Editor’s Note: This is issue 148 of Ukrainian State-Owned Enterprises Weekly, covering events from September 15-21, 2024. The Kyiv Independent is reposting it with permission.
Corporate governance of SOEs
UDI looking for a new CEO. On Sept. 19, Ukrainian Defense Industry (UDI) said that its supervisory board had launched a competitive selection for the CEO position. Candidates can apply from Sept. 20 to Oct. 4.
The search and screening of applicants is done by the Ukrainian office of Odgers Berndtson, an international executive search firm, UDI added.
As we wrote earlier, UDI’s CEO Herman Smetanin resigned on Sept. 4 to become the new strategic industries minister the next day, replacing Oleksandr Kamyshin.
UDI’s supervisory board then appointed Oleh Huliak as an acting CEO and said that it would announce a competitive selection for the new CEO as soon as possible. See Issue 146 for more detail.
Ukrzaliznytsia gets a new supervisory board member. On Sept. 13, the Cabinet of Ministers appointed Oleksandr Kamyshin as a state representative on Ukrzaliznytsia’s supervisory board, starting on Sept. 26.
Kamyshin will replace Serhiy Moskalenko, Forbes Ukraine’s source added. (See our Issue 60 for more information on the composition of Ukrzaliznytsia’s supervisory board.)
As we reported in Issue 39 three years ago, then acting CEO of Ukrzaliznytsia, Ivan Yuryk, filed his resignation in August 2021. After that, the Cabinet of Ministers appointed Kamyshin as acting CEO.
In Issue 49, we reported that in October 2021, Kamyshin was re-appointed as CEO until Dec. 31, 2021.
Sonya Bandouil
On March 24, 2022, Kamyshin reported that based on the supervisory board’s proposal, the Cabinet appointed the executive board of Ukrzaliznytsia on a permanent basis. Kamyshin was approved for four years, and the other executives, for three years.
As we wrote one and half years ago, the Cabinet dismissed Kamyshin on March 21, 2023, and appointed Yevhen Lyashchenko as Ukrzaliznytsia’s new CEO for the next two years. On the same day, the Verkhovna Rada appointed Kamyshin as the new strategic industries minister. See Issue 80 for more detail.
As we reported two weeks ago, UDI’s CEO Herman Smetanin left the company to become the new strategic industries minister. He replaced Kamyshin, who later moved to the position of president’s advisor for strategic issues. See Issue 146 for more detail.
Ukrenergo to get a new supervisory board. On Sept. 20, the Energy Ministry (in its capacity as Ukrenergo’s general shareholders meeting) announced a competitive selection for three independent members of the company’s supervisory board.
As we wrote in Issue 146, on Sept. 2, Ukrenergo’s supervisory board dismissed the company’s CEO Volodymyr Kudrytskyi by a majority vote. The board appointed executive board member Oleksii Brekht as acting CEO and decided to hold a competitive selection for a new CEO.
On the same day, Daniel Dobbeni (independent member and supervisory board chair) and Peder Andreasen (independent member) announced that they filed their resignation notices.
“We strongly believe that the decision on the early dismissal of the CEO of Ukrenergo is politically motivated and, based on the results of the presented report, there are no valid grounds for it,” they said in a statement.
On Sept. 6, Bridget Brink, U.S. ambassador to Ukraine, said that Ukraine should complete Ukrenergo’s supervisory board after independent members resigned in protest against Kudrytskyi’s dismissal. See Issue 146 for more detail.
Yaroslav Zhelezniak
On Sept. 10, Ukraine and the International Monetary Fund (IMF) reached a staff-level agreement on the fifth review of the four-year Extended Fund Facility (EFF) Arrangement. Subject to approval by the IMF Executive Board, Ukraine would have access to about $1.1 billion. According to IMF’s release, the full supervisory board of Ukrenergo should be re-established by end-December 2024.
The terms of office of the current members of Ukrenergo’s board expire in late 2024 — early 2025, the ministry added. Along with the competitive selection of independent members, the ministry would also identify and select candidate state representatives.
According to Ukrenergo’s charter, its supervisory board should consist of seven members: four independent members and three state representatives.
As we reported in June 2023, the Cabinet still had to select and approve one independent member for Ukrenergo’s supervisory board. Hence, independent members did not constitute a majority of the board, which did not meet the requirements of the law or Ukrenergo’s charter. See our Issue 95 for more detail.
