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The state support shafts reduces their investprivlekatelnost …

Last year the government has taken unprecedented measures to support state-owned coal mines. They were given not only the guaranteed market, but also tax and tariff exemptions. However, all these measures failed to lead to significant improvement in the results of public companies, and even vice versa - have worsened their performance and reduced investprivlekatelnost.

This policy calls into question the implementation of plans for the privatization of the mines in the near future - investors are accustomed to working under equal market conditions, experts say.

Auction unprecedented generosity

In the fight against the crisis in the last year the Cabinet of Ministers adopted a series of decisions which were to support the demand for the products of state mines. Earlier this year, was set up state reserve of thermal coal. In April NAC "Energy Company of Ukraine" (controls most of the generating companies in the country) has been entrusted exclusively to buy coal from state mines within the state enterprise "Coal of Ukraine". In late May, the Government, despite the express statutory prohibitions instructed GP "Energy Market" to return the export VAT only for energy companies buying coal from the state. Finally, the Cabinet issued a decree which ordered the "Coal of Ukraine" transfer means for transporting their goods to the railways is not mines, and power generating companies. In turn, the generation of this amount were to supply the Ukrainian Railway electricity. So was actually revived the practice of offsets in the energy sector.

In January 2009 the government order was approved list of 27 state-owned mining enterprises for which the Cabinet had recommended to set electricity tariffs for consumers as the first class. As a result of state-owned mines, contrary to the law of Ukraine "On energy, have to pay for electricity at 26% less (52 kopecks. Instead of 70 kopecks. Per kW • h) than private. All this, according to Ministry of Fuel, has reduced the cost of production of state mines. If tariffs were equally reduced for the mines all forms of property, the cost of private mines would have been 80-90 million UAH lower than they were for the year. Furthermore, according to the order of the Cabinet of Ministers № 281 dated March 18, 2009, state-owned mines all last year had an opportunity not to pursue charges in the Pension Fund and Social Insurance Fund and not pay taxes on wages.

Head of Press Service Alexander Minugleproma Gorobets argues that preferences in the coal industry - the world practice. "Throughout the world, state-owned enterprises supported by the state during the crisis. If we do not support, they would already have closed. With respect to private mines - the government of Yulia Timoshenko a year ago offered to those who wish to obtain benefits, to give their assets to the State "- said Mr. Gorobets.

Head of analytical department of IR BrokerCreditService Maxim Shein, by contrast, notes that all EU countries, USA, and behind them, and Russia refused to subsidies and benefits state-owned mines. "In Poland, private and state-owned mines were granted equal rights, and unprofitable mines closed in 2001. In Russia, refused to benefits in 2005, has since been closed 75 state mines from 1220, while others simply learned to operate profitably," -- reminded the judge.

result is negative

However, benefits provided by the Government have not led to significant improvements in the government mines. Told the head of the Luhansk Regional State Administration Oleksandr Antipov, Cabinet demanded gosshaht to channel funds mainly to pay salaries, resulting in increased depreciation of fixed assets of enterprises. "Of the 1.6 billion UAH received general area as the state support the coal industry, to purchase new equipment designed just 290 million UAH. A provision for the protection of labor in the current year generally reduced by more than 10 times and not more than 25 million grn "- he said. According to Mr. Antipov, most coal SOEs Lugansk depreciation of equipment is now 60-98%. And this, in his opinion, entails a reduction in output. Thus, state-owned mines have reduced the area of coal production last year at the third (at 3.5 million tons). According to the Donetsk Regional State Administration, the reduction of production at gosshahtah this area was 25%.

Alexander Antipov noted that public policy creates additional problems of financing social services in mining regions. In the past year in Luhansk state-owned mines are not charged to the pension fund of 490 million UAH, privatized miners from accidents - 170 million UAH, employment fund - 22 million grn, the local budget - 60 million grn. In the Donetsk region the amount of underpayment to the pension fund amounted to 520 million UAH, in privatized miners from accidents - 200 million UAH. "Today we do not have a state-owned mines, which would not have had before us the debt," - said the head of the Pension Fund of Sverdlovsk Paul collars. And the head of the Pension Fund of the city Rovenky Dmitry Filin said that the foundation filed for gosshahty the courts to begin to pay taxes.
Introduction

benefits also had a negative impact on the work of private mines. According to the Ministry of Fuel and their market share of energy coal in 2009 decreased from 17% to 12%, and the market of coking coal - from 25% to 21%. "The reason for this fall - the artificial creation of favorable conditions for the state mines" - believe the press-service rental company "Mine them. Zasyadko. They argue that such actions violate the antitrust laws of the Cabinet and declare that he had repeatedly appealed to the government demanding a level playing field, but did not achieve the result. "The Law of Ukraine" On economic competition protection "specifically says that state-owned enterprises have advantages over private ones. Creating a preference for them in direct violation of the law" - agrees managing partner Astapov Lawyers Andrei Astapov. However, the press service of the Antimonopoly Committee with reference to its chapter Aleksandra Melnichenko said: "Issues of public support for the coal industry does not fall within the competence of the Committee, and on this issue in an office does not receive complaints from representatives of the private mines.

Privatization in question

Representatives of the private mines indicate that the policy of state-owned enterprises affects privileges investprivlekatelnosti their business. Last year, the volume of capital expenditure in the sector fell by 30%. "Funds for investment from private mines were, and most companies planning to invest their time as in 2009-2010. But to invest any money when the market conditions are unequal - not feasible," - said the source at the rental company, mine them. Zasyadko. Maxim Shein recalled that a similar situation was in Russia. "When the state increased its subsidy mines, private enterprises began to suffer losses, and, of course, their investment activity has been suspended", - said the expert.

