News (#5-6 May-June 2020)

Biznews

Capital Markets

Nova Poshta started placement of UAH 700 million worth of bonds

On 11 May the logistics company Nova Poshta started the placement of Series B bonds to the tune of UAH 700 million.

On 7 May 2020, the bond issue was registered with the National Securities and Stock Market Commission.

The bonds issued mature in 17 February 2023, have a coupon rate of 16% and a payment frequency of four times a year. The placement period runs from 11 May to 10 July 2020.

Renewable Energy

Top 10 investors in green energy earned UAH 14 billion a year

Ten major investors in renewable energy sources earned more than UAH 14 billion in 2019. DTEK Renewables is at the top of the pile, earning UAH 4.7 billion and having 25.5% of the market.

In 2018, DTEK revenue from green energy came to about UAH 3 billion. Therefore, in 2019 the company increased its revenue by 56%.

DTEKs portfolio includes, amongst others, the Botiivska (200 MW), Primorska (200 MW) and Orlovska (100 MW) wind power plants (WPPs). The company also operates the Tryfonivska (10 MW), Nikopolska (200 MW) and Pokrovska (240 MW) solar power plants (SPP).

The Chinese group CNBM, which in 2015 inherited its solar power plants in Ukraine from the empire of the Klyuyev brothers (Active Solar), ranked second. CNBM owns 301 MW of green capacities.

Revenue from its power plants came to UAH 2.9 billion last year. This amount could be explained by one of the highest green tariffs, UAH 7.3 per kW/h.

Swedish businessmen Carl Sturen and Johan Boden, who put their money in the Chumak plant prior to their green investments, ranked third.

Entrepreneurs own six wind power plants in Kherson Region with a total installed capacity of 335 MW. Their power plants generated electricity worth UAH 1.67 billion in 2019.

M&A

Berkshire Hathaway sold all its shares in 4 US airlines

Berkshire Hathaway holding, owned by famous American investor Warren Buffett, has sold all its entire shareholdings in four major US airlines.

The stakes were in Delta Air Lines Inc., Southwest Airlines Co., American Airlines Group Inc., and United Airlines Holdings Inc.

The shares in the four airlines were purchased in 2016. As of the end of 2019, Berkshire Hathaway owned 11% of Delta Air Lines shares, a 10% shareholding in both American Airlines and Southwest Airlines and a 9% stake in United Airlines.

Gas company Regal Petroleum buys competitor

British company Regal Petroleum has announced the expansion of its activities in Poltava Region to cover Svistunkivsko-Chervonolutsk field through the acquisition of Arkona Gas-Energy LLC, which is the owner of a special permit.

The first tranche following the agreements signing will amount to USD 4.315 million. The company will transfer another USD 2.158 million to the former owners of Arkona Gas-Energy LLC subject to compliance to certain terms and conditions laid out in the agreement. In the event that the second payment is made, a year later the third tranche will be paid, also to the sum of USD 2.158 million.

Therefore, under the agreement that was concluded, the total value of the asset could be up to USD 8.63 million. At the same time, the final value will be determined subject to compliance with certain terms and conditions set out in the agreement. It also contains clarifications, obligations and guarantees, which are standard for such transactions, and grants the company the right to defer certain payments and/or to demand reimbursement for damages caused by previous tranches in the event of breach of terms and conditions in the acquisition agreement.

Sanctions

British bank slapped with unprecedented fine due to Ukraine

The British authority responsible for the implementation of financial sanctions has fined Standard Chartered Bank, a London-based bank, for contravention of EU sanctions imposed for violating the territorial integrity of Ukraine.

The fine of GBP 20.47 million was imposed on the London bank for granting loans to DenizBank of Turkey, which at that time was a subsidiary of a Russian bank, Sberbank and was, therefore, subject to EU sanctions. This is the largest fine ever imposed by the British regulator.

During the period from April 2015 to January 2018, Standard Chartered Bank granted 102 loans to DenizBank. Sberbank became the subject of EU sanctions in 2014. Therefore, restrictions included DenizBank.

EU law prohibits the granting of loans with a maturity of more than 30 days to organizations subject to sanctions.

