Head of the State Property Fund Ihor Bilous: We should sell absolutely everything that can be sold

Head of the State Property Fund Ihor Bilous: We should sell absolutely everything that can be sold

A large sell-off is planned in Ukraine this year – the Cabinet of Ministers approved a long list of state-owned assets that are planned to be disposed of.

There are three hundred such assets in total; the main ones include the Odesa Port Plant, “Sumykhimprom,” 78 % of Centrenergo, state stakes in many power generators. The budget is planned to be replenished this year by 17 billion hryvnias as a result.

The role of the head of the State Property Fund, who will organize this sell-off, becomes central in these circumstances. Ihor Bilous’s arrival to the head of the SPF was accompanied by bargaining within the coalition: his appointment was lobbied by the Presidential Administration, while the Antimonopoly Committee ended up in the “prime minister’s quota,” where, in contrast, a “Yatsenyuk person” was appointed.

Many viewed Bilous’s appointment to the Fund skeptically. The still-fresh memory is the scandalous story of his dismissal from the State Fiscal Service. Bilous led customs and tax officials for almost a year. Prime Minister Arseniy Yatsenyuk suspended the head of the SFS and his two deputies – Volodymyr Khomenko and Anatoliy Makarenko – during an internal investigation after business complaints about corruption in the agency. Bilous decided not to wait for the end of the investigation and submitted his resignation. But he later received a new appointment...

Now one of the many former investment bankers in the new authorities faces new tasks. Bilous is very reluctant to recall his time at the fiscal service, especially the circumstances of his dismissal, and speaks rather confusingly about details of his appointment to the Fund. Also, when coordinating the interview, the Fund head’s admissions of friendly relations with the current head of the fiscal service Roman Nasirov, who, like Bilous, is now closely associated with Presidential Administration head Borys Lozhkin, disappeared from the text.

Complaining about catastrophic funding for the agency that manages such assets, the head of the SPF nonetheless overflows with ideas and plans and believes that this time he will succeed. But at the start of his work at the fiscal service he was also full of optimism...

"Unlike some comrades, I didn’t declare war on anyone"

Ihor Olehovych, a year ago you were called a person close to the prime minister. But then you allegedly became closer to Borys Lozhkin, and it was rumored that you were appointed to the State Property Fund at his behest. Can you confirm that?

I have known Borys Yevhenovych for a very long time, even before either of us held public office. I never hid that our acquaintance occurred during business cooperation. And Arseniy Petrovych (Yatsenyuk, – “Glavkom”) knows about that. But in fact the offer (to head the State Property Fund of Ukraine, – “Glavkom”) came from the authorities in general – from both wings.

Power is a very abstract concept in its current configuration...

I mean the Presidential Administration and the Cabinet of Ministers.

Someone still had to make you an offer.

We sat down, talked, I said that I’m one of the few people with real privatization experience and I can do it. I said how and what we would do. So the decision was made, but I didn’t immediately start working. You still had to go through the chamber (approve the candidacy in the Verkhovna Rada, – “Glavkom”).

Please specify what kind of meeting that was where your candidacy for this post was considered?

It was negotiations, an interview. You understand that people aren’t born from nowhere; they come, present their action program, and they are talked to.

Explain how it can be that a person is dismissed after a special investigation for ineffective work, and then almost immediately appointed to head another body.

I wasn’t dismissed; I wrote a resignation. Those are different things.

Yes, you wrote a resignation, but there were complaints about the entire leadership of the fiscal service. Why did the authorities decide you would cope here? Does this indicate certain arrangements between Bankova and the government?

Again, I resigned myself. I think we achieved good results. Of course, there were problems, but only those who do nothing make no mistakes. So I don’t believe there were errors that would indicate I can’t hold another post. Believe me, I have things to do in life. But I was asked to relaunch transparent privatization.

How did it happen that you resigned from the SFS of your own accord, while your deputies – Anatoliy Makarenko and Volodymyr Khomenko – were dismissed under articles?

Look at the chronology of those events. The act is online; everyone can read it. I don’t really want to comment now. You’re asking what you already know. I had difficult relations with my deputies. And not all the things they did I agreed with. Is that news to you?

Explain the specifics of your conflict?

We’ll finish this topic now. The conflict is very simple. The SFS regulations indicated that the head was effectively unable to manage his deputies, which is fundamentally wrong. But when you’re a head and can’t manage your deputies because they simply don’t come to meetings… I won’t even mention that they don’t carry out your assignments. I’ve only shown you the tip of the iceberg of what was actually happening.

To conclude this topic: the internal investigation announced by the prime minister was never completed. Why didn’t society see the results of the check?

Somewhere that report leaked to the Internet. It seems there is the full text of the investigation. No one hid it, and testimonies were given. Unlike some comrades, I didn’t cling to the chair, I didn’t declare war on anyone.