Director of Coalimpex Vasily Kononov (export-import operations with coal) is sure that in this situation do not have to rely on the holding of a successful privatization of the coal industry. Terms of coal mining in Ukraine is much more complex conditions in other countries such as Russia, Poland, the United States and Canada. Maintenance of existing mines and develop new areas requires significantly greater investment than now, "- analyst IK Alfa Capital Oleg hits. In his opinion, under the current circumstances in the privatization of just will not participate Western companies, which the system of preferences for gosshaht do not know. "In the EU countries make concessions or all or none", - he said.

"Ukraine is not the first year suffered from shortages of coking coal in the domestic market. The problem with the production and ensuring the country"s coal can only be achieved through the privatization of coal assets. And unequal competitive conditions reduce the investment attractiveness" - agrees IR Dragon Capital analyst Sergey Gajda.

"This Minugleproma policies aimed at squeezing the market of private mines", --
Deputy Director of Economics of OAO Mine Belorechenskaya "Sergei Khalaj.

- Does this dramatic differences in the activities of private and public mines?

- By 2009, private mine worked better than the state despite the fact that did not receive subsidies from the state budget. This is primarily due to the fact that their owners have invested in equipment, fixed assets and technology. There have been improvements to the structure of lower production costs. But last year the situation changed. At this influenced the government ban on the purchase of coal from non-state mines generations NAC "Energy Company of Ukraine.

- How will it affect the ban on the work of your mine?

- In the summer we dropped by a quarter in sales.

- How do you assess the benefits of tax and the price of electricity for gosshaht?

- Obviously, this policy Minugleproma aimed at squeezing the market of private mines. Now we buy electricity at prices 30% higher than the state-owned mines. For our company - it is 6 million UAH of additional expenses per year. In general, the industry it is about the hundreds of millions of hryvnia. Of course, such a measure makes our products less competitive in comparison with the state.

- What are the problems you have encountered?

- We have a problem with obtaining credit. At present rates of banks - up to 30% per annum, and for the coal companies are acceptable maximum of 4-5%. Without the credits, we are deprived of opportunities to undertake further technical upgrading. Such a policy leads to the fact that the volume of production of individual mines everywhere falling, and some capacity a year or two may be lost forever. Of course, in these conditions do not have to talk about some kind of investment attractiveness of the industry. Companies easier to buy a mine in Russia than in Ukraine.

- What prevents the arrival of investors in the industry?

- A serious problem is the government regulation of coal prices. In fact, the purchase price determines the Fuel and Energy Ministry and Ministry of Coal Industry. Such a system is not transparent and not acceptable especially for foreign investors.

- How can I change this situation?

- I see in the existing pricing policy Minugleproma violation of the principles of economic competition. For most of the private coal mine of the best characteristics, and they are willing to sell it at lower prices. At a time when consumption of electricity in the country is falling, falling, and demand for coal. Under the conditions of narrowing the market for us to apply the anti-competitive actions. At the moment, when, on the contrary, it is necessary to create equal conditions for all, that all enterprises can survive. We hope that the situation will interfere Antimonopoly Committee and will evaluate actions Minugleproma.

"Buy mine is quite risky," - Director of State Enterprise "Donetsk Coal Energy Company" Eduard Polyakov.

- aggravated it in the past year the work of private mines, compared with the state?

- In my opinion, private mines continue to operate better government. The main reason is that they should pay off, because working without state support. And it causes them to reduce costs, to modernize and improve. What, in turn, allows you to work more efficiently.

- How do you assess the decision of the Cabinet, which he ordered the power plant NAC "Energy Company of Ukraine to buy coal only from SE" Coal of Ukraine "?

- The State first tries to protect its producers and provide them with steady sales. It is quite another - the provision of benefits. I believe that this is not the correct approach, when one gives benefits, but others do not. All Ukrainian enterprises are socially significant, because everywhere people work. Moreover, the state-owned mines, and so secured through sale of state order. Therefore, we would not have been worse from the fact that incentives for paying taxes and the price of electricity would give private companies. Otherwise, it appears that we make the industry unattractive. And sooner or later it will affect everybody, because you can not find investors. This is especially true of foreign investors who do not quite understand the desire to support some market participants at the expense of others.

- you support the abolition of these benefits?

- I think it was a temporary measure in times of crisis, when there were no funds. It was adopted to ensure that we were able to pay wages to miners in the state-owned enterprises. On the other hand, if we do not pay taxes, then further along the chain affects everyone, including pensioners and benefit recipients. So now it can be reviewed.

- What to do this?

- Private mines must actively defend its position. Contact with the claims to the Cabinet. Apply to the court, in the end. If someone violates the antitrust laws, it should stop. Otherwise, any problems with finding investors.

- So, in your opinion, to sell the company now impossible?

- There is a program "Ukrainian Coal", which was developed back in 2001. According to her most of the industry should either be privatized or closed. Until recently, the implementation of this program hampered by the fact that there was no specific law on the privatization of coal mines. But such a law will sooner or later be adopted. And then we get the chance to sell some of mine, because we have investment potential. But these companies to buy now rather risky, since the conditions of public and private mines are very different. And so wishing may simply not be.

Oleg Gavrish, Andrew Ledenev

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