"United Mining and Chemical Company" | News | State Property Fund is blocking the path of international investors to state-owned assets in Ukraine
State Property Fund is blocking the path of international investors to state-owned assets in Ukraine
02.06.2020Following the cancellation of the big privatization in Ukraine, the State Property Fund took possession of the most attractive assets of the state through placing the people close to oligarchs and the Russian business to manage these assets.
The State Property Fund of Ukraine officials appointed representatives of oligarchs and potential investors to the boards of the state-owned companies (on the privatization list)
Transparent privatization in Ukraine has been put on hold once again. Dmytro Sennychenko, Head of the State Property Fund of Ukraine, and Serhiy Ihnatovskiy, his deputy, failed to resist the pressure of the oligarchs, thus disappointing the Ukrainian general public. Taking advantage of the pause in the privatization, they planted representatives of Rinat Akhmetov and other business and political groups on the boards of the most attractive state-owned enterprises, while appointing former managers from Glencore to the United Mining and Chemical Company, the blue chip of the privatization. The SPF, therefore, is clearly violating the rights of the potential international investors that would have been able to come to Ukraine as early as next year.
How many more of the same incompetent managers seizing control of the top state assets in Ukraine does the SPF have?
The big privatization in Ukraine, which was expected to add UAH 12 billion to the national budget, which is currently experiencing deficit, has been put on hold. The news was released to the world by the SPF Head Dmytro Sennychenko on March 30. The investors, who believed Sennychenko in Davos, where he presented the most attractive Ukrainian assets in January 2020, were forced to adjust their investment plans. In fact, judging by the 2020 National Budget, Ukraine will not offer anything of interest for the international portfolio investors until the end of the year. The revenues from privatization have been cut to UAH 500 million in the national budget for this year, until the market recovery following the global crisis and Covid-19, as the SPF explained.
This all seems to be right. How much can you get for an asset during a crisis? Our concerns, however, are of a different nature. The current situation at the state-owned enterprises from the TOP-5 on the privatization list, after the procedure of their sale has been suspended by the government, is a matter of concern.
As a reminder, the SPF expected that the lion’s share of the revenues from privatization would come from the sale of United Mining and Chemical Company (UMCC), Odesa Portside Plant (OPP), Elektrovazhmash, Turboatom, and President Hotel. The first three companies from the list seem to be experiencing some serious issues, caused by the new management appointed by the State Property Fund.
Oligarchs at state-owned enterprises once again; losses and poverty
Personnel policy of the SPF at UMCC, Elektrovazhmash and OPP does not stand up to criticism, to put it mildly. Meanwhile, any attempts of mass media to show the head of the fund Dmytro Sennychenko and his deputy Serhiy Ihnatovskiy that the management placed by him and his deputy for corporate rights is unprofessional, to say the least, bring about an emotional reaction of rebuttal.
Take Odesa Portside Plant, the gem of the Ukrainian chemical industry. In January last year, the SPF appointed a new director to the plant – Mykola Synytsya, a restaurateur, a well-known Ukrainian entrepreneur, the owner of OMEX Corporation, which owns Dva Gusya restaurant chain, CITI coffee shops, Sushi-café, Felicita pizzeria. He is a member of Svoboda Party and ran for the Verkhovna Rada of Ukraine in 2019 on the party’s ticket.
The first results of the new management at OPP are as follows: in Q1 2020, the losses of OPP increased to UAH 1.5 billion, informed UNIAN News Agency. https://www.unian.net/economics/other/rukovodstvo-elektrotyazhmasha-i-opz-obvinili-v-neeffektivnom-upravlenii-poslednie-novosti-10968755.html
The situation is no better at the other enterprise from the TOP 5 – Elektrovazhmash. In November 2019, the SPF appointed Viktor Busko as the new director there. Earlier, Busko headed one of the companies of Rinat Akhmetov’s Metinvest Group – Zaporozhogneupor. Busko is a deputy of Zaporizhzhya Oblast Council from the Opposition Bloc, successor of the Party of Regions.
