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Automatically translated version. May contain inaccuracies compared to the original.
Who Controls State Enterprises
Which state assets are controlled by allies of Petro Poroshenko, Volodymyr Hroisman, and Arsen Avakov? The media investigated whom the heads of the largest state enterprises answer to.
During Viktor Yanukovych’s presidency the entire system for extracting money from state enterprises was subordinated to a single center. Armies of “watchers,” architects of the conversion-center “program,” governors, heads of state bodies and state enterprises all worked for that center. They were united by subordination to the so-called Yanukovych Family.
After 2014 the authorities lost their monolithic character. Today all state money is controlled by three power groups. Only in a few state companies do managers resist pressure from the authorities thanks to independent supervisory boards.
The largest power group is the circle around President Petro Poroshenko. His former partner in the Bohdan corporation, Oleh Hladkovskyi, controls enterprises of Ukroboronprom (he was removed from his positions at the end of February). The president’s ally Ihor Kononenko controls energy and transport enterprises. MP from BPP Andriy Pavelko controls machine-building enterprises in Dnipro.
For convenience these names can be grouped as BPP – Bloc of Petro Poroshenko. Its influence is guaranteed by the institutional rights of the head of state: powers to appoint members of national regulators, heads of the Prosecutor General’s Office, the SBU and the Ministry of Defense. Control over the judiciary.
The second influential power group is the circle around Prime Minister Volodymyr Hroisman. The main “watcher” for the head of government is the former acting minister of agrarian policy, dismissed in early February. He made his career in permitting bodies, where it is easy to demand money for “solving issues” – the State Architectural and Construction Inspectorate and the StateGeoCadastre.
We have tentatively called this group the Vinnytsia group. Its influence is due to the powers of the head of government and the large number of acting heads of state bodies and state companies.
The third influential group today is led by Interior Minister Arsen Avakov. His group includes Ecology Minister Ostap Semerak, Infrastructure Minister Volodymyr Omelyan, former MP Mykola Martynenko and the head of the parliamentary defense committee, Serhiy Pashynskyi. Their interests are concentrated in transport (primarily ports), energy and extractive industries.
It is natural to group them as NF – “People’s Front.” Its influence is due to the second-largest parliamentary faction in the Verkhovna Rada and the powers of the interior minister.
Some state enterprises are also controlled by the country’s largest oligarchs – the pro-government Rinat Akhmetov and the nominally disgraced Ihor Kolomoisky, Dmytro Firtash and Kostyantyn Hryhoryshyn. Their influence stems from many years of control over particular enterprises and financial power.
Interestingly, at some especially important enterprises, such as Ukrzaliznytsia or the Administration of Sea Ports, influence is divided among power groups. It’s a kind of ‘supervisory board of watchers.’
BusinessCensor collected information about influence groups over state enterprises. Financial results were taken from the website of the Ministry of Economic Development and Trade. State companies are ranked by the indicator “revenue for the first half of 2018.”
We analyzed companies whose revenue for 2017 amounted to more than one billion hryvnias.
The largest state companies, their heads, patrons and financial results (mln UAH)
№
Name
6 mo. 2018, Revenue
6 mo. 2018, Profit/Loss
2017, Revenue
2017, Profit/Loss
Head
Whom the head answers to
1
PJSC NAK Naftogaz of Ukraine
106 830
11 004
187 927
39 330
Andriy Kobolyev
BPP, Petro Poroshenko
2
