Skip to content
Kyiv Boryspil Express, operated by Ukrainian state railway Ukrzaliznytsia, arrives at the station on Nov. 30, 2021. (Ukrzaliznytsia/Facebook)
This audio is created with AI assistance

Support independent journalism in Ukraine. Join us in this fight.

Become a member Support us just once

Editor’s Note: This is the 60th issue of Ukrainian State-Owned Enterprises Weekly covering events from Dec. 24 - Jan. 14, 2021. The Kyiv Independent is reposting it with permission.

Corporate governance in SOEs

Changes in Ukrzaliznytsia’s executive board. On Dec. 23, the Cabinet of Ministers resolved to change the composition of Ukrzaliznytsia’s executive board.

The Cabinet dismissed executive board member Roman Chernytskyi because his term expired and temporarily appointed Pavlo Zuber and Yevhen Shramko as members of Ukrzaliznytsia’s executive board. They were appointed from Jan. 1 until March 31 or until the company’s general meeting decides about the executive board on the proposal of the new supervisory board, whichever comes first.

Ukrzaliznytsia has a new supervisory board. On Dec. 29, the Cabinet of Ministers approved new members of the railway operator’s supervisory board. Anatoliy Amelin, Alexander Doll, Jakub Karnowski, and Gebhard Hafer will become independent members of the supervisory board, while Serhiy Leshchenko, Serhiy Moskalenko and David Lomjaria will serve as state representatives on the board.

  • Anatoliy Amelin is the co-founder and director of economic programmes of the Ukrainian Institute for the Future, ex-member of the National Commission on Securities and Stock Market. He also headed the Altana Capital Group of Companies.
  • Alexander Doll is the chair of the supervisory board of Lincoln International AG in German. Previously, Doll served as a Group Chief Financial Officer and management board member for freight transport and logistics at Deutsche Bahn. He also took over responsibility as chair of Schenker, DB Cargo, and board member of Arriva PLC.
  • Jakub Karnowski is independent member of the supervisory board and chair of audit committee at Ukrposhta, Euler Hermes Polska, Allianz Non-Life Insurance Polska, Allianz Investment & Mutual Funds Polska, and a member of the supervisory board at Real Estate Management Company owned by the municipality of Bydgoszcz city (ADM). Previously, Karnowski was the CEO of the Polish State Railways (PKP S.A.), where he successfully finalized the privatization of PKP Cargo, the cargo arm of the Polish State Railways.
  • Gebhard Hafer is the Vice-Chancellor of the University of Applied Sciences and a professor of logistics and global supply chain management. Hafer served as Director of Deutsche Bahn AG for Central and Eastern Europe for five years.
  • Serhiy Moskalenko is a private lawyer. He worked at the Supreme Administrative Court from 2011-2019.
  • Serhiy Leshchenko was a member of Ukrzaliznytsia’s supervisory board since December 2019. He is a former member of Ukraine’s parliament, serving from October 2014 to August 2019. Previously, he was an investigative journalist at Ukrainska Pravda.
  • David Lomjaria is Executive Vice President at Iberia Group, Managing Partner at Four Seas Trading, and Chair of the supervisory board at Sun Energy Bank (all these companies are based in Georgia).

In SOE Weekly (Issue 45), we reported that the SOE Nomination Committee announced a competitive selection of independent supervisory board members for Ukrzaliznytsia.

In SOE Weekly (Issue 44), we reported that the Cabinet of Ministers did not extend the powers of Ukrzaliznytsia’s supervisory board chair Şevki Acuner and supervisory board members Serhiy Leshchenko, Andreas Matje, and Oleh Zhuravlyov.

Ukrainian National Airlines registers its shares. The national air carrier Ukrainian National Airlines registered 500,000 shares worth a total of Hr 500 million with the National Securities and Stock Market Commission. The Ministry of Infrastructure will own all these shares.

(There is no rationale for the state to own an airline. This contradicts the government-declared Basic principles of state ownership policy, as air carrier services are readily available from private providers in the competitive market.

If there is a market failure in local air travel, the state can attract private air carriers to local routes through a PSO mechanism. The state may offer subsidies to private airlines for servicing specific routes via public auctions. The company asking for the lowest subsidy will get the route.

Such an approach will not only decrease corruption risks, but also put the business risks on the private carrier rather than the state.

