The Ukrainian Exchange (UX) on Friday decided to exclude from its exchange list the shares of Ukrnafta and Motor Sicha, which were alienated in favor of the state by a November 6 decision of the Supreme Commander-in-Chief’s Staff.
“The following securities have been excluded from the Exchange list since Nov. 14, 2022 due to the lack of free float of shares: MSICH – Motor Sich and UNAF – Ukrnafta,” the message on the exchange website reads.
Earlier this week, these shares were excluded from the exchange basket.
Despite the alienation of all shares on November 6, there are still applications for the purchase of “Ukrnafta” shares on the Exchange, and their price rose to 377 UAH per share, although the day before the alienation of shares were quoted at 229.69 UAH per share, which corresponds to the capitalization of about 12.5 billion UAH.
“Ukrnafta had 22.85% in the index basket, while Motor Sich had 33.06%.
As reported, the rate of Supreme Commander in Chief on November 5 decided to withdraw shares of Ukrnafta, Ukrtatnafta (excluding the share of Naftogaz of Ukraine), Motor Sich, AvtoKrAZ and Zaporizhtransformator as military property of the state during martial law. This was done on November 6 after the regulator regulated the procedure by the National Commission for Securities and Stock Market.
In Ukrnafta, the controlling interest belongs to Naftogaz of Ukraine, while the minority stake of about 42% belongs to the so-called Privat Group owned by Igor Kolomoyskyy and Gennady Bogolyubov, while in Ukrtatnafta (Kremenchug refinery) the situation is reversed.
The circulation of all shares of Motor Sich, the largest owner of which was the recently arrested president of the company Vyacheslav Boguslayev, has been blocked since April 2018 after the sale of a controlling stake in the Chinese Skyrizon and related parties a year earlier.
“AvtoKrAZ” and “Zaporozhtransformator,” controlled respectively by Konstantin Zhevago and Konstantin Grigorishin, have been in bankruptcy proceedings for the past few years.
“The Ukrainian Exchange was founded on May 15, 2008 by the leading participants of the Ukrainian securities market together with the Russian Stock Exchange RTS, which later merged with the Moscow Exchange. UB was the first to launch an order market, Internet trading, repo market, central counterparty settlement and futures market. However, in mid-July 2018, the exchange suspended trading in all securities in a no-address order mode due to a ban on the use of Moscow Exchange software in its operations.
In March 2019, UB announced that it would resume trading in the bid market on a new platform.
The exchange is currently among the three largest securities traders on the Ukrainian market.
The law “On the transfer, compulsory alienation or seizure of property under the legal regime of martial law or state of emergency” and the order of the Supreme Commander-in-Chief of the Armed Forces of Ukraine dated 6 November “On the decision of the Supreme Commander-in-Chief’s headquarters dated 5.11.2022” have become the grounds for the National Commission for Securities and Stock Market Resolution that concerns the order of such alienation of the shares of five enterprises.
According to a copy of the NCSSM decision dated November 6, which is available to the Interfax-Ukraine news agency, there were also five corresponding orders issued by the commander of the AFU Logistics Force for the compulsory alienation of property – shares in Ukrnafta, Ukrtatnafta, Zaporizhtransformator, Motor Sich and AvtoKrAZ.
According to the decision of the Commission, the securities account, on which the shares are alienated (except for the shares owned by Naftogaz), will be managed by the Ministry of Defense.
The Commission also pointed out that the operation on alienation of shares should be carried out despite the existence of other burdens on circulation of shares.
The said law implies that in case of impossibility of preliminary full compensation, such property shall be forcibly alienated under martial law with subsequent full compensation of its value within the next five budget periods after the cancellation of martial law at the expense of the state budget.
Assessment of property subject to compulsory alienation shall be carried out in the manner prescribed by law on the assessment of property, property rights and professional valuation activities, says the law.