The selection of all board members — four independent and three state representatives — is scheduled to be completed by Dec. 9.
The first and foremost task of the new supervisory board would be to conduct a transparent competitive selection of Ukrenergo’s CEO, the ministry also said.
Energy sector
Naftogaz Group pays Hr 60 billion ($1.5billion) in taxes for January-August 2024, the company’s press office said on 1Sept. 16. This includes Hr 56.5 billion ($1.37 billion) paid to the state budget and Hr 4.3 billion ($104 million) paid to local government budgets.
In August alone, Naftogaz Group paid Hr 7.2 billion ($174 million) in state taxes and about Hr 600 million ($14.5 million) in local ones.
As we reported earlier, Naftogaz Group paid Hr 6.1 billion ($147.9 million) in taxes to state and local budgets for January 2024 (see Issue 119), Hr 5.3 billion ($128 million) for February (see Issue 123), Hr 8.3 billion ($201 million) for March (see Issue 128), Hr 8 billion ($193 million) for April (see Issue 132), Hr 9.3 billion ($225 million) for May (see Issue 137), Hr 9.2 billion ($223 million) for June (see Issue 140), and Hr 6 billion ($145 million) for July (see Issue 143).
Kateryna Hodunova
As we wrote in Issue 115, Naftogaz Group paid Hr 83.4 billion ($2 billion) in taxes to the state budget and another Hr 6.8 billion ($164 million) to local government budgets in 2023.
The Group said that it made Hr 23.1 billion ($560 million) in consolidated net profit in 2023, a significant rebound from its Hr 79.1 billion ($1.9 billion) loss in 2022. See our Issue 131 for detail.
Privatization
Hotel Ukraina sold. On Sept. 18, the State Property Fund of Ukraine (SPFU) sold Kyiv’s four-star Ukraine Hotel for Hr 2.5 billion ($60 million), a more than twofold increase from the starting price of Hr 1.05 billion ($25 million).
According to Prozorro.Sale, the winner is Ola Fine LLC, owned by businessman Maksym Krippa.
Notably, Ola Fine’s bid was almost double of the second bid, Hr 1.5 billion (around $36 million), and more than double of the third bid, Hr 1.2 billion (ca. $29 million).
The sale of the Ukraine Hotel was the country’s first online auction for a large-scale privatization asset in the Prozorro.Sale system, the SPFU said.
As we wrote in Issue 114, the 2024 state budget projects the privatization revenue at Hr 4 billion (around $96 million). According to a recent SPFU report, privatization generated Hr 2 billion ($48 million) in January-August 2024. All these proceeds were from small-scale privatization.
In other words, the winning bid on Hotel Ukraina alone is larger than all the small-scale privatization revenues since the beginning of this year. If Ola Fine pays up as required by the regulations, the SPFU’s privatization revenue plan for 2024, however modest, will be completed for the first time in many years.
According to the SPFU, the auction winner has 30 working days to pay the lot price. Only after the funds are transferred to the state budget can the sale and purchase agreement be signed.
Chris York
Maksym Krippa, a businessman that shies publicity, became famous in 2022 when Forbes Ukraine wrote that he had acquired the main Ukrainian esports brand, the NAVI team. Later, the businessman’s representatives confirmed that the deal was concluded back in 2018. Krippa also owns Maincast esports broadcasting studio. In 2023, he acquired GSC Game World, a company that developed the S.T.A.L.K.E.R. cyber game.
According to Ekonomichna Pravda (EP), also in 2023, a new media group was formed in Ukraine: the online outlet Glavkom was taken over by Tatiana Snopko. Six months earlier, Snopko had acquired the Ekonomika+ media holding, which includes Delo.ua, Top-100, Wo.mo, and Marketing Media Review. According to EP’s sources in the media market, Krippa was behind the acquisition of the news sites, while Snopko was just a nominal owner.
According to liga.net, Krippa, who acquired the Brovary Wholesale Market back in 2009, has recently started buying up significant real estate objects in Kyiv. In 2020, he purchased the Dnipro Hotel in Kyiv, which is located near the Ukraine Hotel, and at the end of 2023, the Parus Business Center, previously owned by businessman and former lawmaker Vadym Stolar.