SE Energorynok
85 423
1 805
146 210
856
Yuriy Hnatyuk
BPP, Petro Poroshenko
3
PJSC Ukrzaliznytsia
39 969
468
73 946
111
Yevhen Kravtsov
NF/BPP, Arsen Avakov, Oleksandr Granovsky
4
SE NAEC Energoatom
20 747
3 186
38 488
-1 322
Yuriy Nedashkovskyi
NF, Mykola Martynenko
5
PJSC Centrenergo
7 974
439
10 919
1 891
Oleh Kozemko
BPP, Ihor Kononenko
6
PJSC State Food and Grain Corporation of Ukraine
6 066
155
10 415
-1 518
Iryna Marchenko
Vinnytsia group
7
JSC Kharkivoblenergo
4 523
-22
7 948
31
Vasyl Skopenko
BPP, Vitaliy Khomutynnik
8
JSC Zaporizhzhiaoblenergo
3 234
-50
8 047
-14
Olena Angelova
BPP, Ihor Kononenko, Kostyantyn Hryhoryshyn
9
SE Administration of Maritime Ports of Ukraine
3 196
1 305
7 634
3 606
Raivis Vetskagans
NF/BPP, Rinat Akhmetov, Maksym Burbak, Arsen Avakov, Volodymyr Omelyan (balances)
10
SE Ukrainian State Postal Service "Ukrposhta"
3 130
-537
5 501
-192
Ihor Smilianskyi
NF/BPP Volodymyr Omelyan (balances)
11
PJSC UkrHydroEnergo
3 092
1 228
5 716
1 466
Ihor Syrota
BPP, Ihor Nasalyk
12
SE NEC Ukrenergo
2 893
2 239
8 264
1 748
Vsevolod Kovalchuk
Vinnytsia/BPP, Volodymyr Hroisman, Ihor Kononenko (balances)
13
PJSC Agrarian Fund
2 873
25
4 372
95
Andriy Radchenko
Vinnytsia group,
14
PJSC State Automobile Roads of Ukraine (Avtomobilni Dorohy Ukrainy)
2 852
-86
21
-4
Roman Kosynskyi
BPP, Artur Herasymov
15
SE Derzhvuhlepostach
2 612
3
5 045
33
Mykhailo Voloshyn
BPP, Ihor Kononenko
16
SE Boryspil International Airport
1 981
841
3 870
1 731
Pavlo Riabikin
NF/BPP, Vitali Klitschko, Volodymyr Omelyan
17
PJSC Mykolaivoblenergo
1 874
41
3 297
17
Oleh Syvak
BPP, Ihor Kononenko
18
SE Ukraerorukh
1 632
-2
2 895
616
Dmytro Babeichuk
NF, Maksym Burbak
19
JSC United Mining-Chemical Company (OGHK)
1 509
164
2 856
771
Oleksandr Hladushko
NF, Mykola Martynenko
20
PJSC Khmelnytskyoblenergo
1 386
30
2 459
44
Oleh Kozachuk
BPP, Ihor Kononenko
21
SE Printing Plant "Ukraine"
1 320
274
1 738
341
Yuriy Onishchenko
Vinnytsia group, Volodymyr Hroisman
22
SE Lvivvugillya
1 223
-51
1 816
-146
Oleh Akimov
BPP, Andriy Vengrin, Ihor Kononenko
23
SE Eastern Mining and Processing Plant (SkhidGZK)
1 204
14
3 242
389
Oleksandr Sorokin
NF, Mykola Martynenko
24
SE Regional Electric Networks
1 183
-221
n/a
n/a
Serhiy Bilous
BPP, Stepan Poltorak
25
PJSC Turboatom
1 040
193
2 378
710
Viktor Subotin
(balances)
26
SE Plant "Electrotyazhmash"
944
3
1 437
9
Dmytro Kostiuk
BPP, Stepan Kubiv, Ihor Kononenko
27
SE Design Bureau "Pivdenne" named after M.K. Yangel
937
-26
1 961
315
Oleksandr Degtyaryov
BPP, Andriy Pavelko
28
SE Sea Commercial Port "Yuzhny"
862
57
1 522
234
Anatoliy Yablunivskyi
Oligarchs, Rinat Akhmetov
29
SE Ukrspyrt
801
13
1 865
12
Yuriy Luchechko
Vinnytsia group
30
SE Ukrkhimtransammiak
758
101
1 199
165
Valentyn Shlikhta
Vinnytsia group, Volodymyr Hroisman
31
PJSC Odesa Port Plant
724
247
1 279
-1 448
Serhiy Nazarenko
BPP, Ihor Kononenko
32
SE Artemsil
721
11
1 329
213
Yuriy Tovstokorenko
Vinnytsia group, Oleksandr Stepanenko (mayor of Soledar)
33
SE Kaluska Thermal Power Plant - New
713
9
1 096
35
Volodymyr Maziar
BPP, Ihor Nasalyk
34
SE Sea Commercial Port "Chornomorsk"
568
6
1 103
85
Serhiy Sechkin
NF, Arsen Avakov
35
SE Mariupol Sea Commercial Port
464
14
1 059
186
Oleksandr Oliynyk
NF/Oligarchs, Arsen Avakov, Rinat Akhmetov
36
SE Selydivvugillya
444
-275
1 045
-396
Serhiy Pakhomov
Ihor Kononenko
37
SE Ukrainian State Center of Radio Frequencies
315
32
1 099
12
Volodymyr Korsun
BPP, Oleksandr Zhovtovskyi, Petro Poroshenko
38
SE Ukrinterenergo
n/a
n/a
1 059
186
Vasyl Andriienko
Oligarchs, Taras Kozak, Viktor Medvedchuk
39
PJSC Sumykhimprom
n/a
n/a
2 141
6
Ihor Lazakovych
Oligarchs, Dmytro Firtash
In many cases, though not in all, orientation toward a power group means control over the enterprise’s resources. The goal of such control is concentration of money to finance election campaigns. In 2017 four dozen of Ukraine’s largest state enterprises received more than 560 billion UAH in revenue.