Under his leadership, Elektrovazhmash dropped its Q1 output by UAH 160 million, 72% down than in Q3 2019 under previous management. Proceeds from clients dropped even lower – from UAH 600 million to UAH 90 million. Appointment of Viktor Busko as the director of Elektrovazhmash was “a well-considered decision”, according to Serhiy Ihnatovskiy, SPF Deputy Head, as reported by Interfax Ukraine News Agency. https://interfax.com.ua/news/economic/628186.html
Stakeholders from Glencore and oligarch Akhmetov at UMCC
United Mining and Chemical Company, it seems, has been handed into management straight to the potential buyer, using a combination with subsequent departure of the appointed acting chairman of the board Mykhailo Makarov. There are telling arguments in favor of this version.
In particular, during the first wave of the management change in the company, Sennychenko-Ihnatovskiy, without any tender or documents about the appointment, sent two former employees of a pro-Russian company Glencore to UMCC as advisors of the chairman of the board. They are British citizen Peter Davis (worked at the company from 1994 until 1998) and Tatiana Gogenko, who worked at Glencore for 14 years at the metallurgical raw materials sales division. There was only one task for these employees – to go over all current contracts with the clients. Essentially, ‘the people in the streets’ were granted access to commercial secret of the company; and this company operates in a very narrow, highly competitive market. Is it not a violation of the rights of potential investors of UMCC?
In the beginning of April, the State Property Fund amped up the influence of Davis and Gogenko in the company. The former was appointed interim chairman of the board with the right of signature of all documents, while the latter – a board member for commercial issues. She controls the supplies and production at UMCC, while he oversees all processes in the company, as it has been more than one month since the earlier appointed Mykhailo Makarov took a ‘sick leave’.
Another board member Yuriy Kiyashko, a former employee of Northern GOK, a Rinat Akhmetov’s asset, joined Glencore’s pool of managers in April. He was immediately put on the staff list and given control over the company’s finances – procurements and expenses. The first thing this employee did was stop payments for electricity supply to UMCC subsidiaries – Vilnohirsk VMMP and Irshansk MPP. Clearly, there will soon be new contracts at UMMC for the supply of energy sources – natural gas and electricity. And it cannot be ruled out that the tenders for the supply will be won by the companies owned by Rinat Akhmetov, whose power in the energy sector of Ukraine is currently unlimited with the prime minister and energy minister being the people loyal to the Pro-Russian oligarch. They have already reshaped the energy balance in the country in favor of Rinat Akhmetov’s energy companies.
Be that as it may, no matter how hard the SPF Head Dmytro Sennychenko tries to refute dependence of the new members of boards and supervisory boards at state-owned companies on their former jobs in his interviews, the habits of the oligarchs planting their people at state companies with support of Serhiy Ihnatovskiy, SPF Deputy Head for Corporate Rights, do not change. In terms of management of state assets, Ukraine has, unfortunately, failed to resist the temptation to ‘board the money train’, to the disappointment of the Ukrainian voters.
In this respect, all that is left to say is that the new SPF Head Dmytro Sennychenko failed to put in place transparent management of the state assets prior to privatization. All his appointees at the state companies, without tenders and with the word ‘acting’ in front of their position, continue to support tolling schemes with the oligarchs, as is the case with the Odesa Portside Plant, continue to bankrupt domestic machine engineering industry, as is the case with Elektrovazhmash, and keep distributing the cash flows in favor of the oligarchs and Russian stakeholders, as is the case with United Mining and Chemical Company, all the while hiding behind the masks of the British financial ‘guru’ – Peter Davis.
Having received over 500 state assets into management, the SPF began to appoint incompetent managers there, who either consciously or because of their lack of competence lead successful companies to big losses and debts. How many of the same incompetent managers does the SPF have, who, like an octopus, wrap around and consume the best state-owned assets in Ukraine?
Who set this task for Sennychenko-Ihnatovskiy on the eve of privatization? Perhaps, this is a sort of patriotic position – to please Ukrainian and Russian oligarch to the detriment of international investors? It probably wouldn’t hurt for the President of Ukraine to get to the bottom of the issue and find out what the goal of the SPF officials is, while they manage the most attractive state-owned assets.