How would you describe your relationship with Arseniy Petrovych today?

We have good working relations.

Ihor Bilous

Did you meet with Yatsenyuk after the internal investigation began? What did he tell you?

Yes, we spoke. Basically about privatization. He knows I’m a man of action. All the work tasks he asked were executed, and now we work in the same mode. We have an absolutely constructive dialogue; we meet each other halfway.

"What we do proceeds along the lines of both the prime minister and Bankova"

Is it true that your appointment was part of an agreement: Yatsenyuk gets the Antimonopoly Committee, the president gets the State Property Fund? A so-called exchange?

I don’t think that’s true. We’re not at a market.

The Verkhovna Rada, and especially the coalition, is basically a big market...

That’s not true. Because if you look at the composition of the State Property Fund and the Antimonopoly Committee, you’ll see people from both sides. It’s a compote of different fruits. If you want to ask whether Yurii Terentiev (Chairman of the Antimonopoly Committee of Ukraine, – “Glavkom”) is the prime minister’s person, I’ll tell you no.

Is it correct to understand that you, due to a conflict with Yatsenyuk, moved into Bankova’s camp?

Well, probably everyone sees and knows that. I don’t hide it. But I have friendly relations and professional relations. I report to the Verkhovna Rada. What we do goes along the lines of both the prime minister and Bankova. Coming here, I said we would demonstrate on the example of the State Property Fund that we can achieve good results for both the budget and the state. Everyone will get their political dividends. Because success in privatization is success for the president, success for the prime minister, and my success.

The saga of your appointment, like that of the head of the Antimonopoly Committee, lasted almost a month. Do you know who your competitor was?

There were no competitors for this post. And I still had to be convinced. Frankly: I would have left tomorrow. I run a business; I have work and people to work with. But here we are effectively in business, communicating with external investors. It’s the same business I’ve done for many years.

"Personnel shortage is no less a threat to the state than the ATO"

You admitted you had a conflict with deputies at your previous job. Tell us in more detail: who are you working with now? Who are these people?

We kept the first deputy Dmytro Parfenenko because he has a large baggage of knowledge, and ultimately this machine needs experience. Dmytro has worked here for many years. And in any state body you’ll be told that the primary problem is personnel. Succumbing to populism and saying we’ll fire everyone now and tomorrow hire new ones for meager salaries? I consider that threat to the state no less than the ATO.

So you didn’t carry out a personnel purge after your appointment?

We conducted a functional reorganization of the Fund’s central office. We took a new deputy to coordinate the valuation sector – Nataliya Lebid. She is a professional appraiser, deputy head of the Ukrainian Society of Appraisers, an absolute pro.

In one interview you said the Fund needs transformation and that in its current form the agency is not very effective. What do you plan to reform?

A new law on valuation activity is already on its way to parliament. It will be a revolution. We are developing a large IT block, working on a new website. We will commercialize some of the Fund’s services. That will help us obtain additional income for reorganization.

Ihor Bilous

How much money has been allocated for reforming the institution?

Zero. All the money was taken away, and funding is being cut further. Two deputy positions are still vacant. Currently the Fund is a filter (takes a sheet of paper). If a decision is made to privatize a specific asset that is not in our direct ownership, and as a rule it is in a ministry, which is the main factor of corruption, then Nataliya Lebid’s direction comes into play. We evaluate what comes to us. Sometimes something unclear arrives: just a table and a chair. Accepted to the balance. Next is the corporate governance department – managing the assets that are in our ownership. We have 127 companies with a controlling stake, and a total of 357 with some share. The next important direction is preparation and conduct of privatization. And another big direction is leasing.

Which and how many enterprises does the Fund lease out today?

This is the property of all ministries and agencies except the Ministry of Defense, which leases independently. There are 23 thousand active contracts in total. Once the Fund received 10% of earnings from valuation, leasing and privatization. Then they left 7%, then 5%, then 2%. Now there’s no money in the Fund. The same situation exists at many enterprises. We are motivated to work so that we are returned some percentage of sales and leasing.

"Only one enterprise in Ukraine remains debt-free"

Regarding the top lot of the upcoming privatization – the Odesa Port Plant – some media reported that the start of the privatization process was postponed from year-end to September; your press service denied that. What actually happened? Clarify when the sale of OPP will start?

It’s very simple. People didn’t read the document to the end. Our order indicates that in September we will announce the competition, and in the second half of November we will hold the auction itself. Under Ukrainian law, some time must pass between announcing the competition and the bidding. Journalists didn’t figure this out and spread that privatization would start earlier. Today the auction date is already known – 16 November.

Can such an enterprise be properly prepared for sale in such a short time?