In practice politicians parasitize on state enterprises to stay in power, get re-elected and continue to profit from them. It’s a closed loop of Ukrainian political corruption.
Below we describe in more detail cases concerning the 25 largest companies.
PJSC NAK Naftogaz of Ukraine
This is the gas monopoly, which includes the gas transmission system operator Ukrtransgaz, the main pipeline oil operator Ukrtransnafta, and the country’s largest gas producer Ukrgazvydobuvannya.
In addition, Naftogaz holds the controlling stake in the largest oil-production company Ukrnafta and a minority stake in the country’s only operating refinery – Ukrtatnafta. Naftogaz is the largest importer of gas into Ukraine.
Board chairman Andriy Kobolyev was appointed in 2014 under the People’s Front quota; he had good relations with Arseniy Yatsenyuk and Arsen Avakov. But today he orients toward President Petro Poroshenko. He is the only presidential candidate who guarantees Kobolyev’s retention of the post after the presidential election.
SE Energorynok
Energorynok is the operator of the wholesale electricity market. Today the company manages the settlement system for consumed electricity in the country. Energorynok’s revenue was 146 billion UAH in 2017, equal to the value of electricity produced in the country for the year.
After July 2019, according to the law on the electricity market, Energorynok must be split into two separate enterprises – an operator of commercial settlements and a company that will be the guaranteed buyer of electricity.
The company is headed by Yuriy Hnatyuk, who orients toward Poroshenko. BPP’s control over the enterprise is purely formal. There is no large pool of money that the manager could dispose of.
PJSC Ukrzaliznytsia
The railway operator Ukrzaliznytsia (UZ) is a monopolist in providing mainline traction services and in passenger rail transport. The company provides 80% of freight and 50% of passenger transport in the country.
The monopolist is headed by Yevhen Kravtsov. He orients toward Arsen Avakov. But through the board, BPP also exerts influence over the company. For example, BPP MPs Yaroslav and Bohdan Dubnevych supply the company with goods at inflated prices.
In 2017 the main fuel supplier for UZ was the company Trade Commodity, which through businessman Andriy Adamovskyi is connected to influential BPP MP Oleksandr Granovsky.
SE NAEC Energoatom
The company manages Khmelnytskyi, Rivne, Zaporizhzhia and South-Ukraine nuclear power plants. They produce about 55% of the country’s electricity.
Energoatom has been headed for the third time by Yuriy Nedashkovskyi under the People’s Front quota. The enterprise is under the informal supervision of former NF MP Mykola Martynenko. For example, Martynenko’s companies supply uranium ore from Kazakhstan to the state SkhidGZK. Energoatom then buys it at inflated prices from SkhidGZK.
PJSC Centrenergo
One of Ukraine’s largest power-generating companies. Centrenergo includes three thermal power plants — Trypillia, Vuhlehirska and Zmiivska.
The generation segment is led by Oleh Kozemko.
PJSC State Food and Grain Corporation of Ukraine
The company buys, stores, processes, transships and exports Ukrainian grain. It manages some of the country’s largest grain storage capacities and is a leader in grain exports. A problem for the corporation is an unfavorable contract with the Chinese Eximbank that was signed during Viktor Yanukovych’s time.
The company is headed by Iryna Marchenko. Through the former acting minister of agrarian policy, the corporation is under the control of Prime Minister Volodymyr Hroisman’s circle.
JSC Kharkivoblenergo
Control over the energy-supplying company that supplies Kharkiv region with electricity lies with the state. Another 30% of shares belong to businessman Kostyantyn Hryhoryshyn.
All distribution companies earn on contracts with kickbacks and charging fees for connections. According to BusinessCensor sources, the informal control of the company was handed by Poroshenko’s circle to the leader of the Revival deputy group, Vitaliy Khomutynnik.
JSC Zaporizhzhiaoblenergo
The power-supplying company Zaporizhzhiaoblenergo supplies electricity to one of Ukraine’s most powerful industrial regions – Zaporizhzhia region.
Almost three-quarters of the region’s total energy consumption is accounted for by Zaporizhstal, Dniprospetsstal, Zaporizhzhia Ferroalloy Plant, Zaporizhzhia State Titanium-Magnesium Combine, Zaporizhzhia Abrasive Plant, Ukrainian Graphite, Motor Sich and the Semiconductor Plant.