Note that the decision to establish a national airline – that is, a new large SOE – is also at odds with the Ukrainian authorities’ commitment to downsize the SOE sector under the recent IMF Memorandum. – SOE Weekly.)

In SOE Weekly (Issue 54), we reported that the 2022 state budget allocates Hr 1 billion to the new state air carrier (in addition to the above Hr 500 million from the 2021 state budget). This money will be used as a contribution to share capital of the company.

(Note that such an injection of capital into an SOE from the state budget can be considered state aid. We are not aware if the Antimonopoly Committee has analysed its impact on competition. – SOE Weekly.)

In SOE Weekly (Issue 53), we reported that President Volodymyr Zelensky announced that Ukraine would establish a national air carrier, Ukrainian National Airlines.

The government says it wants to reduce the number of SOEs. Economy Minister Yuliya Svyrydenko announced the government’s intention to reduce the number of ministry-managed SOEs to no more than 100 in 2022.

According to Svyrydenko, the largest SOEs will be overseen by the Cabinet of Ministers. Svyrydenko also said that state companies will be triaged into operating and non-operating. The operating enterprises will be further triaged into companies that will be privatized and ones that will stay in state hands. Non-operating SOEs will be liquidated or privatized depending on their condition.

Also, on Jan. 13, Prime Minister Denys Shmyhal instructed the Ministry of Economy, together with responsible agencies, to prepare a list of state property to be transferred for privatization and create a roadmap for 2022 on the corporatization of SOEs.

(No information is available on when the triage of SOEs and the corporatization roadmap are to be completed. Several previous governments have declared similar intentions to do an SOE triage.

A triage of SOEs was done by the Ministry of Economy in 2017, but it was never published. Ukraine has owned ca. 3,500 SOEs since at least 2014, with that number not changing significantly in the past eight years.

Based on the data on the Unified Register of State Property, we computed the percentage of non-corporatized SOEs to be at least 85% of the entire SOE portfolio. – SOE Weekly.]

In SOE Weekly (Issue 51) we reported that according to the Unified Monitoring of the Efficiency of State Property Management for the first half of 2021, the state has 3,331 SOEs. They employ 697,000 full-time employees. The ownership of the companies is dispersed among 87 entities.

In SOE Weekly (Issue 38), we published the results of the Unified Monitoring of the Efficiency of State Property Management for the first quarter of 2021. In SOE Weekly (Issue 35), we published the results of the Monitoring for 2020.

10 of the 15 largest SOEs turn a profit for the first three quarters of 2021 (unaudited). According to Marlin, the top 15 largest Ukrainian SOEs reported their financial results for the first nine months of 2021.

Nine of them were profitable, including:

  • Ukrhydroenergo (Hr 9.14 billion);
  • Gas Transmission System Operator of Ukraine (Hr 5.8 billion);
  • Energoatom (Hr 2.35 billion);
  • Ukrainian Sea Ports Authority (Hr 1.44 billion);
  • Ukroboronprom (Hr 797 million);
  • Polygraph Combine “Ukraina” (Hr 235,4 million);
  • Boryspil International Airport (Hr 189 million);
  • Ukrposhta (Hr 131.5 million);
  • Agrarian Fund (Hr 1 million).

The loss-makers are:

  • Naftogaz as a group of companies (-Hr 4.37 billion; note that Naftogaz as an individual legal entity made a profit of Hr 9.78 billion);
  • Ukrenergo (-Hr 2.74 billion);
  • Ukrzaliznytsia (-Hr 461 million);
  • State Food and Grain Corporation (SFGC) (-Hr 328 million);
  • Automobile Roads of Ukraine (-Hr 118 million);
  • Ukrainian State Air Traffic Services Enterprise (-Hr 77.5 million).

(Note that the above results are based on unaudited financial reporting. The audited annual results will provide a more reliable picture. – SOE Weekly.)

For half-annual results of the 14 largest Ukrainian SOEs published by Marlin, see SOE Weekly’s Issue 48.

State representative at Ukrenergo’s supervisory board replaced. On Dec. 29, the Cabinet of Ministers replaced Mykhailo Ilnytskyi with Oleksandr Baranyuk as supervisory board member (state representative) of Ukrenergo.

(As we reported in SOE Weekly (Issue 55), according to the State Register and Chernihivoblenergo’s website, Ilnytskyi has continued to serve as this company’s CEO after being appointed as supervisory board member of Ukrenergo.

