Business news from Ukraine

CABINET SETS UP AD HOC GROUP TO PREPARE STATE COMPANIES FOR PRIVATIZATION

KYIV. Aug 3 (Interfax-Ukraine) – The Cabinet of Ministers has created an ad hoc group to hammer out recommendations and proposals regarding the privatization and terms of the sale of state-owned enterprises, and adopted the provisions on the group’s work.

Relevant Cabinet decree No. 525 of June 24 was published on the government’s website on August 3.

The Cabinet appointed the chairman of the State Property Fund (SPF) to head the ad hoc group. The government also decided that the group should include its deputy head (the SPF’s deputy chairman), and the secretary of the group will be elected from among SPF representatives. The group will also consist of the deputy minister of economic development and trade, the senior adviser to the minister of economic development and trade, the deputy minister of the cabinet, the first deputy finance minister, the first deputy minister of energy and coal industry, the director of the Cabinet secretariat’s department for the effective management of state property, and a state authorized representative of the Antimonopoly Committee.

The group will be a provisional advisory and consultative government agency whose main tasks will be to make recommendations and suggestions to draft Cabinet resolutions on the privatization and terms of the sale of state-run enterprises. It will also raise international financial and technical assistance in preparing and putting the enterprises up for sale. It will also hire a contractor to prepare the enterprises for privatization and determine sources to pay for the contractor’s services, including at the expense of international financial and technical aid.

ASTELIT SEES UAH 1.78 BLN IN NET PROFIT IN Q2 2015

KYIV. July 31 (Interfax-Ukraine) – Astelit LLC saw UAH 1.78 billion of net profit in April-June 2015, while year-over-year the operator saw net loss of UAH 667.8 million.

The operator said in a financial report that its net revenue grew by 11.9%, to UAH 1.076 billion.

Earnings before interest, taxes, depreciation and amortization (EBITDA) rose by 16.9%, to UAH 324.4 million. The average revenue per user (ARPU) was up by 1.2%, to UAH 34.5. The number of active subscribers totaled 10.6 million in Q2 2015, a rise of 11.6% year-over-year. Capital investment amounted to UAH 1.53 billion, while year-over-year they stood at UAH 75.4 million.

In July 2015, Turkey’s Turkcell finished consolidation of 100% of Astelit.

NOVA POSHTA SEES 25% RISE IN NUMBER OF DELIVERIES IN H1 2015

KYIV. July 31 (Interfax-Ukraine) –Nova Poshta company had over 32 million of deliveries in January-June 2015, which is 25% up year-over-year.

“Parcels had a lion’s share of the total number of deliveries. Their number grew by 22%. Document mailing grew by 57% over the period,” the company’s press service told Interfax-Ukraine.

McDonald’s, Obolon, DTEK, Interpipe, Coca Cola, Siemens, MTS, Ukrtelecom and other companies became new clients in H1 2015.

The company opened 715 new depots in H1 2015, including automatic parcel terminals, all over Ukraine and increased its network to 2,128 terminals.

“Nova Poshta has revised hours of operations for its branches to be more convenient for clients. From June some of them are ready to service visitors on Sundays in Kyiv, Kharkiv, Dnipropetrovsk, Zaporizhia, Odesa and Lviv,” the press service said.

The company placed its depots within walking distance from houses and offices and at shopping centers and supermarkets.

The company’s truck fleet has been expanded by 19.5% since early 2015, to 2,564 trucks.

Over the reporting period, Nova Poshta launched three terminals with a gross area of almost 10,000 square meters in Kremenchuk, Odesa and Krasnoarmiysk, bringing their total number to 36. Construction work is underway in Uzhgorod, Rivne and Chernivtsi.

“In H1 2015 Nova Poshta expanded the joint consumer credit program with CreditMarket at its branches to regional centers. Now clients are not to go to a bank to buy something. CreditMarket stations are working in 20 depots of Nova Poshta and the company plans to open 30 more stations in the near future,” the company said.

In H1 2015 the company launched special local tariffs for business thanks to which corporate clients could deliver parcels and mail within a city or town and their suburbs at the good price.

“After the successful launch in Kyiv, geography of the Local tariff has been expanded to Odesa, Lviv, Kharkiv, Dnipropetrovsk and their suburbs. The local tariffs are in effect in 99 towns of Ukraine. Today, over 25,000 clients used local tariff and they made over 300,000 deliveries,” the press service said.

Nova Poshta launched the business documents door-to-door delivery service. Over 4,000 clients, among which are banks, insurance companies and industrial companies, used the service. The number of deliveries exceeded 65,000.