60% of the company belongs to the state. Minority stakes are held by the Surkis brothers, Ihor Kolomoisky and Kostyantyn Hryhoryshyn.
Zaporizhzhiaoblenergo is connected to a scandal over assignment of electricity debts in favor of Dmytro Kryuchkov’s company Energomerezha, which was linked to the Surkis brothers.
The National Anticorruption Bureau opened a criminal proceeding over unlawful assignment of electricity debts in favor of Energomerezha. The company’s funds were arrested. Dmytro Kryuchkov was declared wanted, detained in Germany in April 2018, but then released on bail.
The enterprise is controlled through people close to the State Property Fund by Ihor Kononenko.
SE Administration of Maritime Ports of Ukraine (AMPU)
AMPU administers collections in the country’s seaports. The SE owns 280 units of fleet and 263 berths stretching 40 km.
Thanks to high port fees AMPU is among the ten most profitable companies in the country. The company’s profits are transferred to the state budget. At the same time, high port fees negatively affect Ukraine’s export potential.
AMPU is headed by expat Raivis Vetskagans, who balances influences between NF and BPP.
State ports are under the control of oligarch Rinat Akhmetov and Arsen Avakov. In particular, Akhmetov controls the ports Yuzhny and Mariupol, while all other state sea ports of Ukraine are attributed to Avakov’s sphere.
SE Ukrainian State Postal Service "Ukrposhta"
Ukrposhta is Ukraine’s postal operator. It has over 12,8 thousand postal facilities: central post offices, post branches, mobile and seasonal branches and points of presence across Ukraine.
An important social function of Ukrposhta is delivering pensions, correspondence and parcels to rural areas. These functions are loss-making for the company. Authorities at all times try to use Ukrposhta’s postmen for electoral campaigning.
The company is headed by Ihor Smilianskyi, who is subordinated to an independent supervisory board. The manager balances between different influences.
PJSC UkrHydroEnergo
This state company operates all major hydroelectric power plants on the Dnipro and Dniester. Annually it produces 5–7% of the country’s total electricity generation.
Electricity produced by UkrHydroEnergo’s HPPs and PSPs is used to regulate balances in the power system, since nuclear plants cannot quickly decrease or increase power output.
For many years the company has been led by Ihor Syrota, appointed by Energy Minister Yuriy Boyko in 2010. Syrota is able to find common ground with any government. Today he answers to Energy Minister Ihor Nasalyk, who was appointed under the BPP quota.
SE NEC Ukrenergo
This is the operator of the united energy system of Ukraine. The company dispatches and transmits electricity via main power grids from generation to consumers.
The company is headed by Vsevolod Kovalchuk, who is subordinated to an independent supervisory board. The manager balances between different influences.
PJSC Agrarian Fund
The Agrarian Fund is a state operator in the agricultural market. The company buys grain from farmers under forward (preliminary) contracts and resells it on the market. The advance payment by the Agrarian Fund for future harvest is 65% of the contract sum. The remainder is paid at market prices at delivery.
In the last two years the Agrarian Fund, at the government’s instruction, has been buying large batches of fertilizer from Firtash’s plants and reselling them to farmers in exchange for future harvest.
The company is within the sphere of influence of Prime Minister Hroisman and oligarch Firtash.
PJSC Odesa Port Plant
The country’s largest producer of mineral fertilizers. The enterprise is state-owned and managed by the State Property Fund. Informal control over the enterprise is retained by Ihor Kononenko.
OPZ is a monopolist in receiving, cooling and transshipping ammonia. The plant is the end point of the international ammonia pipeline Tolyatti–Horlivka–Odesa.
Under Yanukovych the plant worked in the interests of oligarch Dmytro Firtash. His companies sold gas to the plant at inflated prices and bought fertilizers at low prices.
After Yanukovych fled, companies in Petro Poroshenko’s orbit and those of former MP Mykola Martynenko began supplying gas and buying finished products using the same scheme.
Due to accumulated gas debts of hundreds of millions of dollars the plant switched to tolling (processing) arrangements, but officials still found ways to profit.
SE Derzhvuhlepostach
The enterprise was created in 2016 to replace Vugillia Ukraine. It is the state trader of coal products. It buys coal from state mines and supplies it to energy enterprises and other consumers.
A new state operator of the coal market has been created today – the National Coal Company (NCC), which is to replace Derzhvuhlepostach as that replaced Vugillia Ukraine.
