Ukraine state-owned enterprises weekly — Issue 152

October 31, 2024

By Ukraine

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Editor’s Note: This is issue 152 of Ukrainian State-Owned Enterprises Weekly, covering events from Oct. 13-24, 2024. The Kyiv Independent is reposting it with permission.

`Corporate governance of SOEs`

Updated IMF Memorandum. On Oct. 18, the International Monetary Fund (IMF) published an updated Memorandum of Economic and Financial Policies (MEFP) after its fifth review under the Extended Fund Facility (EFF) for Ukraine.

Ukraine’s key commitments related to state-owned enterprises and banks are as follows:

All banks with majority state ownership will remain the responsibility of the Finance Ministry. Any nationalized non-systemic banks will be immediately transferred to the Individuals Deposit Guarantee Fund (DGF) for resolution (Continuous Structural Benchmark).

As we wrote in Issue 116, foreign investors were interested in buying Ukrgasbank and Sense Bank.

Complete the formation of the full supervisory board of Ukrenergo (seven members), with independent members constituting the majority of the supervisory board (New Structural Benchmark; end-December 2024).

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 an 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 had filed their resignation notices. See Issue 146 for more detail.

Currently, Roman Pionkowski is the only remaining independent member of Ukrenergo’s supervisory board. He was appointed together with other independent members in December 2021, meaning that his term of office is expected to expire in December 2024.

As we wrote in Issue 148, on Sept. 20, the Energy Ministry, in its capacity as Ukrenergo’s general shareholders meeting, decided to hold a competitive selection for three independent members of the company’s supervisory board.

The fourth independent member will be elected in parallel under a previously launched procedure, the ministry added back then.

Three weeks later, the Economy Ministry said that the SOE Nomination Committee approved the candidate requirements and announced the competitive selection for three board members (see Issue 151).

The selection of all board members — four independent and three state representatives — is scheduled to be completed by Dec. 9. See Issues 129 and 151 for more detail.

UDI gets a new CEO. On Oct. 21, Ukrainian Defenze Industry (UDI) announced that its supervisory board had appointed Oleg Gulyak as the company’s new CEO, following a competitive selection process involving more than 20 applicants.

As we wrote in Issue 146, UDI’s CEO Herman Smetanin resigned on Sept. 4 to become the new minister for strategic industries, replacing Oleksandr Kamyshin.

UDI’s supervisory board then appointed Oleg Gulyak as acting CEO and announced that it would launch a competitive selection for the new CEO as soon as possible.

According to UDI, Gulyak has served in the Armed Forces of Ukraine since 1993. In 2021-2024, he was the Commander of the Logistics Forces of the Armed Forces of Ukraine. Since July 1, he has served as a military cooperation advisor to UDI’s CEO, strengthening the company’s ties with the Defense Forces. See Issue 146 for more detail.

As we reported in Issue 148, on Sept. 19, UDI’s supervisory board launched a competitive selection for the CEO position. Candidates could apply from Sept. 20–Oct. 4.

`Energy`

Naftogaz Group paid Hr 67 billion ($1.6 billion) in taxes in January-September 2024, the company’s press office said on Oct. 16. This includes Hr 61 billion ($1.5 billion) paid to the state budget and Hr 5 billion ($121 million) in contributions to local government budgets.

In September alone, Naftogaz Group paid Hr 5.8 billion ($140 million) in state taxes, including Hr 600 million ($14.5 million) in local ones.

As we reported earlier, Naftogaz Group paid the following taxes to state and local budgets in the course of 2024:

Month	Taxes paid to state and local budgets		SOE Weekly details
	UAH	Euros*
January	6.1 billion	147 million	Issue 119
February	5.3 billion	129 million	Issue 123
March	8.3 billion	197 million	Issue 128
April	8.0 billion	189 million	Issue 132
May	9.3 billion	215 million	Issue 137
June	9.2 billion	203 million	Issue 140
July	6.0 billion	132 million	Issue 143
August	7.2 billion	174 million	Issue 148
September	5.8 billion	129 million	This issue

* Converted at the National Bank of Ukraine's average exchange rate for the respective period. Calculations by SOE Weekly.

As we reported 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 ($559 million) in consolidated net profit in 2023, a significant rebound from its Hr 79.1 billion ($1.9 billion) loss in 2022. See Issue 131 for more detail.

As we wrote in Issue 149, Naftogaz Group made Hr 24.4 billion (€578 million at the average exchange rate over that period) in consolidated net profit in the first six months of 2024.

Ukrhydroenergo cancelled a tender to procure lawyers to seek compensation for the destroyed Kakhovka HPP, the company’s press office announced on Oct. 15.

The company said that this decision was made to ensure that the company’s actions are in line with Ukraine’s broader national strategy. This strategy aims to hold Russia accountable for the damage caused to critical infrastructure and ensure compensation for the destruction.

In this context, additional consultations with the Cabinet of Ministers and other key stakeholders will be held to determine the most appropriate course of action in line with the national approach coordinated with Ukraine’s international allies, Ukrhydroenergo explained.

On June 6, 2023 Ukrhydroenergo reported that the Kakhovka Hydroelectric Power Plant (HPP) was destroyed beyond restoration after the Russians set off a massive explosion in the engine room. See our Issue 91 for more detail.

As we reported in Issue 135, on June 6, Ukrhydroenergo announced that it initiated an investment arbitration procedure with Russia to compensate for the damage caused by the destruction of the HPP. The preliminary estimate was about $2.5 billion.

As we reported in August 2024 (Issue 143), Ukrhydroenergo announced a tender to procure lawyers. The tender was scheduled for Oct. 17. Its expected value was Hr 365 million ($8.8 million).

`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 is Hr 178 million ($4.3 million).

As we reported in Issue 148, in the previous attempt, the starting price was Hr 89 million ($2.1 million). It is unclear whether the asset whose starting price doubled will be able to attract bidders this time.

This will be the twelfth attempt to sell the port.

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 €5.6 million at the time) to Ukrdoninvest LLC, a company owned by Ukrainian businessman Vitaliy Kropachov. However, Ukrdoninvest decided not to make the payment. 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, the ninth attempt to sell Bilhorod-Dnistrovskyi also failed (see Issue 147), as did the tenth and eleventh (see Issue 148).

As we also 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 suggested that, based on CASE Ukraine’s information, the winning bidder would have to pay at least Hr 258 million ($6.2 million) in total.

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 detail, see SOE Weekly’s Issues 74, 78, 79, 84, 85, 87, 93, 99, 100, 144, 147, and 148.

SPFU puts seized AEROC up for privatization. On Oct. 15, the Cabinet of Ministers approved the terms of privatization for construction materials producer AEROC, with a starting price of Hr 965 million ($23 million).

The next day, the SPFU set the date of the privatization auction. It is scheduled for Dec. 18.

As we wrote earlier, SPFU planned to privatise AEROC, previously owned by sanctioned Russian oligarch Andrei Molchanov. See our Issues 97, 100, 106, and 110 for more detail.

As we reported in Issue 140, on July 12, the Cabinet added AEROC to the large-scale privatization list.

According to Ekonomichna Pravda (EP) and PRO-Consulting, AEROC is one of the largest aerated concrete producers in Ukraine. The company owns two plants in Obukhiv and Berezan (Kyiv oblast), which have been out of operation since July 2022. The capacity of these plants exceeds 1 million cubic meters per year, while total aerated concrete production in Ukraine in 2020 was 4 million cubic meters.

AEROC also has an unfinished plant in Stryi (Lviv oblast), EP added.

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.