Akhmetov's empire is falling apart
Following the onset of Russia's full-scale invasion, the SCM Group suffered significant losses. What's happening with Rinat Akhmetov's business now, and what is he doing to recover his assets? Nikolai Topalov and Yaroslav Vinokurov inquire on the website. EP.
For Rinat Akhmetov, as for the entire country, the war began back in 2014 with the annexation of Crimea and the seizure of part of the Ukrainian Donbass region.
Even before the full-scale Russian invasion, a Donetsk businessman lost control over a large number of assets in metallurgy, energy, real estate, telecom, mechanical engineering and the agro-industrial complex.
Despite the billions in losses, even then Akhmetov was convinced that peace in Donbas could only be achieved through negotiations. To this end, he advised doing everything possible and impossible, and sitting down at the negotiating table even withbald devil».
After February 24, the billionaire's opinion changed dramatically. "Putin is a war criminal, and Russia is an aggressor country," voiced EP expressed his attitude towards the war and its initiator, Akhmetov.
Since then, Ukraine's richest man has lost at least half of his fortune. Akhmetov himself now estimates his personal losses at tens of billions of dollars. At the beginning of 2022, Forbes estimated his fortune at $13,7 billion.
What's happening with Akhmetov's empire now, where has he suffered the greatest losses, and will he remain the richest Ukrainian in the future?
Akhmetov's empire is falling apart
Akhmetov's Empire: Metallurgical Business
The Donetsk billionaire's key asset, which generated the lion's share of Akhmetov and his business partner, Vadim Novinsky,'s income, was the mining and metallurgical holding company Metinvest. Before the war, this holding company mined and exported approximately 60% of Ukraine's iron ore.
Thanks to favorable pricing conditions, the company earned $2,7 billion in net profit in January-June 2021 alone (annual reports have not yet been published).
With the outbreak of the Great War, two important Metinvest assets located in Mariupol—the Ilyich Iron and Steel Works of Mariupol and Azovstal—found themselves under occupation.
The Azovstal steel plant, which was fascinated by Russians, or what remained of it on July 7
Akhmetov himself recently estimated the losses of these two enterprises at “tens of billions of dollars.”
"Based on the replacement cost alone, the estimated losses of Ilyich Iron and Steel Works and Azovstal due to Russian aggression range from $17 billion to $20 billion," сообщил in July, a businessman.
Aerial view of the ruins of the Azovstal Iron and Steel Works
The company does not yet know the current state of the plants, but believes that their resumption of operations after the deoccupation of Mariupol is quite likely.
"The damage there is quite severe. But everything is being rebuilt; the questions are about feasibility and time," Metinvest CEO Yuri Ryzhenkov emphasized.
The occupation authorities of the Donetsk region declared their intention to demolish Azovstal, but the terrorists wanted to resume operations at the less damaged Ilyich Iron and Steel Works.
Denis Pushilin spoke of plans to build a "technopark or park zone" in the city of Azovstal and turn Mariupol, where Russians killed tens of thousands of Ukrainians, into a "resort city."
Akhmetov's empire is falling apart
Another enterprise within the Metinvest holding company remains mothballed due to constant shelling. This is the Avdiivka Coke Plant, Europe's largest coking plant. Its products are used as fuel in the ferrous and non-ferrous metallurgy industries.
In addition, operations at three mining and processing plants—Inguletsky, Yuzhny, and Severny—have been suspended. During peacetime, these mining and processing plants were Metinvest's most profitable enterprises.
It is not yet known how much ore is exported abroad, and the company has decided not to disclose this data.
Akhmetov's Empire: What Continues to Work?
The Central Mining and Processing Plant (CMP) is operating at reduced capacity but without significant interruptions. Zaporizhstal, one of the largest metallurgical enterprises, is currently operating at half capacity. Its furnaces produced 2,6 million tons of pig iron annually, 76% of which was exported.
At Kametstal (formerly the Dneprovsky Iron and Steel Works), only one of three furnaces is in operation. Pokrovskugol, whose main product is fuel for the steel plants, is perhaps the only enterprise within the Metinvest holding company that remains operational despite the war.
Due to the war, Akhmetov's metallurgical business lost not only its factories but also a large amount of output. "Russia stole approximately 240 tons of finished goods from Mariupol plants, worth $150 million," SCM reported.
These products were stored in the port of Mariupol, directly in the city’s factories and warehouses.
Akhmetov's Empire: The Energy Wing
Compared to the metallurgy industry, Akhmetov's energy holding DTEK also suffered significantly smaller, but still significant, losses.
The first to be lost was the Luhansk Thermal Power Plant, located in the town of Shchastya. Russian forces began shelling it two days before the Great War began, and by February 25, contact with the plant had completely disappeared.
DTEK CEO Maxim Timchenko estimated the loss of this power plant at $180 million.
"The resumption of thermal power plant (TPP) generation in the Ukrainian energy system is only possible after the region is liberated from the occupiers and its operation returns within the current legal framework of Ukraine," DTEK responded to the EP.
Akhmetov's empire is falling apart
DTEK also shut down the Zaporizhzhia Thermal Power Plant, which is located in the temporarily occupied city of Energodar and is now also effectively lost.
On the front line, the Kryvyi Rih and Kurakhovskaya thermal power plants are under constant shelling.
Due to the war and occupation of territories, the group stopped and mothballed all wind power plants, and solar power generation dropped to minimal levels.