We can. If you really want to and work hard, you can do everything.

What do you plan to do about the debts, and how much debt does OPP currently carry?

Every business has some debts. It’s a “billion-dollar” enterprise. The fact that there is 218 million in creditor debt for gas there – we are analyzing how it arose and reviewing the contracts.

Allow me to remind you that OPP also has a significant debt to Oschadbank. The bank issued a loan of 5 billion hryvnias last year.

The debt to the bank is already being settled, so it’s not a problem. We have the only enterprise in Ukraine without debt – Turboatom. That enterprise has 70 million dollars in its accounts. It is a good example of competent corporate governance. Unfortunately, the only one in the country. So when everyone shouts that we must preserve large enterprises in state ownership, the question is: where is the money? Past years managed them so there were no dividends or profits. Only losses and billions of debt.

Still, these debts will transfer to the new owner. Aren’t you afraid they will scare off investors?

Don’t pay so much attention to those debts! Debts are repaid from each enterprise’s current operational activities.

Then why weren’t they repaid earlier?

Because there was a backlog in their repayment. We’ve now started work and are only clarifying what these debts are. Although debts to RGC Trading are being repaid according to a schedule. Everyone somehow thinks it’s a terrible problem. It’s an ordinary working situation, like having bills for electricity or water.

So for how much do you plan to sell such an asset?

You know that amount well.

Ihor Bilous

We’ll ask differently: where did the figure of a minimum enterprise value of half a billion dollars come from?

Look, it’s very simple to take comparable deals, valuations used in the investment banking world, see that it’s a strategic enterprise. Not only because there’s a plant, but there’s also transshipment and one of the largest ammonia storages in the world. The enterprise is in a super-technological state. It’s one of the best chemical enterprises in the world.

A logical question – then why sell it?

Because the state is an inefficient owner. Over the years of managing the plant, the state hasn’t seen many dividends from it. Or even nothing at all. Why keep an enterprise that doesn’t generate profits? Therefore I believe that we should sell absolutely everything that can be sold. And not only OPP. Yes, a category of so-called strategic assets remains, without which we cannot guarantee the country’s security. Everything else can be sold.

How do you comment on talks that this and other major sales will be political?

I don’t know how it could be political, but I’ll explain how the sale will take place. We determine the valuation. Let it be 300 or 500 million dollars. A tender commission is now being created that will decide the terms of privatization of this object.

So the terms don’t exist yet?

No. We create a commission that will include enterprises, experts, NGOs, and deputies. This commission will also be responsible for approving the minimum price. After the Cabinet approves the minimum price, those wishing to take part in the privatization will submit documents. Then documents will be checked so we understand what kind of companies they are – not offshore, not under sanctions. Then investors who are approved must pay 20% of the minimum price. This is a kind of seriousness test. Then people come to the auction. There is an auctioneer. If necessary, we’ll bring one from London; such offers already exist. Once the sale-purchase agreement is signed, payment occurs within 30 days.

Returning to the possible “political” privatization scenario. Insiders claim there is already an understanding: the prime minister and president agreed that before the elections one strategic object will go to Ihor Kolomoyskyi in exchange for financing the prime minister’s political force, and another object to Hryhoryshyn, in exchange for the same for the president’s party?

I don’t know where you got that. If Kolomoyskyi wants to participate, he’ll participate. You know that he is in court with us regarding recognition of him as the winner in the previous competition.

Effectively he demands the right of first night...

There is no such right. If some contract had been signed, perhaps something could be demanded. But no contract has been signed.

Who supplies gas to OPP now? They say Kolomoyskyi does.

Kolomoyskyi does not supply gas.

Ihor Bilous

Then who does?

The sole supplier today is considered to be the NAK. That’s what I at least know. Who injects gas into storage and withdraws it I can’t say. We have spot gas supply; different suppliers may appear month to month.

Is it true that Centrenergo is not yet put up for sale because those “upstairs” haven’t agreed who will get this asset?

Who said it’s not being put up for sale?

Minister of Energy Volodymyr Demchyshyn argued that first you need to find a buyer, and only then put the enterprise up for sale.

We have dialogue with buyers for almost all assets. Why is OPP first? Because it is the most prepared. It does not depend on the turbulences that exist in Ukraine.

"We are preparing 11 mines for closure and conservation. For another 24 mines we need to seek solutions; there is nothing to privatize there"

Which investors do you think have a better chance of winning the tender – domestic or foreign?

Foreign.

Recently the Ministry of Energy and Coal announced the sale of 35 mines. Have you already begun preparing these assets for privatization?

There will not be 35 mines. We are preparing 11 mines for closure and conservation. For another 24 mines solutions must be sought; there is nothing to privatize there. They will likely go into long-term lease to competent people who can manage them and not ask the budget for money.