In an interview for Forbes Ukraine last week, Krippa claimed that he received funds for these assets from diversified sources: income from successfully implemented business projects, real estate, dividends, and investment assets. Earlier, Forbes Ukraine linked him to the Vulcan Online Casino, GGBet bookmakers, and Evoplay IT company, but Krippa denied this.
In his interview for Forbes Ukraine last week, Krippa said that Ukraine Hotel is not just a hotel, but a historic building in central Kyiv with significant capitalization potential. He plans to effectively develop the hotel and renovate it after the full-scale war, but he refused to disclose the plan.
As we wrote in Issue 116, the SPFU planned to put Kyiv’s four-star Hotel Ukraina up for privatization. According to SPFU then-head Vitaliy Koval, the hotel is under-booked because of martial law and has racked up more than Hr 45 million in debt (around $1.1 million at the time).
Elsa Court
The Cabinet of Ministers designated Hotel Ukraina as a large-scale asset for privatization on April 23 (see our Issue 129).
On July 12, the Cabinet approved the terms of sale of the hotel. The starting price was set at Hr 1.05 billion ($25 million). See Issue 140 for more detail.
As we wrote in Issue 141, the SPFU then scheduled the auction for the Hotel Ukraina for Sept. 18.
The tenth and eleventh attempts to sell Bilhorod-Dnistrovskyi port fail. According to Prozorro.Sale, an auction for the sale of the Bilhorod-Dnistrovskyi trade seaport, scheduled by the SPFU for Sept. 16, failed due to the absence of bidders. The starting price was Hr 89 million ($2.1 million). This was the tenth attempt to sell the port.
The SPFU then extended the deadline for bidders to Sept. 24 with the same starting price, but the eleventh auction also failed for the same reason. Prior to that auction, the SPFU told delo.ua that if no bidders come forward, the starting price would have to be reduced further.
Earlier, liga.net wrote that SME Nika-Tera LLC (part of Dmytro Firtash’s Group DF), Potoky Oil Extraction Plant (part of Vadym Yermolayev’s Alef Corporation), and grain trading and shipbuilding Nibulon (owned by Andriy Vadatursky) were interested in privatizing the port.
The payback period of the port is too long to invest in it in the current realities, Oleg Arestarkhov, Head of Corporate Communications at Group DF, told liga.net.
As we wrote in Issue 147, according to CASE Ukraine, despite the attractiveness of the asset, there are no bidders because the port has debts of Hr 151.3 million ($3.6 million). The winner would also have to pay VAT of 20% of the purchase price. This suggests that, based on CASE Ukraine’s information, the winning bidder would have to pay at least Hr 258 million ($6.2 million) in total.
Bilhorod-Dnistrovskyi also faces a significant logistical constraint: the drawbridge to the port was destroyed by Russian shelling. Without its restoration, the port would not be able to operate properly, Arestarkhov added. “Near Mykolaiv, we have the Nika-Tera port, which was destroyed by Russian attacks. Our post-war priorities are to restore our port. We will restore our port, and only then will we look at other assets,” he summarized.
Later, Nibulon told delo.ua that it was no longer considering the acquisition of the asset, without specifying the reasons for the refusal. Alef Corporation did not comment on its plans to privatize the port, the media added.
The first privatization auction for Bilhorod-Dnistrovskyi in March 2023 failed as no one registered.
At the second auction, the seaport was sold for Hr 220 million (around $5 million at the time) to Ukrdoninvest LLC, a company owned by Ukrainian businessman Vitaliy Kropachov. However, Ukrdoninvest did not pay up.
As we reported in April 2023 (Issue 85), the company said that it backed out while hashing out the terms of the purchase agreement with SPFU’s regional office in Odesa and Mykolaiv oblasts.
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 and 100, we reported about the following failed attempts to sell the port.
As we wrote in August 2024 (Issue 144), former Deputy Minister of Infrastructure Viktor Dovhan posted on Facebook suggesting that Polish investors were considering participating in the privatization of the port.
However, as we reported in Issue 147, the ninth attempt to sell the port also failed.
For more detail, see SOE Weekly’s Issues 74, 78, 79, 84, 85, 87, 93, 99, 100, 144, and 147 for more detail.
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.
The contents of this publication are the sole responsibility of the editorial team of the Ukrainian SOE Weekly.
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.
Editorial team: Andriy Boytsun, Oleksiy Pavlysh, Dmytro Yablonovskyi, and Oleksandr Lysenko.
Dominic Culverwell