Business

Number of business complaints increases in Q1 2020

The Business Ombudsman Council reports that the first quarter of 2020, despite the decline in business activity due to the introduction of quarantine in mid-March, was marked by an increase in the number of complaints from entrepreneurs. The office received 462 appeals on malpractice on the part of state bodies (a rise of 12% on Q4 2019). Entrepreneurs addressed new challenges related to the impact on business due to the lockdown: ban on re-export of medical products, refusal to register a taxpayer, ungrounded orders on closing shops and conducting of classes online.

In Q1 2020, 84% of all appeals related to the following complaint blocks:

  1. Tax issues (58%). The number of appeals on tax issues increased compared to Q4 2019 and Q1 2019. It was driven by a rise in the number of key matters of complaints: tax inspections, tax criminal cases and suspension of tax invoices. In the latter subject, the biggest groups of appeals were: inclusion in lists of high-risk taxpayers (44%) and non-enforcement of court decisions on registration of tax invoices (38%), while common complaints on suspension of tax invoices totaled only 18%.
  2. Actions of law-enforcement bodies (11%). Companies complained more against the National Police, in particular, reporting more episodes of procedural abuse, while the number of appeals on inaction, on the contrary, actually fell. At the same time, the Council received fewer complaints concerning the Prosecutors Office and the Security Service of Ukraine compared to Q4 2019 and Q1 2019.
  3. Actions of local government authorities (LGAs) (7%). In the reporting period, the Council received 33 appeals against LGAs almost four times more than in Q4 2019 and double the number received in Q1 2019.
  4. Actions of state regulators (4%). The number of complaints against actions by state regulators decreased by about one third in comparison with Q4 2019 and Q1 2019. Compared to the previous quarter, businesses complained less about the actions of the DABI and the AMCU, while the number of complaints about actions by the State GeoCadastre rose.
  5. Customs issues (4%). This subject of appeals was on the rise in the reporting quarter. We received 18 appeals, which is 8 cases more than in Q4 2019. This was due to the increase in the number of complaints related to disputes in customs valuation of goods and delays in customs clearance.

The Council noted some systemic achievements of the quarter based on its recommendations, as previously issued to government agencies:

the law on reducing the size of the shadow market in metallurgical raw materials and scrap metal operations was adopted in the first reading;

a draft legal act approving the technical regulation of building materials in full compliance with the EU Commission Regulation was prepared;

a mechanism to provide information to companies included in the high-risk taxpayers list on how to be excluded from it was introduced. A recent resolution adopted by the Cabinet of Ministers of Ukraine stipulates such reasoning, but we will continue monitoring its practical implementation;

the obligation of businesses to inform the tax authority about the appointment of a new CEO was cancelled;

amounts of fines for employers were reviewed, taking into account the severity and the employers degree of guilt, as well as the possibility of applying warnings for minor offenses;

technical regulations on conformity assessment and acceptance of industrial products were aligned with the Association Agreement signed with the EU.

On-line business

IKEA started operations in Ukraine: online store launched

Swedish store IKEA has started its operations on the Ukrainian market by launching an online store. In addition to delivery, customers will be able to pick up goods for free at one of two collection points in Kyiv.

Following the onlines store launch, IKEA plans to open a store in Kyiv in a new city format as soon as possible. The company recently signed a leasing agreement with the Blockbuster Mall shopping and entertainment complex.

UberEats halts operations in Ukraine

The UberEats food delivery service will halt its operations in Ukraine on 3 June.

The decision was taken following a study of business indicators on the very competitive food delivery market.

At the same time, the company notes that it will continue to serve customers via the Uber taxi service.

Data Screening

YouControl opened access to European registers: its now possible to review files of foreign companies

YouControl, a Ukrainian service for contracting party verification, announced data integration from the official registers of the United Kingdom and the European Union. The analytical system now allows a person to get familiar with files not only of Ukrainian partners, but also of foreign ones. The company has also launched the YouControlBot chatbot in Telegram, Messenger and Viber with similar options.

A search of British companies allows a person to learn the company status (operating or closed), full name of the founder or the director, account number, type of activity. It is also possible to search by company name and the full name of its director, both in Latin and Cyrillic.

The company claims this will help to verify providers of foreign medical goods and other companies.

Currently, it is possible to use verification of foreign partners for free. However, some of these data are provided by European registers for a fee, so to collect more comprehensive information, we propose statements at a price from EUR 5 to 50. These contain more detailed information on lawsuits, financial statements, trade transactions, etc., YouControl added.

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