain Company (SFGC).

In line with the Ministry, SFGC repays a mortgage instalment each and every six months. On Jan. 21, the corporate paid simply $8.8 million of the $96.4 million it used to be meant to. Because of the state ensure, the Ministry of Finance needed to pay the remaining.

Moreover, Ukraine won China’s reaction to a proposed mortgage restructuring. The Chinese language facet proposed that this factor will have to be resolved on the degree of “related government,” it seems that, suggesting that the Ukrainian proposal used to be rejected.

In SOE Weekly (Factor 62), we reported that SFGC will have requested for a restructuring of its remarkable $900 million debt to the Export-Import Financial institution of China, in step with an October presentation reported through Ekonomichna Pravda.

In SOE Weekly (Factor 61), we reported that lawmaker Maryan Zablotskyy (Servant of the Folks get together) wrote on his Fb web page that SFGC may cross bankrupt quickly. In line with Zablotskyy, the Grain Company used to be not going to pay off its subsequent $95 million mortgage tranche by itself.

Later, Ekonomincha Pravda revealed a piece of writing explaining how SFGC’s money owed gathered and claiming that on Jan. 21 SFGC would default on its debt. In line with information outlet’s assets, the President’s Place of business helps a “default state of affairs,” which routinely invokes a state ensure.

In SOE Weekly (Factor 47), we reported that the Cupboard of Ministers arrange an inter-ministerial operating team to seem into Grain Company’s debt and grain provide duties to Chinese language state-owned firms. SFGC won a $1.5 billion mortgage in 2012 to be repaid through 2027. It used to be issued underneath Ukrainian state promises in an effort to identify a scientific provide of grain to China.

As we reported in SOE Weekly (Factor 44), from January to September, the Grain Company’s elevators have been operating at 10% in their general capability and the company has now not despatched a unmarried grain cargo to the China Nationwide Equipment Import and Export Company. This used to be a document low because the get started in their industry dating.

In SOE Weekly (Factor 42), we reported that Andriy Vlasenko, who’s suspected of embezzling Hr 71 million ($2.5 million) and used to be positioned underneath area arrest, used to be “relieved of his tasks as appearing CEO” through the Ministry of Financial system in September. Vasyl Kovalenko, used to be appointed as the brand new appearing CEO.

In SOE Weekly (Factor 39), we reported that the Nationwide Police established that the control of SFGC had squandered the company’s belongings through promoting grain to offshore firms at decreased costs, with out prepayment. On Aug. 13, the Nationwide Police detained Vlasenko at Kyiv Global Airport when he used to be seeking to flee Ukraine. His companion used to be detained along side him.

In SOE Weekly (Factor 30), we reported that the Grain Company used to be a number of the largest loss-makers amongst all Ukrainian SOEs, with its 2020 loss totaling UAH 5.9 billion ($210 million).

Privatization

State Belongings Fund to denationalise 5 distilleries.

In line with Ukrspyrt, the State Belongings Fund introduced 5 distillery privatization auctions. The auctions will happen from Feb. 25 till March 4. The sum of the beginning costs in those auctions is over Hr 140 million ($5 million).

Detailed data at the gadgets and auctions is to be had right here.

Because the starting of 2020, 26 distilleries had been effectively privatised, producing a income of Hr 1.5 billion ($53 million).