As reported, the National Commission on Securities and Stock Market (NSCSM) decision of November 6 settled the issue of depositary records of depositary operations for forced alienation of shares into state ownership, the issuers of which are PJSC “Ukrnafta”, PJSC “Ukrtatnafta”, “Motor Sich” JSC, PJSC “AvtoKrAZ” and PJSC “Zaporozhtransformator.
In addition, on the same day the National Commission for Securities and Stock Market allowed meetings of joint stock companies during martial law, if the number of shareholders does not exceed five and if they own 100% of the shares, while until recently it only allowed remote meetings.
In Ukrnafta, the controlling stake belongs to Naftogaz Ukrainy, while the minority stake of about 42% belongs to Igor Kolomoysky and Gennady Bogolyubov’s so-called Privat Group, while in Ukrtatnafta (Kremenchug refinery) the situation is the opposite.
The circulation of all shares of Motor Sich, the largest owner of which was the recently arrested president of the company Vyacheslav Boguslayev, has been blocked since April 2018 after the sale a year earlier of a controlling stake in the Chinese Skyrizon and related parties.
“AvtoKrAZ and Zaporizhtransformator, controlled respectively by Konstantin Zhevago and Konstantin Grigorishin, have been in bankruptcy proceedings for the past few years.
AVTOKRAZ, FOREIGN TRADE, MOTOR SICH, nationalize, UKRNAFTA, ЗТР, УКРТАТНАФТА
Employees of the Security Service of Ukraine have detained Vyacheslav Boguslayev, president of Motor Sich JSC, who is suspected of collaborating and working for the Russian Federation, the press center of the SBU reported.
In addition, law enforcement officers detained the head of the Department of Foreign Economic Activity of this enterprise.
The suspects were announced on suspicion under two articles of the Criminal Code of Ukraine, in particular, Art. 111-1 (collaboration activity) and art. 111-2 (complicity with the aggressor state).
The SBU noted that the detention took place within the framework of criminal proceedings on the illegal supply by Motor Sich of military goods for Russian attack aircraft.
According to the materials of the investigation, the management of the plant located in Zaporozhye is involved in the deal. Officials acted in collusion with representatives of the Russian corporation Rostec, which is one of the main arms manufacturers for Russia, close to the Kremlin.
“The attackers have established transnational channels for the illegal supply of wholesale lots of Ukrainian aircraft engines to the aggressor country. The occupiers used the resulting products for the production and repair of Russian attack helicopters of the Mi-8AMTSh-VN “Sapson”, KO-52 “Alligator”, Mi-28N “Night Hunter” types “, the message says.
It has been established that the invaders massively used the corresponding models of army aviation for a full-scale invasion of Ukraine. This is confirmed by numerous facts of the destruction of enemy combat helicopters by our defenders.
“To circumvent the established restrictions on trade with the Russian Federation, the organizers of the scheme used controlled commercial structures in three countries of the Middle East, Europe and East Asia. It was these companies that sent the order to the Ukrainian manufacturer, allegedly for the needs of the foreign side,” the report says.
At the same time, after receiving military products, “intermediaries” forwarded them to Russia. The enemy also used his foreign accomplices to repair and maintain their own aircraft using Ukrainian spare parts.
During the investigation, the Security Service officers identified all the organizers of the transactions, documented their criminal actions and carried out comprehensive measures to bring the perpetrators to justice.
Vyacheslav Boguslaev, President of JSC “Motor Sich” – one of the largest enterprises in Europe for the production of aircraft engines. Prior to the sale of a controlling stake in the Chinese company Skyrizon, which was frozen by the court, he was the largest shareholder of the enterprise.
Born in 1938, in 1966 he graduated from the Zaporozhye Machine-Building Institute with a degree in Aircraft Engines, since 1973 he has been the director of the Volochisk Machine-Building Plant, since 1988 he has been the general director of the Zaporizhzhya PO “Motorostroitel”.
Boguslaev headed Motor Sich in 1991. Since 1994 – the head of the board and general director of Motor Sich OJSC.