The public and some politicians are negative about privatizing during war and economic crisis. In your opinion, is it appropriate to hurry?

I already answered. We’ve had this situation for 24 years. The more property the state owns, the longer corruption will persist. The main factor of corruption is property managed by officials. Officials don’t know how to manage property. Almost 300 enterprises are in the Ministry of Infrastructure. Almost 550 in the Ministry of Agrarian Policy. Can you imagine the scale?

"We have a huge enterprise Ukrzaliznytsia. I’m more than convinced that 100% of its shares are not needed by the state"

Many criticize you for making budget replenishment – to pay internal and external debts – the goal of planned privatization rather than economic development and enterprise growth.

That is not the goal. We aim to return large-scale and small-scale privatization to track. With a successful example of OPP, I very much hope we will attract Western investors’ attention. We have an experiment we are conducting with Arseniy Petrovych. We are preparing for small-scale privatization on the principle of an auction with a falling price. Plans are under development.

17 billions you plan to obtain from this year – is that an optimistic scenario?

It’s a real figure. We simply entered late. If the OPP competition goes well and properly, we can hit that number. We plan to sell regional energy distribution companies and several thermal power plants. Selling to collect a lot of money is not an end in itself. We have the huge enterprise Ukrzaliznytsia, which is now undergoing corporatization. I am more than convinced that 100% of its shares are not needed by the state. We have forestry enterprises. Do you know how many? More than three hundred. Do you think a minister can effectively manage all forestry enterprises? Therefore I believe all ministries should regulate, not manage. Managers should manage — they can include the state. For example, Socar is an Azerbaijani state company, yet it is super-profitable. And our energy companies are all massively loss-making.

How much time do you need to implement all these initiatives?

We have big problems – miserable salaries. It’s impossible to retain good specialists. All volunteers work well, but everyone has families and needs to live. We can earn for ourselves, but only if we are left some percentage.

By the way, did you lay off many employees?

About fifty people. We don’t have the volumes that were in the SFS. We have 400 people in Kyiv, and 1200 in the regions. But there certainly don’t need to be so many. Now we are approaching the regions. Selling OPP means nothing for the state by itself. We need to seriously think about a huge reorganization of the state property platform.

So you are here for the long haul?

If you analyze the life of every official in power, you’ll see they don’t last long.

Ihor Bilous

But each new minister comes with reforms and then resigns, and a new one arrives with new ideas...

That’s why I hurry. Time is short, work is plenty, society is very heated. And we don’t have money to pay court fees. How can we compete with Kolomoyskyi, Hryhoryshyn, Surkis and our other respected “brothers”? So when deputies say “Let’s not sell now, we’ll sell tomorrow,” I want to look at their tax declarations, see how much they earn and what cars they drive. It’s wrong when everyone in the state bloc gets a three-thousand salary and says we live on that. We all deceive one another. On the market an appraiser gets 50-80 thousand hryvnias. Our appraiser gets at most two thousand!

Too much populism: “Let’s take everything from everyone!” They took Mezhyhirya. Now there’s an electricity debt of 10 million hryvnias. And no one wants it. That’s a vivid example of our “good” management. Strategic might be Energoatom, Ukrzaliznytsia, certainly ports, space and aircraft building, Pivdenmash. But what makes the rest strategic – more than a thousand enterprises?

"Strategically correct – sell all Ukrainian enterprises that exist in Russia"

Do you also plan to sell DUS-owned enterprises?

Yes, the President Hotel, for example, we will sell at auction. We are for everything to be transparent. Everyone somehow thinks we’ll do backroom deals. That won’t happen. People will come to the auction and raise bidding paddles according to their judgment.

Ihor Bilous

And won’t there be cases where not all investors are admitted to the bidding? Obviously, such complaints will arise.

I think we will admit as many as possible so these people don’t sue over these processes later. Everyone will be able to come to me and request information about the object.

On 13 July the High Specialized Court obliged you to refute information regarding the involvement of former SFS head Oleksandr Klyment, who was part of Yanukovych’s “Family,” in corrupt acts. When and how do you intend to do that?

I haven’t heard about that yet. I need to ask my lawyers.

How is your work carried out today on occupied territory and in Crimea?

We don’t really have such work. Now we are inventorying our assets that remain in Russia and Russian assets that remain with us. There are many. I believe it’s strategically correct to sell what’s in Russia because we cannot manage them effectively. They generate large debts. And in fact they want to seize all our enterprises for the debts.

How many state objects has Ukraine lost?

We are systematizing the information. I won’t say that we have any super-strategic assets there. But there is a lot of property, hundreds of millions of hryvnias.

Oksana Loy, Pavlo Vuyets, Stanislav Hruzdev (photo), “Glavkom”