Metinvest Donetsk assets planned for Yanukovych ally, recordings say

The Russian government is arranging for Metinvest assets in occupied Donbas to be transferred to the entourage of former Ukrainian President Viktor Yanukovych, according to intercepted recordings released by the Security Service of Ukraine (SBU) published on March 1.

 

In the recordings, Aleksandr Zakharcehnko, the leader of the self-declared Donetsk People’s Repbulic, discusses the expropriation of Ukrainian assets on the occupied territory and complains about a decision in Moscow to bring all metallurgical assets under the control of “Kurchenko,” which likely refers to Serhiy Kurchenko, the financial frontman for the Yanukovych family when he was president.

 

The assets include Metinvest’s (METINV) Yenakiyeve Steel, its subsidiaries, as well as Khartsyzk Pipe.

 

“Kurchenko will take from us all the best, and about 30 enterprises will remain with us, which we do not need,” Zakharchenko complained. He also expressed his concern that all the profit from the steel enterprises will go to Kurchenko.

 

Recall, Interfax reported on March 1 that the leaders of the occupied territories of the Donetsk and Luhansk regions announced the introduction of “external management” on companies operating on their territories but officially registered in Ukraine.

 

Metinvest and DTEK (DTEKUA), which have many assets on the occupied territories, have yet to confirm whether their assets have been affected. SCM, the key shareholder of Metinvest and DTEK, issued a March 2 press release stating that “private property is sovereign” and deeming “unacceptable” the demands by the self-declared republics that SCM companies reregister and pay taxes to them. SCM is owned by Rinat Akhmetov, Ukraine’s richest individual.

 

Alexander Paraschiy: The released information indicates that Metinvest indeed faces a real risk of losing control over its assets in the occupied parts of the Donetsk region, to the benefit of Moscow-based people. That’s not encouraging, but not much damaging either since we estimated that its annual revenue would only fall by 8% and annual EBITDA by 12%.

 

We can also conclude that DTEK’s assets there (Komsomolets Donbasa mine, Zuyivska thermal power plant) did not fall under the Kurchenko list, meaning that Akhmetov still has a good chance to reach a deal with local guys like Zakharchenko.

 

All this does not change our view on the bonds of Metinvest (positive) and DTEK (cautiously neutral).

 

On a political level, Zakharchenko’s call offers further proof that the local leaders of the self-declared republics decide little on their territory, with all the important decisions being made in Moscow. It confirms that falsehood of the claims by the Kremlin and loyal media that the moves of the self-declared republics reflect the autonomous will of the local populace.