The companies sounding the alarm are TIU Canada, a solar energy company, and Ovostar, one of Europe’s biggest egg producers.
Two companies that represent millions of dollars in Canadian investment say they are facing raider attacks and getting no help from a Ukrainian government that created “investment nannies” to promote the nation as an attractive place to do business.
The companies sounding the alarm are TIU Canada, a solar energy company, and Ovostar, one of Europe’s biggest egg producers.
Their encounters with Ukraine’s powerful business elite, the nation’s distrusted courts and other accessories to corruption, such as notaries, are not going to help the nation’s already dismal reputation for international investors, despite government promises to assign officials — or “nannies”— to pay close attention to solving problems for big investors.
The lack of rule of law and trustworthy institutions are why Ukraine has attracted a paltry $50 billion in foreign direct investment in 30 years, keeping living standards among the lowest in Europe as politicians talk big about breaking up the competition-stifling oligarchy.
322 new raider attacks
More than 322 new raider attacks have been registered as of May 26, according to the Prosecutor General’s Office. The vast majority of them are still tied up in court. According to Open Data Bot, they usually fall under two articles of the Criminal Code: sham business and obstruction of legitimate business activity and illegal seizure.
For green-energy investor TIU Canada, the problems started when it received a letter on Dec. 23, 2019, notifying it that the company’s solar power plant would be disconnected from the nation’s electric power grid.
The letter came from the Nikopol Ferroalloy Plant in southeastern Dnipropetrovsk Oblast on whose premises the 10.5-megawatt plant and its high-voltage substation lies. However, the plant leases the land from the municipal government in a 30-year agreement.
Kolomoisky company
The Canadian firm held meetings with plant officials, including the plant’s prominent shareholder, billionaire oligarch Ihor Kolomoisky, who faces sanctions and criminal investigations in the United States for “significant corruption.” For their efforts, the plant disconnected TIU Canada’s renewable energy plant from the grid on March 2, 2020.
Ostensibly, the plant cited the need for repairs. More than a year later, TIU country director Valentyna Beliakova told the Kyiv Post she has seen “no evidence of repairs.”
What the company got, however, was an offer to buy the plant for 10 percent of its value.
Kolomoisky wasn’t available for comment following phone calls to three Swiss-based numbers. Two voicemail messages left on a Ukrainian number went unanswered.
Costly attack
The disconnection has cost TIU more than $1.5 million in damages. It is repaying its 7-million-euro loan on this particular project with cash flow from its other three in-country renewable energy projects in which $65 million has been invested.
An administrative assistant of Nikopol plant chief executive Volodymyr Kutsin acknowledged receiving a Kyiv Post inquiry and stated that the dispute “is in no way a raider attack,” repeating the need for “overdue repairs.”
A court date in Kyiv at the commercial appellate court was postponed until July 26 because co-defendant DTEK — Ukraine’s largest private electricity producer belonging to billionaire Rinat Akhmetov — didn’t appear at a late June hearing to have TIU’s grid connection reinstated.
The solar plant connected to the grid via DTEK’s Dnipro oblenergo power distribution company.
Appealing lower court
The Canadian firm lost the initial lower court hearing in favor of Kolomoisky and other principal Nikopol Ferroalloy Plant shareholders, which include the tycoon’s longtime business associate Hennady Boholyubov.
“There is no other way to explain this other than it’s a raider attack,” Beliakova said, noting Kolomoisky has a track record of allegedly taking over other foreign firms, including airport cargo handler SwissAir at Kyiv Boryspil International Airport.
U.S. authorities are investigating him for laundering money from Ukraine’s largest private lender, PrivatBank, where international auditors found losses of $5.5 billion. The bank, owned by Kolomoisky and Boholyubov until December 2016, required a taxpayer bailout and nationalization to stay afloat.
The U. S. State Department has banned Kolomoisky and his immediate family members from traveling to the country.
Kolomoisky has denied wrongdoing and has publicly asserted that he is still the rightful owner of PrivatBank while engaging in litigation to regain control of the bank.
Kolomoisky, who backed Volodymyr Zelensky’s winning 2019 presidential campaign, has not faced any criminal bank fraud charges stemming from the PrivatBank losses.
‘Paid no attention’
TIU’s predicament comes only two years after Zelensky, on an official visit to Canada in 2019, singled out the company as an example of a successful investor from a nation with some 1.5 million people of Ukrainian heritage.
“We think about the future, that is why green energy will be one of the key sectors of our economy during the upcoming years,” Zelensky said in July 2019. “I know that we have here Canadian company TIU that already successfully works in this area. We are grateful to them for this — please, follow their example.”
Today, however, Beliakova said Zelensky’s administration “has paid no attention” to the dispute with the Kolomoisky-affiliated company.
To date, TIU is the biggest Canadian foreign investor since Kyiv and Ottawa signed a free trade agreement that went into force on Aug. 1, 2017.
Ultimately owned by Refraction Asset Management in Calgary, the company refused the Kyiv Post’s request for a due diligence report on the Nikopol solar energy project, a study conducted by consultancy CMS McKenna in 2017.
But the Ukrainian government’s shabby treatment of renewable energy companies has caused many investors to freeze commitments to the nation, or to simply invest elsewhere. After promising high payouts, or feed-in tariffs, to spur production of renewable energy, the Ukrainian government stiffed investors. Unpaid debts are currently estimated at $1 billion.
TIU’s case, as well as others, highlights how poor rule of law is the main deterrent to attracting more investment from abroad.
It is “the biggest obstacle to doing business in Ukraine,” said Andy Hunder, president of the American Chamber of Commerce in Ukraine. “Security of investments, property rights, and assets, together with physical security, are vital…Companies that already have invested millions of dollars and created hundreds of thousands of jobs must be protected and treated well.”
Until the situation improves, Hunder said, “Ukraine will forever remain a toy in oligarchs’ hands.”
Ovostar eggs
Canadian government representatives and Ottawa lawmakers have spoken out about the case of Ovostar Union, one of Europe’s five largest egg producers.
The Kyiv-based egg producer has since 2020 fended legal battles from a former owner of the company that Canadian-based Fairfax Holdings and others purchased at an auction.
In May, Canadian Ambassador to Ukraine Larisa Galadza penned an open letter to Prime Minister Denys Shmyhal, Agriculture Minister Roman Leshchenko and then-Economy Minister Ihor Petrashko.
She warned of “serious consequences” should the initial owner regain the company through the courts. Galadza said the case brought on by the Makarovo firm — which had defaulted on a loan that led to its loss of control over the firm — had approached Ovostar’s new shareholders with a promise to withdraw its legal complaint if a “one-time payment would be provided.”
Ovostar named “raiders Vasyl Astion and Yevhen Astion” as the culprits, both of whom have agricultural and political ties to Dnipropetrovsk Oblast. They could not be reached for comment.
Traded on the Warsaw Stock Exchange, Ovostar has so far successfully won the legal battle after the Northern Commercial Court of Appeal on May 19 ruled in its favor while dismissing the case brought by Makarovo and another former company owner, FC Fingroup.
The plaintiffs allege that the current shareholders, including Polish Generali Group and Aviva Poland, had artificially bankrupted Makarovo, charges that Ovostar denies. The case has been appealed with the Commercial Court of Cassation within the Supreme Court.
Originally published at Kyiv post