Andrey Pavlushin, General Director of OTP Leasing
We invested in an environmental project, and in return we receive burnt garbage trucks.
In 2012, OTP Leasing entered into a waste collection and recycling equipment leasing agreement with the State Enterprise "Ukrekoresursy." As a foreign investor, we were inspired by the social component of this project—an investment in both the environment and the economy of the country where we operate.
Unfortunately, this story has now taken a completely opposite turn. Instead of fulfilling contractual obligations, we see malicious disregard on the part of the state-owned company, represented by its new management. Equipment has been burned and stolen. And the authorities are powerless to address this absurd situation, which threatens any foreign investment in this country.
And it all started like this.
In 2012, we entered into a leasing agreement with the State Enterprise Ukrekoresursy for waste processing equipment (27 units in total, including 19 modern garbage trucks and several waste processing lines) for a total of UAH 40 million over a period of 3 years.
Until April 2014, relations with the state-owned company, represented by its former CEO, Dmitry Radionov, were developing more or less smoothly. The equipment was working, and the client was making lease payments. When difficulties arose, we always accommodated them, providing deferrals and restructurings.
Feedback from the former director of Ukrekoresursy about working with OTP Leasing
I'd like to point out that the terms of this lease were initially more than liberal – financing was provided in hryvnia (although leasing is usually done in foreign currency), without being tied to the dollar exchange rate, with a flexible approach to repayment.
In all our concessions, we were guided by the idea that we were contributing to an important social and environmental project, trusting what we believed to be a reliable client. After all, the state-owned enterprise "Ukrekoresursy" is the only authorized entity responsible for building a national waste collection and recycling system.
Any company importing goods into Ukraine must pay a certain percentage to Ukrekoresursy for the disposal of packaging used for the goods. In fact, the Cabinet of Ministers once made this state-owned enterprise a monopoly in the waste disposal services market.
But the situation changed dramatically after the Cabinet of Ministers dismissed the former director of Ukrekoresursy, Dmitry Radionov, on April 16, 2014, and appointed Ara Safaryan, who had worked in various positions at another state-owned enterprise, GosEcoInvest, since 2012, as director.
With the appointment of a new director, Ukrekoresursy immediately stopped paying, citing inventory control. The outstanding balance amounted to approximately 20 million hryvnias.
All our written requests were ignored, and during meetings with Mr. Safaryan, the latter chose to avoid his obligations by citing the need for a Supervisory Board decision. This is completely absurd, since, according to its charter, this company is free to conduct its business activities.
Another issue is that this enterprise reports directly to the Cabinet of Ministers of Ukraine. Therefore, we decided to consult with the ministries, Mr. Oleh Didenko, Advisor to the Minister of the Cabinet of Ministers, and the Minister of the Cabinet of Ministers himself, Ostap Semerak. But this had no impact on Mr. Safaryan's actions.
For failure to fulfill the lease agreement, we have the right to seize our equipment, which we did two months ago, sending the client a notice of termination of the lease agreement and issuing an enforcement order for execution by the State Enforcement Service.
And then things got interesting – the events resembled a 1990s crime blockbuster. They began hiding our equipment, prudently disabling its GPS. After the two vehicles were seized in Kyiv, the next day, by a strange coincidence (!), three garbage trucks worth UAH 1 million each burned in the parking lot.
We no longer have any hope of getting the two garbage trucks back from Alushta...
But the main negative aspect of this precedent isn't even the state-owned enterprise's violation of the law, nor our losses, nor the ruined environmental project. It's the total erosion of any foreign investor's trust in the new government, which so zealously declared a European development vector.
Even in these difficult times for our country – we are in a state of war, we are on the brink of economic default – some officials continue to openly disregard all the laws of normal business conduct.
Until now, OTP Leasing has been virtually the only leasing company willing to do business with state-owned companies. We built on the successful experience of our parent company, OTP Bank Plc, Hungary's largest bank, which extensively finances municipal projects in Hungary.
We also had a fairly successful partnership with Boryspil Airport on leasing cars for taxi services. But under these circumstances, I'm sure neither our shareholder nor any other foreign investor will decide to invest in Ukraine. And our country needs these investments now more than ever.
But I'm an optimist. And I haven't lost faith that the perpetrator, no matter what position they hold or what connections they have, will be brought to justice. And that the new government will be different from the previous one (though even under the previous one, this wasn't the case!) and will prove that it has learned the lessons of the Maidan.
We'll see.
Andrey Pavlushin, Economic truth
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