As we said then, it is likely that according to the Law “On Management of Objects of State Property”, he may not serve on the supervisory board of Ukrenergo because Chernihivoblenergo operates in an adjacent market.

It is also likely that Ilnytskyi may not serve on Ukrenergo’s supervisory board because the  Law “On Electricity Market” prohibits an officer of an energy distribution company to be a supervisory board member of the transmission system operator. – SOE Weekly.)

Energy sector

Energy Community opposes giving GTSOU public service obligations to regional gas distributors. According to Ekonomichna Pravda (EP), the Energy Community Secretariat wrote in a letter that transmission system operators are prohibited from producing or supplying gas. If the Gas Transmission System Operator of Ukraine (GTSOU) is given these obligations, it will jeopardise its financial stability, the Secretariat stated, invoking the EU Gas Directive.

The Energy Community proposes that the National Energy and Utilities Regulatory Commission (NEURC) should establish an appropriate distribution tariff, which would include the cost of purchasing process gas (the gas required by regional gas distributors to cover production and technological losses – SOE Weekly) at market prices.

In SOE Weekly (Issue 57), we reported that according to Ekonomichna Pravda (EP), Naftogaz wants to give the GTSOU its public service obligation (PSO) to supply process gas at the special price of Hr 7.42 per cubic meter. The volume of the process gas required is about 1.3-1.4 billion cubic meters per year.

NEURC to audit electricity distributors. The National Energy and Utilities Regulatory Commission (NEURC) intends to conduct unscheduled on-site inspections of 13 electricity distribution system operators after numerous complaints from customers about unsatisfactory services.

The state has a significant stake in some of these enterprises, including Ukrzaliznytsia (100%), Kharkivoblenergo (65%), Zaporizhzhiaoblenergo (60.5%), DTEK Odesa Electric Networks (25%), and Sumyoblenergo (25%).

Note that Ukrzaliznytsia, the national railway operator, is on this list because the company distributes electricity.

Ukrgazvydobuvannya natural gas production goes down. According to the media, Ukrgazvydobuvannya reduced gross natural gas production in 2021 by 3.7% (by 527.3 million cubic meters) compared to 2020.

Production of commercial gas in 2021 went down by 477.7 million cubic meters to 12.93 billion cubic meters, a 3.6% decrease.

The report says that Ukrgazvydobuvannya has reduced gas production for the third year in a row. In 2020, Ukrgazvydobuvannya reduced commercial gas production by 1.3% to 13.45 billion cubic meters and gross production by 5% to 14.23 billion cubic meters.

(Ukrgasvydobuvannya is 100% owned by Naftogaz. – SOE Weekly.)


Supreme Court reverses the ruling that Ukrzaliznytsia must pay Hr 750 million for the Donetsk Railway’s debts. The Supreme Court overturned a decision awarding Hr 749.2 million to the  Ukrtransleasing, which the Donetsk Railway owed money to. Because this railway is in occupied territory, the plaintiff tried to collect from Ukrzaliznytsia, the national rail operator.

The Supreme Court remanded the case to the Donetsk Regional Commercial Court.

According to the state register, Rinat Akhmetov controls 52.29% of Ukrtransleasing shares. Ukrzaliznytsia owns 47.7% of Ukrtransleasing shares.

We reported in SOE Weekly (Issue 43) that Serhiy Leshchenko, a member of Ukrzaliznytsia’s supervisory board, wrote on his Facebook page that a financial company named Tilmark is trying to collect a Hr 399 million debt of the Donetsk Railway (located in the occupied parts of Donetsk and Luhansk oblasts) from Ukrzaliznytsia.

There is currently a moratorium on asset recovery for debts owed by the railways in occupied areas. Leshchenko wrote that Ukrzaliznytsia’s inquiries to the Ministry of Justice and the Prosecutor General’s Office got no response.

The Cabinet approves Ukrzaliznytsia’s financial plan. On Dec. 29, the Cabinet of Ministers approved Ukrzaliznytsia financial plan for 2022. Ukrzaliznytsia projects a net profit of Hr 1.68 billion in 2022.

Revenues are expected to hit Hr 102 billion, with net sales revenues of Hr 98 billion and capital investments of Hr 29.9 billion. The company plans to use Hr 6.8 billion from the state budget for capital expenditures. Dividends are projected at Hr 28 billion.

(It seems that Ukrzaliznytsia’s financial plan was developed without the supervisory board’s participation. The board was approved on the same day that the Cabinet approved Ukrzaliznytsia’s financial plan. – SOE Weekly.)

