The escalation of the conflict between deputies, officials and the Dnepropetrovsk governor, oligarch Igor Kolomoisky, became one of the most high-profile events this January. We are talking about attempts to deprive the Privat group of sole control in the country’s largest oil company, Ukrnafta. Along with this, there are less obvious processes that also seriously weaken the influence and oil business of the oligarch. Some call this a fight for state interests, others call it a settling of scores, but it cannot be ruled out that someone is trying to tear off a piece of the pie that, after the revolution, the Dnepropetrovsk bearded man is single-handedly chewing. It is likely that what is happening is just visible elements of behind-the-scenes bargaining for business, TV channels, political funding, etc. The fight against Kolomoisky is like a revolution: it is carried out by romantics, and scoundrels take advantage of the results.
The conflict with Kolomoisky on “oil” grounds is an integral tradition of the first year of any government. It’s simple: there is a redistribution of flows, the winners demand “suitcases” from the curators of state-owned companies. Recent history has been no exception, at least in terms of public conflict.
Kolomoisky’s most vulnerable asset is Ukrnafta. A controlling stake of 50% + 1 share belongs to the state-owned Naftogaz of Ukraine, but one of these days it will be 12 years since the company is actually led by Privat, which has consolidated 43% of the shares. And since then, this smaller but blocking stake allows the minority shareholder to decide whether to hold a meeting of shareholders, whether to change management and whether to pay dividends to the state.
The fact is that, according to the law, a meeting of shareholders can only take place if the holders of 60% of the shares are registered. With a little more than 40%, meetings can be blocked, depriving the state shareholder of the opportunity to influence the situation in the company. But in order not to aggravate the situation, Kolomoisky and his partners came up with an excellent scheme. For many years, they have been taking advantage of the constant need of the Cabinet of Ministers of “all convocations” for money and, in fact, exchanging the payment of legal dividends to the state for further control in the company. We give you your dividends and the glory of the great economic reformers on 1+1, and you don’t meddle in the management and finances of Ukrnafta – the principle is something like this. There is reason to believe that a separate dialogue was built with the presidential chain of command. Fortunately, the company regularly reproduces “arguments” for any dialogue…
The press often incorrectly formulates the main complaint against Kolomoisky and the goal of restoring effective state participation in Ukrnafta. It is the lack of understanding of the specifics of the company and, most importantly, its significance and potential that is the main problem of the constantly changing power “Kermans”, who cannot even understand how much this structure earns and what this structure is capable of. Everyone understands “squeezing out Kolomoisky,” but few of those who think in such terminology know what to do with Ukrnafta. The state needs to strengthen control over its finances and implement its strategic objectives, which “private” shareholders usually didn’t care about, and Ukrnafta is no exception.
Firstly, cleaning up the company’s finances will allow Ukrnafta’s official profit and, accordingly, dividends to increase significantly. After all, the problem is not so much that the evil governor does not pay dividends to the state, but that this is ridiculous money by the standards of the oil industry. We are talking here about transparent and fair accounting, and not about “squeezing out” the rights of minority shareholders. Secondly, state participation should be aimed at the development of the company, since it has long been degrading, hungry for investment. If you want, we are talking about energy security, since the more oil and gas we produce within the country, the less we will pay to importers, who in one way or another rely on Russia (*country sponsor of terrorism).
Premature euphoria
The project to amend the Law “On Joint-Stock Companies” in order to reduce the quorum of the shareholders’ meeting from 60 to 50% of shares was not born this January or even last year. This stick hovered over the Privat management of Ukrnafta even under Yushchenko, but was quickly hidden, it must be understood, after the “issue was resolved.” In 2010, the regionals pulled this project out from under the carpet. However, soon a supervisor from the Dentist appeared at Ukrnafta, and to
In 2014, no one even tried to convene a meeting of shareholders.
Therefore, the appearance of the baton in 2014 was not particularly surprising. But the fact that on January 16, the required majority of 230 votes voted for Oleg Lyashko’s bill is yes. The situation has not yet reached this stage, and this qualitatively distinguishes it from the previous ones. And although the attempt to effectively bring Kolomoisky under the reins of the state failed, as will be discussed below, the vote turned out to be extremely educational. Parliament’s approval was based on the votes of the presidential faction, Samopomich, the Radical Party, the Opposition Bloc and a number of non-factional deputies. At the same time, despite the inclusion of this bill in the coalition agreement, the project was supported by only 13 out of 85 deputies of the “prime minister” faction “People’s Front”. A little later, the NF stated that it did not vote because the project was imperfect. Let’s see how the faction votes for the “perfect” one, which Arseniy Yatsenyuk has already announced. To be more convincing, the Prime Minister instructed the Ministry of Energy and Coal Industry and Naftogaz to announce a meeting of Ukrnafta shareholders and change the company’s management. However, will this help?
Apparently, the leader of the radicals did not consult enough in the session hall with Voropaev, Akhmetov’s lawyer. Indeed, Lyashko’s project, adopted in haste, with its formulation, had no chance of achieving the goal, since it dealt with companies with state participation. But the state is a shareholder of Ukrnafta indirectly – through NJSC, and this, as they say in the region entrusted to Igor Palitsa, is two big differences with the “corporate rights of the state.” But the “improvement” of the bill promised by the prime minister, which will take this problem into account, is not a fact that it will overthrow Kolomoisky.