The company's green portfolio includes solar and wind power plants with a total installed capacity of 1 GW. More than two-thirds of Ukraine's total installed wind power capacity is located in the Zaporizhzhia and Kherson regions.
Akhmetov's empire is falling apart
Akhmetov's energy business also suffered significant losses due to the destruction of networks, which were subjected to regular shelling.
First and foremost, this concerns DTEK Donetsk Electric Grids. Second place goes to the Kyiv region, where UAH 300 million has already been spent on infrastructure restoration following the de-occupation. Third in terms of the scale of destruction is the Dnipropetrovsk region.
Coal and gas production suffered the least. DTEK expects to maintain production volumes in these sectors at last year's levels.
Akhmetov's Empire: Finances
Despite the fact that the war dealt a serious blow to the banking system, Rinat Akhmetov's First Ukrainian International Bank (FUIB) survived the first months after the outbreak of the Great War relatively stable.
There was virtually no outflow of deposits. Moreover, the total amount of deposits in the bank at the beginning of August was higher than at the beginning of the year.
The deposit portfolio grew despite a decline in the number of depositors. This was due to the bank's revaluation of foreign currency deposits following the increase in the official dollar exchange rate from 29,25 to 36,57 hryvnias.
Akhmetov's empire is falling apart
The bank's assets decreased by almost UAH 20 billion in February and March, but since June, the bank has managed to reduce this loss to UAH 10 billion. At the beginning of August, FUIB's net assets amounted to UAH 105,3 billion, making it the sixth-largest bank in Ukraine.
Despite positive performance indicators, Akhmetov's bank began to incur losses for its owner.
The effects of military action on borrowers are gradually becoming apparent. FUIB's financial results shifted from a profit of UAH 596,5 million in January to a loss of UAH 33,4 million in July.
The bank somewhat reduced its losses due to the loss of branches in the occupied territories, namely due to a reduction in operating expenses and labor costs - from UAH 245,9 million in January to UAH 185,95 million in July.
In total, 31 branches and 172 ATMs have been lost or damaged since February 24. Due to constant shelling by Russian invaders and the occupation forces, access and control over 16 branches and 95 ATMs in Mariupol have been lost. The same situation applies to one branch and two ATMs in Volnovakha.
Three branches were also suspended in Kherson, one each in Nikolske, Izyum, Nova Kakhovka, Dniprorudne, Energodar, Melitopol, Kupyansk, and two branches in Berdyansk. Two branches were completely destroyed—one each in Kharkiv and Severodonetsk.
Banking wasn't SCM's only financial interest. Before the Great War, Akhmetov was the owner insurance company "ASKA"However, the businessman sold it in August of this year to another insurer, the company "USO".
Agro-industrial complex: minus land and harvest
Before the Great War, Akhmetov's agricultural holding, HarvEast, cultivated 127 hectares of land in the Donetsk, Kyiv, and Zhytomyr regions.
The lion's share of the land—almost 90 thousand hectares—is located in temporarily occupied territory.
Akhmetov's empire is falling apart
The company reported that in early September, HarvEast was unable to access 51,789 tons of its agricultural products. This includes wheat, sunflower, corn, peas, lentils, rapeseed, barley, mustard, sorghum, and other crops from the 2019-2021 harvest.
Transport
Akhmetov also owns the country's largest private railway rolling stock operator, Lemtrans. Before the war, its fleet consisted of over 15 gondola cars.
Lemtrans was the target of looting and destruction by Russian troops. The company's railcar depot in Volnovakha was destroyed by shelling and a fire.
In addition, more than 2 train cars are temporarily blocked in active combat zones.
Akhmetov's empire is falling apart
Telecom
Ukrtelecom also suffered significant losses. In early September, 447 of the company's vehicles were stolen in the temporarily occupied territory.
Akhmetov's empire is falling apart
SCM reported that Russians destroyed 34 buildings, and another 165 sustained varying degrees of damage. Furthermore, telecom network segments and other assets were being hijacked in the temporarily occupied territories.
Real estate
For the first time, Akhmetov's private and commercial real estate and his companies have become the second-largest source of wealth, surpassing even the energy company DTEK. Forbes Ukraine estimates the total square footage value of Ukraine's richest man at $650 million.
Thus, the value of Akhmetov's real estate and the companies he owns has declined by only 7% since the beginning of the Great War. By comparison, Metinvest and DTEK have lost 70% of their value, FUIB by 17%, and Shakhtar football club by 45%.
In SCM itself, any assessment of the value of assets during wartime is considered incorrect and incomplete.
Claim for occupation, looting and destruction
Ukraine's richest man isn't going to simply forgive the Russians for the losses they suffered during the war. At the end of June, Akhmetov filed a lawsuit to the European Court of Human Rights in connection with the blockade, looting, destruction and diversion of grain and metal flows by Russia.
True, this is only the first step on the long road to receiving compensation, the amount of which will be determined after a further assessment. However, according to the businessman himself, the value of the lost assets by the start of the war amounted to tens of billions of dollars.
"The estimated losses of the two factories in Mariupol due to Russian aggression alone range from $17 billion to $20 billion. Because the war is ongoing, the final compensation amount has not yet been determined, but it is in the tens of billions of dollars," the oligarch stated.
translation Skelet.Org
By topic: Rinat Akhmetov has come up with a way to financially support Mariupol's pocket officials.
No Time for Oligarchs: How the War Changed Rinat Akhmetov's Position and What Future Awaits Him
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