3000 jobs at risk in Ukraine as Smart Holding’s gas operations are suspended by authorities

May 21, 2023
by

Smart Holding, one of the largest Ukrainian industrial groups, has now calculated the potential imminent job losses resulting from the freeze on operations as part of the on-going investigation by the Ukrainian authorities, which Smart Holding considers unlawful and without any basis in fact. Taking into account the latest asset freezes and operational hurdles, over 3,000 Ukrainians face losing employment as businesses belonging to Smart Holding operations across a number of key industries were subject to restrictive measures.

Assets worth over US$280 million are currently frozen, including rights to over 40 enterprises as well as licenses to 30 gas wells. Smart Holding’s Ukrainian operations have been impacted by the mounting pressures due law-enforcement and investigative actions following the decision by the Ministry of Justice to annul the 2022 corporate ownership changes and to deny the current beneficial owner their rights, alleging that Vadim Novinskiy, Smart’s founder and ex-shareholder, remains the current owner.

The asset freezes started on 13 April 2023 when, on the basis of unfounded criminal proceedings related to accusations against the former owner, the Security Service of Ukraine announced the seizure of the property of Smart Holding. This is an extra-judicial ban that ignores due process, and is an unlawful attack on Company’s business.

The seizure includes the assets of Smart Energy Group in the Kharkiv region, where production licenses were now suspended, and all activity has been stopped. Smart Holding has previously reported that due to suspension of Ukrgazvydobutok and Prom-Energo Product at Ostroverkhivske and Vasyschivske fields, the State and local budgets have already lost almost US$3 million, and the energy system – 12.4 million m³ of gas. Unless operation of companies is resumed in the near future, by the end of 2023 alone the State will have lost another US$35 million in taxes and 135 million m³ of gas. Other permits suspended include the licenses of Enwell Energy, which is listed on the London Stock Exchange.

Last year, the dividends of Smart Energy Group amounted to USD 27 million, of which USD 13 million was donated to help the military and citizens affected by the war. The remaining part was used to support the workplaces and operational activities of the Group.

Julia Kiryanova, the CEO of Smart-Holding, commented: “We fully support Ukraine’s effort to protect its national security, and are committed to Ukraine winning the war against the Russian invaders. However, this should not come at the expense of the Ukrainian socially responsible business and must be done in full respect of fundamental rights and freedoms and following international standards.

The suddenly halted operation of a number Smart Holding businesses, including in the strategically vital gas production sector, puts the workforce of entire factories and operations at risk. We are trying to do the best we can for all our stakeholders, employees and the people of Ukraine but the unreasonable and unlawful position that the authorities have adopted to our business are making this increasingly difficult. We continue to offer as much support to our employees as we can.

We vigorously deny any allegations of wrong-doing, and see this as an unjustified and unlawful attack by the authorities on a key Ukrainian business. We call on the Office of the President to urgently launch an investigation and prevent further damage and escalation.”

About Smart Holding

Smart Holding is one of the largest investment groups in Ukraine. The interests of the Group focus on the industries that are the key ones for the economy of the country. The companies of the Group invest in metals and mining, oil and gas segment, agriculture, shipbuilding, real estate and energy sector. The strategy of Smart Holding is aimed at efficient management of a diversified investment portfolio in order to increase its value in the long term.

About Smart Energy

Smart Energy is a part of investment group Smart Holding and is in charge of implementing exploration projects, commercial development of the hydrocarbon deposits. It is ranked in top 5 biggest private gas producers of Ukraine, producing over 1 mln m3 of gas per day in total at the beginning of Russia’s invasion of Ukraine.

Oil & Gas business block of Smart Energy is represented by gas producing Ukrgazvydobutok (Kharkiv region) and Enwell Energy, a listed British company having assets in Poltava (the Representative Office of Regal Petroleum Corporation Limited and Arkona Gas-Energy LLC) and Kharkiv regions (Prom-Energo Produkt).

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