Andriy Boytsun: Ukrainian Public Enterprise Weekly – KyivPost

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Editor’s note: this is the 47e issue of Ukrainian State-Owned Enterprises Weekly, covering events October 9-13, 2021.

Corporate governance in public enterprises

Metzger placed under house arrest at night and dismissed by the supervisory board of Ukreximbank.

After CEO Yevhen Metzger assaulted journalists in his Ukreximbank office on October 4, the supervisory board was suspended.

On October 11, media reported that the court had placed Metzger, as well as the director of the Department of Information Policy, Volodymyr Pikalov, under house arrest for two months. On the same day, at an extraordinary meeting of the appointments committee of the supervisory board of Ukreximbank, the board received Metzger’s resignation letter.

Based on comments from the ethics committee and Ukreximbank’s internal investigation, the nominating committee therefore immediately recommended to the supervisory board that Metzger be fired, which the board did. He stressed that Metzger would not receive any severance pay.

The nomination committee [apparently, the supervisory board – SOE Weekly] appointed Serhiy Yermakov acting CEO of the bank from October 12 until a new CEO is appointed. The replacement must be selected and appointed no later than April 12, 2022.

US Congressional Caucus in Ukraine on the competitive selection of Naftogaz Supervisory Board.

The Congressional Ukraine Caucus – the bipartisan Ukrainian support group in the US Congress – issued a statement on corporate governance at Naftogaz. The group said it was closely monitoring competitive selection to fill positions on Naftogaz’s independent supervisory board in accordance with standards set by the international community.

The statement said that strong corporate governance and transparency are essential to ensure Ukraine’s energy security and independence. He also urged the country’s leaders to continue to demonstrate their commitment to the necessary reforms.

In SOE Weekly (Issue 42), we reported that on September 7, Prime Minister Denys Shmyhal tasked Oleksiy Lyubchenko (First Deputy Prime Minister and Minister of Economy) to announce a competitive selection of four independent board members monitoring of Naftogaz within one week. [by Sept.14 – SOE Weekly].

As of 1 Oct 13, no information on the announcement of a competitive selection for Naftogaz was available.

Interministerial working group to investigate SFGC debts to China.

The Cabinet of Ministers has set up an inter-ministerial working group to examine the (SFGC) debts and grain supply obligations to Chinese state-owned enterprises.

SFGC received a loan of $ 1.5 billion in 2012 to be repaid by 2027. It was issued as part of Ukrainian state guarantees in order to establish a systematic supply of grain to China.

The company owes money to the China Export-Import Bank and the China National Machinery and General Contracts Corporation.

The working group will be chaired by First Deputy Prime Minister Oleksiy Lyubchenko. It will also include representatives of the Ministries of Economy, Finance, Foreign Affairs and Agrarian Policy. In addition, representatives of the Chinese side, the National Bank of Ukraine, the CEO of SFGC and deputies are allowed to join the group.

SFGC said on its Facebook page that the first meeting of the interdepartmental working group took place on October 12. He developed an action plan to overcome the financial problems, including consultations and drafting of amendments to the agreements between SFGC and the Export-Import Bank. from China.

In SOE Weekly (Issue 30), we reported that SFGC was among the biggest losses among all Ukrainian state-owned enterprises, with a loss in 2020 amounting to Hr 5.9 billion.

In SOE Weekly (Issue 39), we reported that National Police investigators established that SFGC management squandered the company’s assets by selling grain to offshore companies at discounted prices without prepayment.

On August 13, the National Police arrested Andriy Vlasenko, former acting CEO of SFGC, at Ihor Sikorsky International Airport in Kiev as he tried to flee Ukraine. His accomplice was arrested with him.

In SOE Weekly (issue 42) we reported that Vlasenko, who is suspected of embezzling Hr 71 million and placed under house arrest, was “removed from his post as interim CEO” by order of the Ministry of Savings as of September 15. SFGC said on its Facebook page, and Vasyl Kovalenko, has been appointed as the new interim CEO.

As we reported in SOE Weekly (Issue 44), since the start of the year, SFGC’s elevators have only been operating at 10% of full capacity, and the company has not sent any grain shipments to the China National Machinery Import and Export. Society. This is a record level since the start of their business relationship.

Centrenergo change of CEO

Centrenergo’s supervisory board dismissed interim CEO Yuriy Vlasenko and handed over these functions to Vitaliy Dovgal, a member of Centerenergo’s management since February 2021.

SOE Updates

Banks

from Oschadbank development strategy for 2021-2024 approved.

The Council of Ministers approved Oschadbank’s development strategy for 2021-2024. It aims to achieve a projected net profit of approximately Hr 4.2 billion, a return on capital of approximately 15% and a cost / income ratio of less than 65%. [The Ministry of Finance’s press release did not state whether Hr 4.2 billion was the projected net profit per annum, or for the entire period. – SOE Weekly.]

According to its development strategy, Oschadbank should continue to operate as a leading universal bank. The strategy includes the following elements: business model: strengthening the bank’s position in retail loan and commission products, maintaining leading positions with businesses and micro, small and medium-sized enterprises, with a share of reduced activity with public enterprises; operating model: development of a range of digital products, including industry specific products; and financial stability: operational efficiency and sustainable profitability of the bank.