SE Boryspil International Airport
Boryspil is Ukraine’s largest airport, providing 70% of passenger air transport. Thanks to visa-free travel and the arrival of low-cost airlines, Boryspil steadily increases passenger traffic. In 10 months of 2018 the airport served 10,6 million passengers. For comparison, last year the airport served 10,5 million passengers.
In 2017 Boryspil received 4,1 billion UAH in revenue. This was a record for the airport’s history. Profit before tax amounted to 2,1 billion UAH. Boryspil is the base airport for the airline MAU of Ihor Kolomoisky.
Airport head Pavlo Riabikin orients toward the capital’s mayor Vitali Klitschko, but reports to Infrastructure Minister Volodymyr Omelyan from NF.
PJSC Mykolaivoblenergo
Mykolaivoblenergo is on the list of assets to be privatized. Minority shareholder Kostyantyn Hryhoryshyn owns 13% of the company. The controlling stake belongs to the state through the SPFU.
Like other state energy assets, the company is controlled by Ihor Kononenko.
SE Ukraerorukh
The enterprise provides air navigation services in Ukraine’s airspace. Ukraerorukh’s area of responsibility covers 774,57 thousand sq. km.
The enterprise falls within NF’s interests through former Infrastructure Minister Maksym Burbak, who lobbied for the appointment of the current head.
JSC United Mining-Chemical Company (OGHK)
OGHK includes the Irshansk Mining and Processing Plant and the Vilnohirsk Mining and Metallurgical Combine, which extract ilmenite and zircon concentrates. These raw materials are used in metallurgy and the chemical industry.
OGHK was created in 2014 after the state terminated lease agreements with Dmytro Firtash’s Krymskyi Tytan and transferred the plant complexes to management of the new enterprise.
A scandal is connected to this company over the sale of OGHK raw materials through the Austrian intermediary firm Bollwerk, which is linked to former MP Mykola Martynenko.
Despite a criminal proceeding, Martynenko continues to maintain control over the enterprise.
PJSC Khmelnytskyoblenergo
This company supplies electricity in Khmelnytskyi region. More than 80% of shares belong to the state, and another 19% to the VS Energy group of Russians Yevhen Hiner, Mykhailo Voyevodin and Oleksandr Babakov. The latter, as a Duma deputy, voted for the annexation of Crimea in 2014 and is under Ukrainian sanctions.
Like other state distribution companies, Khmelnytskyoblenergo is within Kononenko’s sphere of interest.
SE Printing Plant "Ukraine"
The producer of secure documents, the Printing Plant Ukraine owes its financial success to the visa-free regime with the EU, which motivated citizens to massively order biometric passports.
The plant produces Ukrainian identity cards, driver’s licenses and excise stamps. The plant is controlled by Prime Minister Hroisman’s circle.
SE Lvivvugillya
This state coal-mining enterprise unites seven mines in western Ukraine. The company is controlled by businessman Andriy Vengrin, who was introduced to the western mines by former energy minister Volodymyr Demchyshyn, who previously worked at the investment company ICU.
ICU serviced Petro Poroshenko’s business.
Coal mined by Lvivvugillya is processed at the capacities of the Lviv Coal Company (LVK), which is legally owned by Opposition Bloc deputy Natalia Korolevska. But through an arbitration manager the company is controlled by Vengrin.
LVK is the operator of the only enrichment plant in the west – the Chervonohrad plant. Because of this Vengrin influences both state coal-mining enterprises in the west: Lvivvugillya and Volynvugillya.
SE Eastern Mining and Processing Plant (SkhidGZK)
The only company in Ukraine and the largest in Europe for mining and processing uranium ore. All volumes of uranium concentrate from SkhidGZK are sold under contract to NAEC Energoatom, which sends it for processing into nuclear fuel for Ukrainian NPPs.
Part of the uranium concentrate for Energoatom was purchased by the plant from Kazakhstan’s Kazatomprom through the Austrian company Steuermann Investitions und Handelsgesellschaft GmbH, which is linked to former MP Mykola Martynenko.
On this case NABU and SAP suspect them of embezzling funds of SE SkhidGZK in the amount of $17,3 mln. The plant is under Martynenko’s supervision.
PJSC Turboatom
This is one of Ukraine’s flagships of heavy engineering and one of the world’s largest producers of turbines for power plants.
For many years control over the state enterprise has been retained by its director Viktor Subotin. A minority stake of the enterprise (15%) belongs to businessman Kostyantyn Hryhoryshyn. Another 5,6% is owned by the Cypriot Biscone Limited, affiliated with the Russian holding Power Machines of Alexey Mordashov.
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