Privat has long recognized the threat to its precarious position in Ukrnafta and has done something to strengthen it. In 2010, between the two rounds of the presidential elections, a shareholders’ meeting was held, at which a shareholders’ agreement was signed between the government (Naftogaz) and minority shareholders. In short, according to this agreement, the state shareholder cannot even sneeze without the consent of the minority shareholder. For example, the chairman of the board is appointed only from candidates submitted by Privat. Or here: six members of the board are elected exclusively by the supervisory board, but… from candidates proposed by the head of the board, i.e. again “Privat”. It would seem that the state has a majority in the supervisory board – six out of ten members. But decisions are made only by a quorum of eight people, i.e. again, there’s nowhere without a minority shareholder.
All norms of this agreement are implemented in the charter of Ukrnafta. Yes, and here’s another thing: amendments to the charter are possible only with 75% of the votes of shareholders, which the state does not have when a minority shareholder appears at a meeting. What Prime Minister and presidential candidate Yulia Tymoshenko, who authorized the signing of the agreement, received in return is unknown. It is possible that it is just the right to all the same legal state dividends that were paid at that meeting. Let us emphasize once again: with such standards, the state will not be able to make either personnel or financial decisions at Ukrnafta.
“The legitimacy of this agreement is very doubtful, but its provisions are written out in the charter – this is a valid document that needs to be challenged in court,” says a source at Naftogaz of Ukraine. What are Kolomoisky’s chances of winning in court in Ukraine? Let’s just say that theoretically they exist.
However, it cannot be said that the bill to reduce the quorum, which has not yet been adopted, is useless – this is the first step on a long path. And it is needed in any case.
Kolomoisky’s response
It should be noted that parliamentary events are not the only ones that have plagued the Dnepropetrovsk oligarch lately. It is known from sources in the Ministry of Energy and Coal Industry that under the current minister, Deputy Minister Igor Didenko has no chance of remaining in his position. (This is provided that the presidential minister himself does not “take off” earlier.) It is not known whether Igor Nikolaevich fulfilled the tasks and hopes assigned to him, but he tried very hard to ensure that the “Dnepropetrovsk” interests did not suffer and were multiplied. In the spring of 2014, he created at least five projects for the processing of state technological oil pumped out by structures under the oligarch’s personnel control. Along with Didenko, other ministry functionaries who were seen in the projects of the Dnepropetrovsk governor are also leaving.
But Demchishin’s main step lies elsewhere. On January 21, the Cabinet of Ministers adopted an amendment by the Minister of Energy to the resolution on the procedure for conducting auctions for the sale of Ukrnafta oil. It is truly revolutionary, as it eliminates the 15% discount with which this oil was sold in recent years. In 2013 prices, the lost profit of Ukrnafta due to the application of this discount amounted to about UAH 3 billion per year. This amount, accordingly, can be considered additional profit for the buyers of this oil – Privat structures. At the time of writing, the amendment had not been signed by the prime minister. Will he sign?
Another surprise for Kolomoisky was the sharp decline in oil prices. At one of the meetings, the leader of Privat said that Ukrnafta’s zero profitability was at $45 per barrel. In other words, there is no money. At all. Therefore, there is nothing to pay taxes (oil rent) and dividends from. Let us remind you that Ukrnafta has not paid rent since the summer, and today its debt to the budget is about UAH 3 billion. Also at the shareholders meeting in October, the company pledged to pay the state its dividends in the amount of UAH 1.9 billion. The fiscal service went to court, but it prohibited the seizure of Ukrnafta’s property.
According to our sources, it was during disputes about ways to pay off Ukrnafta’s debts to the budget that Privat leaders Kolomoisky and Palitsa raised the issue of the need to pay off old gas debts to Ukrnafta and pay a penalty for its non-market price for the population for many years years. As expected, no one fell for this, and it was in connection with this that the sensational January letter from the Cypriot shareholders of Ukrnafta, published by ZN.UA, appeared, in which they threaten the state of Ukraine with an international court. In short, in it, investors point out Ukraine’s violation of the Energy Charter Treaty, the infringement of their investor rights, and ultimately estimate their damage at $5 billion, which they propose to first agree on amicably within 90 days.
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The oligarch’s willingness to fleece his impoverished country even in court is absolutely contrary to the patriotic image he is building. He did not put forward such demands to Yanukovych, although he had the same grounds. The same threatening letter refers to claims against the state since 2006. Obviously, this is a response to the formal and not very pressure that the prime minister and president put on him. The first one at least wants to close budget debts, but is that all? Whether Arseniy Petrovich wants systemic changes in relations with Ukrnafta will become clear very soon. In the process of voting by the NF faction on the “quota” law, signing a resolution to eliminate the discount on Ukrainian oil and filing a lawsuit challenging the charter of Ukrnafta.
What does the president want, advancing through the Ministry of Energy and through voting in parliament? There is a wide spectrum here, but obviously we are talking about the same thing that the “frontrunners” wanted, and, most likely, the same thing that the prime minister wants. It cannot be ruled out that the conflict would not have happened if oil had been at 100 instead of 48 dollars per barrel – then there would have been enough for everyone to be happy…
But there is another question: what to do with dozens of deputies of the presidential and other factions who vote and sincerely want order and justice in the country’s largest oil producing company? It will be difficult to put the brakes on the issue, and this is the greatest positive in this whole story.
