Ukraine's government takes on oligarchs in energy sector

By bne IntelliNews November 17, 2014

bne -

Ukraine's new government is set to take on the country's most powerful oligarchs in the energy sector, according to the draft coalition agreement posted on the website of the Petro Poroshenko Bloc.

The new government is planning to abolish a clause in Ukraine's corporate law that sets the quorum for a shareholder's meeting at 60%, reducing it to the internationally accepted 50% +1  share. The measure - listed in the section of the coalition agreement that deals with "transparency of energy markets" - will determine the fate of giant oil producer and refiner Ukrnafta, one of the country's largest companies,  and shows the determination of the new government to break with the vested interests who have ruined Ukraine's prospects over the last two decades.

Ukrnafta is state-owned but not state-controlled. This is because oligarch Ihor Kolomoisky's Privat Bank group owns around 45% of Ukrnafta - which thanks to the law on the 60% quorum has given the group a stranglehold on the company, by the simple ruse of leaving the AGM without a quorum if its demands are not met - which has been a frequent occurrence.

Lowering the quorum for AGMs to 50% will restore full state control of the asset which has been valued as worth as much as $11bn, paving the way for an international IPO. The measure is listed among those to be implemented in the last quarter of 2014.

Kolomoisky's response is not yet clear. Kolomoisky has been one of the strongest backers of the new Ukrainian authorities against Russian-backed separatists.  Kolomoisky was made governor of Dnipetrovsk in March 2014, where Ukraine's largest bank Privat is headquartered, and also many of the group's industrial assets. Kolomoisky also controls 1+1 television channel, one of the country's largest, and is widely regarded as a major backer of the People's Front party led by prime minister Arseny Yatsenyuk, which came a surprising first place in the share of the vote in parliamentary elections on October 26, despite having been created only one month before the election. 

While strongly backing both Yatsenyuk as prime minister as well as Petro Poroshenko as president, Kolomoisky's TV channel has in recent months been waging a media war with Ukraine's largest TV channel, Inter, owned by Kolomoisky biggest rival in the energy sphere, gas and chemicals oligarch Dmitry Firtash. Despite both TV channels and their owners supporting the current authorities, they have been tearing strips of each other, with Firtash' Inter running exposés of Kolomoisky and vice versa.

But the government has acted against Firtash' gas and chemicals interests as well, forbidding his gas guzzling fertiliser producers from drawing gas from underground storage or from domestic producers during the winter, in an effort to reduce dependency on Russia, since the fertilizer plants consume together nearly as much gas as the combined households of Ukraine. On November 15 a government decision prohibited the largest 90 industrial companies from buying gas from any gas producers except state company Naftogaz. Firtash has said he will take the government to court over the former decision.

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