Motor Sich still owns Snizhne plant, president says

Motor Sich (MSICH UK), among Ukraine’s leading
aeronautics firms, still continues to own the Snizhne Machinery Plant that is
located on the occupied territory of the Donetsk region, the company’s
president Vyacheslav Boguslayev said in an interview published by Radio Free
Europe/Radio Liberty on Jan. 11. Motor Sich has hired a foreign company to
manage the plant, while remaining its controlling shareholder, he said, without
naming the company or where it’s based. He also said that Motor Sich is still using
components produced by the plant, but it has to buy them in another country.

Boguslayev made his comments after Motor Sich
published on its website a statement dated Dec. 29 that it had lost control
over the operations of Snizhne Machinery as of Dec. 20. The plant was focused
on producing blades for turbines of plane helicopter engines.

Alexander Paraschiy: Indeed in
the interview, the 79-old Soviet-era factory director and member of Ukraine’s
parliament not only revealed the way that Motor Sich is continuing to cooperate
with Russian-backed occupying forces in Donbas. Most likely, Motor Sich is also
supplying key Russian aeronautics enterprises in the same way it’s getting its
supplies from Snizhne, which is by buying raw materials and selling finished
goods via third-party countries.

For instance, Russian helicopter plants are still
heavily dependent on Motor Sich engines and very likely are purchasing them in
significant volumes, despite the company not reporting sales of these engines
to Russia since its military aggression against Ukraine was initiated in 2014.
Most Russian-made helicopters are equipped with engines of the TV3-117 family
made by Motor Sich. (They are also produced in Russia in limited amount under
the VK-2500 brand).

For instance, officially, the Russian state helicopter
holding produced 189 helicopters in 2016, meaning it should have used at least
450 TV3-117 helicopter engines, while official production of Russian VK-2500
engines was just 60 units in 2016.

Such ongoing cooperation with Russian helicopter
producers seems to be a key factor of Motor Sich’s stability in terms of
P&L in recent years. At the same time, given that Russians are producing
increasingly more engines locally (VK-2500 production plan for 2017 was 130
units), it is very likely that Motor Sich’s financials will deteriorate in the
coming years.

This incident could mean that Motor Sich is not
alone in the Ukrainian universe in having officially lost control over
enterprises located on the occupied territories of Donbas, but is nonetheless
dealing with them through “third countries.”