Yatsenyuk said—Yatsenyuk did: he secured a shareholders' meeting at the country's largest oil producing company, PJSC Ukrnafta, and received almost UAH 1,9 billion in dividends for the state-owned stake. At first glance, this tone of news could be interpreted as nothing less than a victory for Arseniy Petrovich. But if you look closely, the winner is the other party—the minority shareholder, the Privat Group, headed by Ihor Kolomoisky. For the opportunity to receive his legally owed money, the prime minister turned a blind eye to Ukrnafta's catastrophic production and financial situation, as well as to the blatant schemes to plunder it. Considering the company's management remains unchanged, it's safe to assume that the tried-and-true schemes will continue. Yatsenyuk, however, was simply forced to agree to this. In modern parlance, this is called "draining."
The operation was carried out according to a template first developed and implemented in 2010. And it must be admitted, it was executed brilliantly. Ihor Kolomoisky exploited the government and the next prime minister's perennial need for money and PR to the fullest.
There was no certainty that the Ukrnafta PJSC shareholders' meeting on October 10 would take place until the very last day. The splits Kolomoisky used to force Yatsenyuk into allowed him to achieve his desired goals. But first, a few words about the situation.
Formally, the state owns a controlling stake in Ukrnafta—50% plus one share. However, in reality, the state has had no role in the company's management, and has for a long time. Since 2003, the board has been chaired by protégés of the Privat Group, which, according to various sources, has consolidated between 43% and 48% of Ukrnafta's shares. This allows the group to block shareholders' meetings, as the law requires a quorum, i.e., the presence of holders of at least 60% of the shares.
In the winter of 2010, Dnipropetrovsk residents further cemented their position, for the first time spectacularly exploiting the electoral needs of politicians. Between the two rounds of the presidential election, Kolomoisky and his associates secured the signing of a shareholder agreement on mutual understanding and cooperation with Naftogaz Ukrainy (which formally controls the state-owned stake in Ukrnafta). According to this document, "private" shareholders gained the right to form the public joint-stock company's board, whose powers were simultaneously significantly expanded. Formally, Naftogaz Ukrainy gained a majority on the supervisory board—six out of 11 members and the chair. However, firstly, the supervisory board is largely a "wedding" body, and secondly, minority shareholders only need to secure the support of one or two state-owned members to secure the majority.
The latest example: in 2010, Naftogaz appointed Valentyn Franchuk, a longtime manager of Privat Group enterprises, to the supervisory board. He is generally known as a classmate and close friend of Ihor Palytsia and Oleksandr Lazorko, the most prominent oil and gas fledglings of the Dnipropetrovsk business group. In gratitude for the shareholder agreement, the government of presidential candidate Yulia Tymoshenko reported a "victory," i.e., the distribution of net profits of UAH 5,09 billion for 2006-2008. As we can see, the scenario implemented by Kolomoisky in October 2014 is identical to the 2010 operation, even in terms of the three-year period for accumulating retained earnings.
But what did Kolomoisky negotiate for himself this time? Or what favor did Yatsenyuk do for PrivatBank to obtain money already belonging to the state? Let's start with the fact that the government abandoned its initiative to replace Ukrnafta CEO Pieter Van Hecke. The preferences of the Belgian, who launched his campaign as an independent candidate in 2011, are now clear. According to sources at Naftogaz, Mr. Van Hecke has been virtually absent from Ukraine for a couple of years, managing his own football club in his native Belgium. Meanwhile, the official salary of the top manager of the semi-state-owned company alone, according to available data, is $2 million per year.
But the health of the company entrusted to this citizen is much worse, as eloquently demonstrated by the financial and production indicators of Ukrnafta over the past three years (see table).
It is noteworthy that, against the backdrop of a 10% drop in oil production and a 14% decline in net income, the net profit indicator in 2013 fell by 11,5 times compared to 2011. Strange, isn’t it?
According to the materials of the special group preparing for the Ukrnafta shareholders' meeting, "PJSC Ukrnafta and its structural division, OGDU Poltavanaftogaz, purchased geological survey work from PJSC Carpathian Geophysical Survey Department for a total of UAH 2,262 billion in 2012-2014... Currently, fiscal authorities are conducting a pre-trial investigation into the criminal case regarding the transfer of funds for geological survey work by PJSC Carpathian Geophysical Survey Department to LLC BC Gefest Alliance (a subcontractor), which has signs of being fictitious," according to a note prepared by the Department of Economic, Information, Industrial Security and Risk Management of NJSC Naftogaz of Ukraine.
According to other sources, Ukrnafta also incurred a loss of UAH 1,136 billion from petroleum product sales through its network of gas stations between 2011 and 2013. The secret is simple: gross profit was UAH 568,3 million, which failed to cover distribution costs of UAH 1704,7 million. Ukrnafta also lost UAH 439 million from wholesale fuel sales. The secret to its success is equally simple: sales were conducted at prices lower than the purchase price. For reference: Ukrnafta purchases all petroleum products for wholesale and retail sales from companies affiliated with PrivatBank.
Only the two mentioned “pieces” – fictitious costs and artificial losses – weigh
Ukrnafta's revenue in 2011-2013 was UAH 3,9 billion. And then there are the mysterious transactions involving food, ferroalloys, and urea, which Ukrnafta, for some reason, purchases from PrivatBank companies and subsequently exports to offshore jurisdictions. This also means that 50% of Ukrnafta's income is being siphoned off. Accordingly, the state received, at best, half of the actual dividends at the October 10 shareholders' meeting. It is known for certain that Yatsenyuk was informed of this situation.
"At the general meeting of shareholders on October 10, it is necessary to consider the effectiveness of Ukrnafta's financial and economic management, as well as conduct a comprehensive audit. The composition of the management board and supervisory board must be completely changed... The profit results for 2013 must not be approved, the profit for 2013 must not be distributed, and an independent financial audit must be appointed based on the 2013 results," these were the conclusions and recommendations of the special group preparing for Ukrnafta's shareholders' meeting.
The October 10 meeting is over, the 2013 issue was not raised, and Pieter Van Hecke remains in his position. NAK has appointed a new team to the supervisory board, led by its leader, Naftogaz Ukrainy CEO Andriy Kobolev.Read more about it in the article Andrey Kobolev. An unnoticed "veteran" of the gas pipeline.). But they're unlikely to succeed in changing anything. Especially considering that after the upcoming elections, there's a high probability that Nakov officials will lose their positions, which would automatically turn them into "stooges" for buying up their votes for the minority shareholder.
To ensure the final defeat of the hypothetical enemy, Igor Valerievich unleashed a new "weapon" on the eve of the shareholders' meeting. It was revealed that Ukrnafta was refusing to pay oil and gas production royalties, having accumulated a debt of over UAH 1 billion in two months. A perfect example for the country's taxpayers, whose arms have recently been twisted by the tax service for every thousand hryvnias...
Be that as it may, the Ukrnafta PJSC shareholders' meeting took place. As a result, Arseniy Yatsenyuk received little more than pre-election PR (it's unclear when the money will be forthcoming; Privat still controls that issue). And Igor Kolomoisky, with his characteristic modesty, got everything: more patriotic PR (he helped the country with its own money), legally received his dividends from Ukrnafta, legitimized the "effective" work of his management in 2011-2013, and, most importantly, retained all his positions in the company. Soon, there will likely be a new prime minister, and he, too, will be willing to turn a blind eye to anything, just to receive the coveted dividends.
Sergey Kuyun, ZN
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