News (#01-02 January-February 2018)

Biznews

Energy

Subsidiary of Americas TrailStone obtained license for right to supply natural gas

The National Commission for State Regulation of Energy and Public Utilities has issued a license for the right to supply natural gas to Trailstone Energy, owned by TrailStone, an American group of companies.

The TrailStone group of companies was founded in 2013 by Riverstone Corporation, a private energy investment company with its headquarters in the USA.

The main areas of the company commercial activity are energy resources trade and investments in oil, gas and electricity (including infrastructure projects) in Europe and North America.

Kyivenergo split into two companies

On 22 December the shareholders of Kyivenergo decided to withdraw DTEK Kyiv Electricity Supply Networks, the distribution systems operator, from the company.

At the time of the shareholders meeting conduct, the largest holders of Kyivenergo voting shares were SCM constituent corporations: DTEK Holdings Limited 25%, DTEK Energy B.V. 29%, Ornex Limited 21% and DTEK Energo 18%.

The established company will carry out activities on electricity distribution and operation of electricity supply networks. In this regard, Kyivenergo transfers the rights, obligations and property to the balance sheet of
PJSC DTEK Kyiv Electricity Supply Networks to carry out distribution activities. It is expected that the state registration of the new company will be completed in February 2018.

At the same time, Kyivenergo will retain its energy supply activities.

Due to reorganization, the shareholders decided to convert 108.4 million shares of Kyivenergo with a nominal value of UAH 0.25 each to the same number of Kyivenergo shares with a nominal value of UAH 0.05 each and of DTEK Kyiv Electricity Supply Networks with a nominal value of UAH 0.2 each.

The company assured that all current shareholders will become owners of the shares in Kyivenergo and DTEK Kyiv Electricity Supply Networks.

Establishment of new companies will not affect the scope of rights and obligations under contracts for communal property management concluded between Kiev City Council and Kyivenergo.

A reminder that in mid-November, Kyivenergo shareholders decided to reorganize business by dividing the company on the basis of activity.

Thus, two new companies will be established: one will be engaged in electricity distribution and operation of electricity supply networks, the other in energy supply activities. This decision is explained by the requirements of the Law On the Electricity Market.

As is known, on 18 August the State Property Fund sold a state-owned stake in the amount of 25% of the power company Kyivenergo for
UAH 759.633 million to Ornex, a company owned by SCM Corporation.

Banking & Finance

NBU refinanced PrivatBank via loan

On 10 January the National Bank of Ukraine provided UAH 2.3 billion worth of refinancing to PrivatBank at 16.5% per annum. The loan was secured by government bonds.

The National Bank of Ukraine stated that refinancing was provided for programs for the development of loan services for small and medium-sized businesses, in particular, of an agricultural program called AgroKUB.

An independent investigation conducted by Kroll Inc. showed that PrivatBank had been the target of large-scale and coordinated fraudulent activities for at least ten years prior to its nationalization, which resulted in losses amounting to at least USD 5.5 billion.

Trade Policy

Largest free trade zone on the planet

The EU and Japan have finally agreed to create a free trade zone. The parties have agreed on the text of the agreement on creating an economic partnership to create the worlds largest open economic zone.
The FTZ will cover 600 million people and about 30% of global GDP.

The agreement, which took four years to develop, provides for reducing tariffs, carrying out cooperation in the field of standards and regulation, and opening public procurement markets.

However, despite the announcement, the parties have not yet agreed on protection of investments, which is the last obstacle to creating a free trade zone between them. Discussions on this issue will continue in 2018.

M&A

Nestle sells Ferrero confectionary business in USA

Swiss Nestle SA has sold the American division for confectionery products manufacture of the Italian company Ferrero for USD 2.8 billion. The transaction is expected to be closed by the end of Q1 2018.

In 2016, the revenue of Nestle American confectionery unit amounted to about USD 915 million. It accounts for approximately 3% of Nestles total revenue in the USA.

In terms of market share, Nestle is the third largest manufacturer of confectionery products in the world after Mars Inc. and Mondelez International Inc. The company ranks fourth in the USA, also bypassed by Hershey Co.

Softbank bought stake in Uber

On 18 January a group of investors led by SoftBank Group Corp. closed a transaction with Uber Technologies Inc. to become the companys largest shareholder.

After the transaction, SoftBank will own 15% of Uber, thereby making it the largest shareholder in the company. At the same time, the total value of Uber was estimated at USD 48 billion.

Under the terms of the transaction, Uber will enlarge the Board of Directors from 11 to 17 members, including four independent directors, and will limit certain powers of voting shareholders.

EU

EU approved tax havens blacklist

EU finance ministers have approved a blacklist of tax havens, which includes 17 jurisdictions outside the European Union. The following countries and territories are on the blacklist: American Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macao, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia and the United Arab Emirates.

The EU decided to create a unified blacklist after another leakage of offshore documents dubbed the Panama Papers.

As of today, each EU member state has its own lists of jurisdictions, which are very inconsistent in tax matters. The criteria for determining a tax haven vary greatly among EU member states, and some of them do not allow any jurisdictions to be included in their national blacklists.

Public Administration

Desk audits to be computerized

The Ministry of Finance has developed, in cooperation with the State Fiscal Service, an algorithm for computerization of desk audits.

The pilot project of this algorithm, which took place in one of the regions, showed that it is possible to significantly speed up the audit process and to reduce the influence of the factor of human error on the process of desk audits.

Due to computerization, one declaration will take up to 5 minutes, whereas currently an inspector spends an average of around 40 minutes on it. It will also significantly reduce manual intervention in the audit process and will, therefore, reduce corruption risks.

Currently, a working group is finalizing the methodology of the developed algorithm. It is planned to introduce the algorithm in the test mode in other regions of Ukraine so as to further computerize desk audits throughout Ukraine.

In the long run, desk audits are planned for inclusion in the taxpayers account. That is, the taxpayer will immediately receive online information on the completed declaration.

AMCU

AMCU commenced case on petrol price rises

The Antimonopoly Committee of Ukraine is investigating the situation on the petrol market in NovemberDecember 2017. AMCU Chairman Yuriy Terentyev added that within the framework of this case the Committee continues to analyze the current state of the market in January 2018. The Committee has practically completed its investigation into the case regarding the situation on the liquefied gas market in 2017 and plans to publish information on the results in February.

At the end of December 2017, the AMCU reported that it was studying possible collusion between operators of filling stations OKKO, WOG and the Nadezhda group of companies on the liquefied gas market.

In early September, the AMCU commenced proceedings on the grounds of anti-competitive concerted actions on the liquefied gas market.

From late July to 28 August the price of liquefied gas increased by an average of 5 UAH/liter. Analysts of the Consulting Group A-95 named the lack of resources to be the main factor for the rise in price of liquefied gas.

A reminder that on 15-16 January retail prices for petrol and diesel fuel in filling station chains rose again. The rise in fuel prices in Ukraine recently is related to the rising cost of oil and the devaluation of the national currency.

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