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Thursday, October 17

Green Light: Centrenergo to be First Big Privatization...Red Light: Kyiv Court Decision Coming on PrivatBank...Rada Cuts Supreme Court in Half...UZ Prepares for IPO...More Trains to Boryspil Airport...Next Year: Wifi on Intercity Trains, Surf the Net Across the Nation
James Brooke
by James Brooke
UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief

Opening the way for multi-billion dollar privatization, an appeals court has unblocked the auction of Centrenergo, electricity supplier to Kharkiv, Kyiv and Donetsk regions. With three thermal power plants – Uglegorska, Zmievska, and Tripolska — Centrenergo accounts for 14% of Ukraine’s electricity generating capacity, almost four times the total wind and solar installed capacity in Ukraine.

Centrenergo is 78.3% owned by the state. Last December, a tender for its sale was canceled by Kyiv Commercial Court. Dmitry Sennichenko, the new head of the State Property Fund, writes on Facebook Wednesday’s decision by the Northern Economic Court of Appeal: “The goal of the Fund is transparent, honest, even exemplary privatization of Centrenergo.”

Two weeks after the Rada abolished a list of state companies exempt from privatization, the Yevhen Kravtsov, CEO of the state railroad, announced Wednesday that he is preparing Ukrzaliznytsia for an IPO, the first public sale of company’s shares. Preparation for the IPO will take at least one year and would run parallel to the planned division of the railroad into three divisions – freight, passengers, and infrastructure. With 20,000 km of track, Ukrzaliznytsia is considered the sixth largest railroad in the world.

Noting that he is already purging inefficient mid-level managers, Kravtsov tells UNIAN that companies that prepared for IPOs “always increased their efficiency, improved management processes, improved the quality of services, and also reduced corruption.” Speaking of the IPO, he said: “This makes it possible to raise funds at the highest rate…Depending on the package, it can go from three to eight billion dollars.”

In the latest move to trim government, the Cabinet has ordered the nation’s three largest state companies – the railroad, the postal service, and the gas company – to conduct nationwide inventories of excess or non-core properties. Then, Ukrzaliznytsia, Ukrposhta, and Naftogaz are to sell or rent the properties through the ProZorro.Sales electronic auction platform. In the first step, Ukrzaliznytsia started to lease the property through ProZorro in June. The railroad hopes to earn $250,000 a year in rent.

Financial analysts uniformly praise Tuesday’s ruling by a 3-judge panel of Court of Appeal of England and Wales against Ihor Kolomoisky and his business partner Gennadiy Boholyubov. But they also warn about a ruling expected next week by the Economic Court of Kyiv on the nationalization of PrivatBank.

ICU writes: “This is clearly a positive decision for Ukrainian authorities who seek compensation for the UAH155bn [$6.25 billion] injected into PrivatBank since its nationalization in 2016….Nevertheless, if the [Kyiv] court rules in favor of former shareholders, we expect it to have a negative impact on the country’s currently positive sentiment. Any decision is very likely to be appealed by the losing side.”

Timothy Ash, the London-based analyst, writes: “My base case is still that the Ukrainian authorities lose the appeal in Ukraine. And then the question is: what next for Privatbank?”

Concorde Capital’s Alexander Paraschiy writes: “This victory enables the Ukrainian government to continue to claim massive compensation from Kolomoisky & Co. in a court whose ruling will be respected by all the sides of the trial. After the recent ruling, the government’s position in the claim looks strong and an award of compensation seems only a matter of time. This interim victory also significantly improves the government’s leverage in possible talks with Kolomoisky on a “compromise” that will satisfy the position of the state and Ukraine’s Western financial partners.”

in collaboration with CMS Cameron McKenna Nabarro Olswang Ukraine and UBN,  we have created the "Investing and Doing Business in Ukraine 2020 guide”.

However, he warns: “Ironically, the state bank’s success in the international court only increases its risks within Ukraine. As the potential damage to Kolomoisky’s wealth has grown more ominous, the billionaire now has much more incentive to try to retake control of the bank based on the decisions of local courts.”

In one step toward changing the courts, the Rada gave final approval Wednesday to a judicial reform bill that cuts the Supreme Court in half, to 100 judges. The bill also changes the judge selection and purging process.

Too early for Halloween: PrivatBank demands almost $30,000 in compensation from Kolomoisky’s Nikopol Ferroalloy Plant for a series of noisy demonstrations in front of the bank’s Dnipro headquarters that forced the relocations of the 300 employees of the Bank’s Customer Support Center. Starting Sept. 20, plant workers blew horns, shouted insults, beat metal containers and rapped plastic helmets to protest almost $1 million in unpaid salaries. PrivatBank spokeswoman Inna Muzychuk notes on Facebook that the plant is not a client of the bank.

In the last year, PrivatBank drew 1.5 million new customers, making for a total of 22 million, Petr Krumhanzl, board chair of PrivatBank, told NV Business. In a nation of 40 million people, PrivatBank is the nation’s largest bank and third-largest taxpayer, he said. In the first nine months of 2019, the bank recorded $1.1 billion in profit, 60% of the profits of Ukraine’s entire banking system, said Krumhanzl, a Czech. Kolomoisky’s lawyers seek to persuade Ukrainian judges that he should be compensated for the nationalization of the bank in Dec. 2016.

Seeking to learn from PrivatBank’s highly successful ‘Privat 24’ mobile app, Mikhail Fedorov, the new Minister of Digital Transformation, has signed a cooperation agreement with the bank. Fedorov’s task is to build ‘the state in the smartphone’ digitizing as many documents as possible, including driver licenses, student ID’s and birth certificates.

By the end of the year, train service from Kyiv to Boryspil Airport will be improved by the addition of a new train and the opening of a stop at Vydubychi, on the Green metro line. With passengers often standing at peak hours for the 35-minute ride to the airport, the train carries more than 3,000 passengers a train, about 10% of the non-transit passengers using Ukraine’s busiest airport.

Intercity trains are to offer Wi-Fi internet access next year, Ukrzaliznytsia CEO Kravtsov told reporters Wednesday at Rail Expo 2019 in Kyiv. This high speed, Czech- and South Korean-made trains go from Kyiv to Dnipro, Kharkiv, Kostiantynivka, Kryvy Rih, Lviv, Odesa, Pokrovsk, Ternopil Zaporizhia, and Przemysl, Poland. Intercity service is to be expanded next year to Kherson.

Oleksandra Klitina is the new deputy infrastructure minister working to get new electric trains for Dnipropetrovsk and Zaporizhia regions.

From the Editor:  Ukraine is increasingly important to Europe’s vehicle supply chain. As a result,  UBN is a media sponsor for the third annual Ukrainian Automotive Forum, Nov. 7 in Kyiv. Early bird prices for the forum end tomorrow. If you track this industry, don’t miss out! For more info or to register, click here. Best regards Jim Brooke jbrooke@ubn.news.