Under the Humanitarian Mail of Ukraine program Nova Poshta carried 4,700 tonnes of aid for servicemen, displaced persons and residents of suffered towns.

“The results of the first half of the year show that despite the difficult situation in the country we continue developing. People get used to send parcels and receive goods from online shops. Despite the decline in the conventional online trade segment, we see a rise in the number of deals on the online sites between individuals, which positively influences the express delivery services,” the press service said, citing the founder of the company Viacheslav Klimov.

UKRSPYRT ALMOST DOUBLES NET PROFIT IN H1 2015

KYIV. July 31 (Interfax-Ukraine) – State enterprise Ukrspyrt saw UAH 96 million of net pretax profit in January-June 2015, which is almost twice up year-over-year (UAH 49 million), the company said in a report on its website.

The company said that its net profit margin was 13% compared to 6% year-over-year.

The company said that the indicators show that the efficiency of administrative and other operation business processes have increased and non-operation expenses were reduced as much as possible (UAH 21,000 in H1 2015 compared to UAH 35.5 million year-over-year).

“Despite the large fall in sales (by 30%), we managed to increase the efficiency of operation without increasing gross markup (39% in 2014 and 32% in 2015). The use of raw materials per produced unit was decreased by 22%. Operation, administrative expenses were cut, the corruption schemes during procurement and at enterprises were removed, and returns on decaliters grew by 335%,” the report said, citing acting head Roman Invaniuk.

Since early 2015, the debt burden on the enterprise was cut by UAH 182.5 million: by 99.8% for credits, by 8% with the budget and by 10% with suppliers. Overdue liabilities were paid by 85%, and new agreements were signed with postponement of payments, which supports the debt level without additional expenses.

The company said that total sum of operating expenses in H1 2015 amounted to UAH 139.4 million compared to UAH 222.7 million year-over-year.

ODESA GOVERNOR HAD NO POWER TO DEMOLISH FENCE OF ZELENY BEREH RECREATION CENTER, CONFLICT HAS TO BE RESOLVED IN COURT – LAWYERS

KYIV. July 31 (Interfax-Ukraine) – Head of Odesa Regional State Administration Mikheil Saakashvili had no authority to demolish the fence of the Zeleny Bereh recreation center without a relevant court ruling, having only the instruction of the municipal security department of Odesa City Council, according to lawyers polled by Interfax-Ukraine.

“Under the current law, the representatives of Odesa Regional State Administration had no authority to demolish the fence,” Partner of the Shevchuk&Partners law firm Darya Koziy considers.

In particular, she said the decision of the Constitutional Court of Ukraine dated April 16, 2009 (the case on the abolition of acts of local self-governance authorities) establishes that local authorities cannot revoke their previous decisions, or amend them, if in accordance with these decisions legal relations related to implementation of certain subjective rights and interests protected by law appeared, and the subjects of these legal relations oppose their adjustment or termination.

“Even if we assume that the land plot was leased in violation of the law, to demolish the fence and return the land plot it is necessary to contest the lease contract in court to restore the situation that existed before the signing of the lease contract through the demolition of the fence. If the court would have satisfied such a claim, then after the entry into force of the court decision the demolition of the fence should had been carried out by the executive service but not the representatives of Odesa Regional State Administration,” the lawyer said.

Commenting on the validity of prescriptions used by the head of Odesa Regional State Administration, Koziy said that “if Odesa Regional State Administration for its request within 15 days would not have received the requested documentation, the further resolution of this issue in accordance with the legislation of Ukraine would have to be carried out judicially”.

“The document, which was referred to during the demolition of the fence, cannot be the ground for the fence demolition, therefore the demolition was carried out in excess of authority,” the expert said.

Partner of the Volkov&Partners law firm Roman Drozhansky noted that the instruction of the municipal department includes violations of the law. In particular, it does not indicate violations of the rules of urban development in Odesa, as well as the name of the legal entity or the individual who committed the offense.

The Zeleny Bereh recreation center is not the name of a legal entity, but only the name of an object owned by the person, the lawyer said.

In addition, he pointed out that the instruction followed by the head of Odesa Regional State Administration includes a reference to an invalid local regulation – the rules of urban development in Odesa dated 2008, which expired in accordance with the decision of Odesa City Council of December 23, 2011.

“The valid rules of urban development in Odesa (as well as the text of the instruction) state that the elements of landscaping set (placed) in violation of the requirements established by the regulations are to be dismantled for the money of the person who installed them within the term specified in the order of the authorized executive body of Odesa City Council. At the same time, the demolition of the fence of the Zeleny Bereh recreation center was made before the deadline specified in the instruction,” Drozhansky said.