Finance Ministry added that Oschadbank will reduce share of non-performing assets to 10% [apparently, by 2024 – SOE Weekly].

The strategy is also to reduce operating costs and revise capital costs by optimizing the network and centralizing operations. [This wording typically implies cutting the number of a banks’ branches. – SOE Weekly.]

It is also envisaged that Oschadbank will join the Individual Deposit Guarantee Fund (IDGF), which will also ensure the entry of international financial institutions into the capital of Oschadbank.

As SOE Weekly (Issue 24) noted, on April 14, the Cabinet of Ministers backed a bill that will link Oschadbank with the IDGF. The connection of Oschadbank to the IDGF is the first step towards the entry of the European Bank for Reconstruction and Development (EBRD) in the capital of the bank.

Currently, the deposits of Oschadbank depositors are fully guaranteed by the state, i.e. 100%, regardless of the amount. After joining the IGDF, the guaranteed amount for new depositors should be 200 thousand UAH, as for all other Ukrainian banks.

Later, the Verkhovna Rada registered an alternative bill, which implies that the guaranteed amount for new depositors should be 600 thousand UAH for all banks. He also proposes that Oschadbank are expected to join the IDGF once this law comes into effect. The bill was adopted at first reading.

SOE Weekly (Issue 22) reported that the government has decreed that Oschadbank should ensure its connection to the IDGF from January 1, 2021.

[There is no rationale for the state to own Oschadbank. This also contradicts the government-declared Basic principles of state ownership policy. Since the services that the bank provides are readily available from private providers in the competitive market, Oschadbank should be privatized or liquidated.

Note that two members of the SOE Weekly team, Andriy Boytsun and Dmytro Yablonovskyi, published a policy paper titled “What Should the State Do with its Banks” in 2017. They concluded that the risks of state ownership of banks in Ukraine outweighed the benefits, suggesting that all state-owned banks should be privatized. The state can obtain the same services from private banks or international development finance institutions. – SOE Weekly.]

Energy sector

Naftogaz buys a large amount of electricity at auction.

According to Ekonomichna Pravda, the Naftogaz subsidiary bought 215,900 MWh of electricity from Centrenergo for 377.8 million Hr. The auction took place on the Ukrainian Energy Exchange on October 4.

Naftogaz purchased electricity at a weighted average price of 1.75 Hr per kWh. The delivery time is set from January 1 to March 31, 2022.

Ukrenergo will receive 23 billion HR in the form of bonds to repay the green debts.

The Cabinet of Ministers granted Ukrenergo a state guarantee for the issuance of bonds amounting to 22.8 billion hr. This will be used to repay the debts contracted by the Guaranteed Buyer for the payment of the renewable energy tariffs.

Naftogaz will sell cheap gas to religious and budget-funded organizations.

Naftogaz offers medium-term contracts to religious and state-funded organizations with a fixed price for gas – 13.7 UAH per cubic meter (or 16.8 UAH including delivery costs and VAT). The contract is concluded for a period of 15 months, until the end of 2022.

According to Naftogaz CEO Yuriy Vitrenko, organizations funded by the budget can buy gas from any supplier. Vitrenko said that many suppliers offer a monthly gas price of 30 to 45 UAH per cubic meter or abandon their obligations under contracts with a lower price that were concluded earlier. Unlike these suppliers, Naftogaz is in the market with a fixed price offer for the next 15 months, at more than half of the current monthly price.

Naftogaz also proposes that heat producers enter into three-year contracts: the amount of gas they need to supply heat and hot water to organizations funded from the budget can also be purchased at 13.7 UAH. per cubic meter, excluding VAT and shipping costs.

[Note that Naftogaz’s special rates for households, heating companies, and budget-funded and religious organizations can be considered as a public service obligation (PSO). According to the OECD Guidelines on Corporate Governance of State-Owned Enterprises, PSO costs should be compensated from the relevant (state or local) budgets.

Note also that for the above-mentioned group of clients, Naftogaz performs a function of hedging against price fluctuations, in fact correcting market deficiencies. In developed markets, such hedging products are normally available from various providers. – SOE Weekly.]

In SOE Weekly (number 39), we indicated that Naftogaz offered customers to join the new “Comfort Season” tariff plan and to pay for gas in equal monthly installments. The price of gas in the new tariff plan has been set at 7.96 Hr per cubic meter, excluding the cost of distribution (delivery). The total gas bill was determined by the amount of gas consumed by the household during the heating season (October to the end of April).

Ukrainian SOE WeeklyMT is an independent weekly digest based on a compilation of the most important information about state-owned enterprises and state-owned banks in Ukraine. Editorial team: Andriy Boytsun, Mariia Kramar, Dmytro Yablonovskyi and Oleksandr Lysenko. SOE Weekly is produced and funded by Andriy Boytsun. Communication support is provided and funded by CFC Big Ideas. SOE Weekly is not funded or influenced by any external party. © 2020-2021 Andriy Boytsun, all rights reserved. Spaces – Maidan Plaza || Maidan Nezalezhnosti 2, Kiev 01012, Ukraine
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[email protected] || Phone: +380 44 247-7829


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