Government is forcing Kolomoyskiy to pay up

Photo: PHL

The government is not giving up the attempts to get the largest oil producing company UkrNafta to repay its debts. On December 2, the Financial Investigation Department of the State Fiscal Service (SFS) registered a case on abuse of power by senior officials of UkrNafta (The state owns a 50%+1 share, while 42% stake and the company’s management is controlled by the structures of the Head of the Dnipropetrovsk Oblast State Administration Ihor Kolomoyskiy).

Head of the SFS Ihor Bilous announced plans to open a case against UkrNafta back in November. Capital was told that the case was opened due to non-payment of UAH 467 mn in dividends over 2011-2013. “Based on the results of a preliminary investigation, provided there are solid grounds, the measures will be taken to ensure criminal proceedings, including seizure of property and freezing of accounts and assets of the company,” a representative of the SFS informed.

Applying pressure

The specified UAH 467 mn account for mandatory dividends that UkrNafta was intended to repay the government in 2011-2013. By law companies with a state share exceeding 50% must annually deduct 30% of the profit to the shareholders even without holding shareholder meetings. The share of the state in UkrNafta is 50% + 1 share, which means that the company must annually transfer a minimum of 15% to the state.

As a reminder, on October 10 the first shareholder meeting of UkrNafta in three years was held at which a decision was made to pay dividends to shareholders in full by April 10, 2015. “However, the state demanded primary repayment of debts for previous years when 15% (UAH 467 mn) were due to be paid,” an employee of UkrNafta said on condition of anonymity.

The current criminal case is not the government’s first attempt to put pressure on Kolomoyskiy’s company. At the end of November, tax inspectors revealed non-payment of VAT in the amount of UAH 13.73 mn at the gas stations Avias and ANP in the Sumy oblast. “In Sumy we arrested the gas stations and now the employees are being arrested. This procedure will continue,” confirmed Bilous. The final goal of the SFS is to levy the rent for the use of subsoil from UkrNafta, says General Director of the A-95 Consulting Group Serhiy Kuyun.

As a reminder, on July 31 the Verkhovna Rada approved a bill on raising the rent for the use of subsoil in a closed meeting. Under the document the rates for production of oil were temporarily raised from 18% to 21% and from 39% to 45% depending on the depth of mining until January 1, 2015. UkrNafta stopped paying taxes and rent since August. In the middle of November the Prosecutor General’s Office of the Sumy oblast opened a criminal investigation into the non-payment by UkrNafta of rent for the production of crude hydrocarbons on the territory of the oblast in the amount of UAH 1.1 bn.

The process will not speed up

The aggregate debt of UkrNafta to the state (rent and dividends) reached UAH 2.87 bn as of December 1, the official response of the SFS to Capital’s inquiry reads. Executive Director of UkrNafta Volodymyr Pustovarov assured the publication that “normal dialog is being held and a solution is being sought” between the company and the tax authority, though he refused to comment any further.

The prices of oil are rapidly declining, which is why it will be difficult for UkrNafta to repay debts to the state, says Director of the Analytical Department at Eavex Capital Dmytro Churin. Nonetheless, the issue of repayment of the debt to the state is a question of a rule of thumb of UkrNafta’s owner, emphasized the expert. “The company practically has no credit load, which is why UkrNafta can take out a loan and repay the debt to the state,” explained Churin.

Opening a criminal case will not speed up levying of the rent, assures Senior Partner at Ilyashev & Partners law firm Roman Marchenko. “Within the framework of the case the guilty will simply be punished,” he sums up, adding, “The government should concentrate not only on criminal, but also court actions to collect this money owed to the budget.”