Ukrzaliznytsia earns more than Hr 450 million (unaudited). According to Ukrzaliznytsia’s CEO, Oleksandr Kamyshyn, Ukrzaliznytsia made a profit of Hr 457 million in 2021.

As we reported in SOE Weekly (Issue 30), Ukrzaliznytsia was among the biggest loss-makers in 2020, with a loss of Hr 11.9 billion.

According to Ukrzaliznytsia, the company received net revenue of Hr 86.6 billion, which is 15% higher than in 2020. In particular, revenue from freight transportation increased by 11.2% to Hr 72.3 billion and from passenger transportation, by 50.7% to Hr 6.23 billion. The company's EBITDA increased by 42.8% to Hr 14.5 billion in 2021.

(Note that the passenger transportation was stopped by Ukrzaliznytsia for almost three months in 2020 due to Covid-19 restrictions.

Note also that the above results are reported by the company’s CEO based on “current information”. We are not aware of published financial statements, either audited or unaudited. The audited annual results may provide a more reliable picture, which may differ from the reported financials. – SOE Weekly.)

We reported in SOE Weekly (Issue 57) that according to the Head of the parliament’s Temporary Commission of Inquiry, Yulia Hryshyna, Kamyshin as Ukrzaliznytsia’s CEO, failed to implement presidential decrees, government plans, and the financial plan for 2021. The action plan for the EU Association Agreement was also not implemented. Hryshyna said the company’s indicators fall way short of the financial plan approved by the Cabinet.


Bilshovyk shares arrested. According to the State Investigaion Bureau (DBR), the court seized 100% of the authorized capital of the First Kyiv Machine-Building Plant (commonly known as the Bilshovyk) pending an investigation of alleged criminal abuse by State Property Fund (SPF) officials during the privatization auction in October.

DBR said it was investigating illegal sale of the Bilshovyk at a reduced price. An examination found that the asset valuation report used to establish the value of the Bilshovyk shares did not meet the legal requirements, which may have affected the trustworthiness of the valuation, the investigators said.

(It is unclear from DBR’s statement what the alleged abuse refers to.

It is also unclear whether DBR thinks whether the assets were overvalued or undervalued and whether this may have affected the potential buyers’ decision to take part in the privatization auction and the price of the asset.

According to Ekonomichna Pravda, some of the buyers refused to take part at the auction because of the legal risks. Among such risks were: lease agreements, possible withdrawal of land, unformed land plots, and litigations. None of these had to do with the valuation report.

Note that according to the Law on Privatization, the starting price is set by the privatization advisor. KPMG, one of the Big Four audit companies, acted as the advisor for the Bilshovyk privatization auction. KPMG set the starting price at Hr 1.38 billion. The price was then approved by the Cabinet of Ministers. – SOE Weekly.)

The investigation is ongoing.

Note that as of Jan. 5, the ownership rights for the Bilshovyk have already passed to the new owner, General Commerce LLC.

In SOE Weekly (Issue 49), we reported that on Oct. 27, the State Property Fund (SPF) sold the Bilshovyk at a privatization auction for Hr 1.429 billion. The SPF said that 15 potential buyers were interested in the asset. However, only three companies took part in the auction, and only two of them made bids. General Commerce LLC, reportedly affiliated with the businessmen and developers Vasyl Khmelnytskyi and Andriy Ivanov, became the winner of the auction. Various media have suggested that the formal auction participants may have colluded in the bidding (see articles by Kyiv Post, NV Business, and Ekonomichna Pravda).

In SOE Weekly (Issue 50), we reported that the Antimonopoly Committee of Ukraine (AMCU) began an inquiry into the recent privatization auction of the Bilshovyk.

In SOE Weekly (Issue 57), we reported that on Dec. 29, the AMCU granted permission for the purchase of the asset, and the deal was completed. Note that AMCU said that it was a concentration permission only – that is, when granting that permission, AMCU only considered potential negative impact of the acquisition on market competition.

AMCU also said that it continued its inquiry into possible anticompetitive behaviour of the auction participants. The inquiry was started almost two months ago after media reports about possible collusion among the bidders. (As we said, this implies that the deal can be reversed. – SOE Weekly.)