He also stressed that “the conclusion of the legality of installing the fence and blocking access to the beach can be done after studying the contract on land lease and other permits and registration documents related to the recreation center and the beach.”

Partner of the GORO law firm Dmytro Ovsiy said in turn that “the regional state administration is part of executive power headed by the Cabinet of Ministers, therefore the actions of its head do not refer to the powers of the governor, and thus there was an abuse of authority.”

“Only the courts can determine guilt. The duty of the executive service is to implement court rulings. Saakashvili independently determined the guilt of the fence owner, replacing court, and executed the decision, replacing the executive service. Such actions can be qualified as abuse of authority,” the lawyer said.

According to Ovsiy, the instruction composed does not constitute grounds for the demolition of the fence.

“The order fixes violations of municipal improvements. This article does not provide for other sanctions except for a fine of up to UAH 1,700,” he said.

“Another difficulty of the situation is that the violation of fence installation took place in the territory of the city beach. The order was issued by the municipal security department of Odesa City Council. According to information announced by the recreation center owner, the land is leased. The leasing party is the city council. Formally, legally the city authorities should protect the rights violation,” Ovsiy said.

The lawyer noted that a legitimate way of “demolishing the fence is possible only by court order.”

“If a facility is illegally built on municipal land, the owner (the city council) has the right to go to court with the demand to dismantle the unauthorized building and compensation for damages. In addition, if the construction of the fence was not agreed with the city authorities and is contrary to the lease contract, the latter have the right to demand the cancellation of the rent contract,” he said.

Ovsiy believes that at present “the owner of the fence has every ground to apply to court to recognize the actions of the authorities illegal and require compensation for damages.”

Lawyer of the Asters law firm Volha Sheiko has forecast that the resolution to the situation will be found in court.

“In fact, there was the instruction, but, apparently, no documents were provided in response. I think there will be several lawsuits, we will follow them,” she said.

In her estimation, “it is possible to write a dissertation on the legality or illegality of such fences.”

“It is possible to find loopholes in legislation and get around laws. In fact, land plots, according to the Land Code of Ukraine, are allocated for ownership, leasing on the basis of decisions of the local council, i.e. the territorial community. The community, in turn, must make decisions on the basis of existing regulations. It can be concluded that Odesa City Council adopted a number of local regulations, on the basis of which such land plots were allocated. However, if to work out the regulatory framework in the form of a number of laws, including those such as the Water and Land Codes, it can be concluded that the beach is a public space,” the lawyer said.

As reported, on July 20 Saakashvili, accompanied by the head of the Odesa police, the Emergencies Service and a bulldozer, arrived at the Zeleny Bereh recreation center. Threatening to use force, they entered the center and organized the demolition of the wall, blocking access to the beach. Saakashvili demanded that the police open a criminal case against the owners.

Businessman Vasyl Khmelnytsky, associated with the object, in turn, described Saakashvili’s actions as “populism and the invasion of private property” and said the negative consequences of this incident would affect the country’s investment attractiveness. He stressed that “the unfinished Zeleny Bereh recreation center” is privately owned and located on a legally rented land plot. In his words, “access to the beach was closed during the Soviet era.” Khmelnytsky said that the local authorities made the order to remove the fence or provide permissive documents on July 20, 2015 and gave ten days for this to take place.

MRIYA AGROHOLDING PLANS TO SOW WINTER CROPS ON 100,000 HA

KYIV. July 30 (Interfax-Ukraine) – Mriya agroholding has started sowing winter crops for the 2016 harvest and plans to sow them on around 100,000 hectares, the company said in a press release.

The company said that winter rapeseeds will be sowed on over 20,000 hectares which as already begun.

The agroholding is restoring and expanding its technical fleet to ensure stable operations during the sowing and harvesting campaigns. Over the past three months the company bought and leased machinery worth over $55 million. In the near future, harvesters for sunflower seeds, tractors and self-propelled spraying machines will be supplied.

Mriya was founded in 1992 by Ivan and Klavdiya Huta. It grows wheat, barley, rapeseeds, sugar beet, buckwheat, and potatoes.

In August, 2014, Mriya reported arrears worth $9 million of interest earnings and nearly $120 million of debt held under the company’s obligations. Mriya’s total debt equaled $1.3 billion when the company’s bankruptcy was announced.

Mriya’s creditors have not agreed on debt restructuring programs. In January 2015, a temporary liquidator from British Virgin Islands was appointed to run Mriya under a court ruling. Operation control over the agroholding was passed to creditors who elected new top managers of the company.