Since 2006, the people’s deputy of Ukraine of 5-8 convocations, and since 2019, the president of Motor Sich JSC and the general designer for the creation and modernization of helicopter technology.
China’s Beijing Skyrizon Aviation Industry Investment Co. has filed a lawsuit against Ukraine in the Permanent Court of Arbitration in The Hague, demanding %4.5 billion in compensation for the violation, in its opinion, of the Sino-Ukrainian intergovernmental agreement of October 1992 on protection of the company’s investment in Motor-Sich shares, the Chinese publication Global Times reported, with reference to Skyrizon.“Chinese investors have suffered significant losses both in Ukraine and in China due to five years of unfair treatment and continued use of illegal measures in Ukraine,” the newspaper reports.At the same time, information about the claim is not yet available on the website of the Hague Arbitration.Earlier it was reported that Skyrizon and other Chinese investors in Motor-Sich shares notified Ukraine of their intention to submit to international arbitration in early September 2020, and sent a direct request to the court in early December as there was no compromise with Kyiv. The initial amount of claims was %3.5 billion. The interests of the Chinese plaintiffs were represented by the international law firms WilmerHale, DLA Piper and Bird & Bird.PJSC Motor-Sich is one of the world’s largest manufacturers of engines for aviation equipment, as well as industrial gas turbine units. It supplies products to more than 100 countries around the world. Last year, Motor-Sich received UAH 906.65 million in net profit against UAH 703.18 million in net loss in the previous year. The company’s revenue increased by 14.1% – up to UAH 11.432 billion.According to a source in the Ukrainian government, currently about 75% of Motor-Sich’s shares are already owned by a group of Chinese owners, and some part of the disputed block of shares acts as a pledge for financing provided, among other things, by China Development Bank.
PJSC Motor Sich (Zaporizhia) in January-September 2021 received UAH 920.03 million of net profit, which is 0.7% less than in the same period in 2020.
According to the interim consolidated financial report of Motor Sich on the website, net income for the nine months of this year increased by 25.9% – to UAH 9.696 billion.
The company’s gross profit increased by 5.4% – to UAH 3.375 billion, while operating profit decreased by 35.4% – to UAH 1.078 billion.
According to the balance sheet, the company’s retained earnings at the end of September reached UAH 19.14 billion.
“During the reporting period, Motor Sich increased the share of sales of new types of equipment in the total volume of sales and continues to work towards achieving the planned profitability indicators of such projects. The diversification strategy of production is expected to offset the decrease in receipts for products that are approaching the end of their life cycle in the long term,” the report says.
According to the report, for the nine months of this year, serial aircraft engines accounted for about 56% of production and sales, and helicopters – about 10.6%. Another 8.2% of production and 7% of sales came from aircraft engine repairs.
Motor Sich is one of the world’s largest manufacturers of engines for aviation equipment, as well as industrial gas turbine units. It supplies products to more than 100 countries around the world.
Motor Sich (Zaporizhia) will supply four D-436-148FM aircraft engines to Antonov state-owned enterprise and 14 helicopter engines to Turkish Aerospace Industries (TUSAS), the corresponding contracts were signed in June.
According to a report in the ProZorro system, the amount of the contract concluded on June 15 with Antonov State Enterprise is UAH 414.99 million (UAH 86.46 million per engine), while two engines, subject to timely advance payment, must be delivered on DDP terms until the end this year and two more – until the end of October next year.
According to the agreement signed with TUSAS on June 26, Motor Sich will supply engines for attacking heavy-class helicopters, the Turkish side said in a statement. According to the report, the delivery of the first two engines is expected in September 2022, and the first flight of these helicopters is scheduled for 2023. The entire contract is valid until 2025.
There is no information about the cost of the Turkish contract yet.
PJSC Motor Sich is one of the world’s largest manufacturers of engines for aviation equipment, as well as industrial gas turbine units. It supplies products to more than 100 countries around the world.