Company affiliated with the winner of the Bilshovyk auction changes its owner. Businessman Andriy Ivanov is ready to buy 55% of the shares of UPD (Ukrainian Property Development) Holdings Limited owned by real estate development tycoon Vasyl Khmelnytskyi.

According to the media, the Antimonopoly Committee of Ukraine (AMCU) approved the agreement on Dec. 29, and the parties plan to conclude it in January.

According to Ekonomichna Pravda, the deal will proceed in several stages. During the transition period, from the conclusion of the agreement until mid-2026, Ivanov will gain control over 55% of the company’s shares.

(Note that according to the Unified Register of Legal Entities, the Cyprus-registered UPD Holdings Limited is a shareholder of General Commerce LLC, the company that won the privatization auction of the First Kyiv Machine-Building Plant (commonly known as the Bilshovyk).

As of Jan. 5, the ownership rights for the Bilshovyk passed to General Commerce LLC. General Commerce LLC is apparently affiliated with Khmelnytskyi and Ivanov.

It is unclear whether the deal between Ivanov and Khmelnytskyi implies a full transfer of the ownership rights for the Bilshovyk from Khmelnytskyi to Ivanov. – SOE Weekly.)

Privatization brings Hr 5 billion to the state budget in 2021, according to the Director of the State Property Fund’s privatization department Vladyslav Danylyshyn. This is the best result since 2014.

Danylyshyn said that the largest revenues came from the privatization of the Bilshovyk plant (Hr 1.43 billion), the Kaluska Combined Heat and Power Plant (Hr 801 million), the Lviv Correctional Facility (Hr 377.5 million), Odesavinprom (Hr 234.9 million), and the Dunayevets Bakery Plant (Hr 227.1 million).

The result is still far from the planned Hr 12 billion for 2021.

In SOE Weekly (Issue 54), we reported that Prime Minister Denys Shmyhal said that the government would probably get only Hr 3 billion from privatization in 2021 contrary to the projected Hr 12 billion.

In SOE Weekly (Issue 52) we reported  that Dmytro Sennychenko announced his resignation as the Head of the State Property Fund (SPF) on Nov. 18.

In SOE Weekly (Issue 10), we reported that state budget income from privatization in 2020 added up to Hr 2.5 billion.

Presidential Office expects three major assets to be privatized in 2022. According to Deputy Head of the Presidential Office Rostyslav Shurma, the Presidential Office hopes to see the United Mining and Chemical Company (UMCC), Centerenergo, and the Odesa Portside Plant (OPZ) sold this year.

(OPZ has been slated for privatization since at least 2009. The government also named it the flagship case in 2015, as it would be the first large asset to be privatized after the Revolution of Dignity. Yet, many of the attempts to do so have failed repeatedly, largely because of OPZ’s toxic debt to the oligarch Dmytro Firtash.

Centerenergo was offered for privatization in an unsuccessful auction in December 2018. It has never been offered for privatization since. – SOE Weekly.)

Shurma acknowledged that there is a certain level of distrust that deters strategic investors that could bring down asset prices.

In SOE Weekly (Issue 54), we reported that according to the state budget for 2022, the state will privatize Hr 8 billion worth of assets in 2022.

In SOE Weekly (Issue 53), we reported that according to the updated IMF Memorandum, the Ukrainian authorities committed to launch tenders for the sale of at least three large SOEs by the end of December 2021, including the United Mining and Chemical Company (UMCC), the First Kyiv Machine-Building Plant (commonly known as Bilshovyk), and the President-Hotel.

The Bilshovyk was sold on Oct. 27, and the deal was completed after the Antimonopoly Committee of Ukraine (AMCU) granted its blessing on Dec. 29.

In SOE Weekly (Issue 58), we reported that the UMCC auction was postponed three times, with the new date unknown. The President-Hotel auction has never been announced.

Support independent journalism in Ukraine. Join us in this fight.
Freedom can be costly. Both Ukraine and its journalists are paying a high price for their independence. Support independent journalism in its darkest hour. Support us for as little as $1, and it only takes a minute.
visa masterCard americanExpress

News Feed

Ukraine Daily
News from Ukraine in your inbox
Ukraine news
Please, enter correct email address

Editors' Picks

Enter your email to subscribe
Please, enter correct email address
* indicates required
* indicates required
* indicates required
* indicates required
* indicates required


* indicates required
* indicates required


* indicates required
* indicates required


* indicates required
Successfuly subscribed
Thank you for signing up for this newsletter. We’ve sent you a confirmation email.