The Ministry of Finance cuts investment in ports?

The Ministry of Finance is destroying the plans of the Ministry of Infrastructure to invest UAH 17 billion (USD 627.3 million) in Ukrainian ports.

Just last week, USM wrote that by 2025 the Ministry of Infrastructure plans to attract about UAH 17 billion of investments to Ukrainian ports. They planned to raise these funds by reducing dividend payments from 80% to 30%.

It means, the necessary UAH 17 billion for ports can be received only if these dividends from next year will amount to 30%.

What do we have now? In 2020, the dividend payments of the Seaport Authority amounted to UAH 3.6 billion (USD 132.84 million). This year, the company plans to allocate UAH 3.8 billion (USD 140.22 million) to the state budget and trust funds. This is the 80% dividend.

To demonstrate the approximate amount of payments, USM uses the expected amount of income and further payments specified in the financial plan of the State Enterprise “Ukrainian Sea Ports Authority” for 2021.

According to USM estimates, if the USPA fulfills its financial plan, and the volume of dividend payments really decreases, the company will transfer UAH 1.43 billion (USD 52.76 million) to the state, and benefit by UAH 3.32 billion (USD 122.5 million). This is the sum of dividend payments of ports in the amount of 30%. In this case, the company will indeed receive the very same UAH 17 billion until 2025.

What if the MIU does not achieve a dividend cut?

The Minister of Infrastructure Olexandr Kubrakov said today, November 23th, that the Ministry of Infrastructure expects to reduce dividends “to at least 50%”.

“We are currently in discussion with the Ministry of Finance. Their position on this issue remains unchanged – 80%. We are trying to explain that this all is good, but state-owned companies also have development tasks that need to be addressed, and without which they will very quickly cease to be competitive in their markets. Therefore, I think that we will find some kind of balance”, the Minister said in an interview with Interfax-Ukraine.

Kubrakov also noted that state port companies and other infrastructure enterprises have a long list of development tasks. And this development needs funding.

“For major companies, we see a definite and quite significant increase in revenue, especially when compared with the previous year. Taking this into account, we will try to ensure that the Ministry of Finance does not sag in the income from dividends that they expect in the budget. But at the same time, so that the state-owned companies have money. I am not ready to state the exact figures, but I would like to reduce the payment of dividends for infrastructure companies at least to 50%”, the Minister summed up.

Let’s go back to the calculations. If the Ministry of Finance accepts Kubrakov’s proposal and agrees to reduce dividends to 50%, then after the payment of dividends, the USPA will have UAH 2.37 billion (USD 87.45 million) out of UAH 4.75 billion (USD 175.27 million). In this case, the period for attracting UAH 17 billion of investments in ports is postponed from 2025 to 2027.

And now it is  supposed that the Ministry of Finance refused to cut the dividend rate at all. Then the ports will expect 17 billion UAH of investments for 17 years.

It is still unknown when the draft of State Budget will be adopted. As well as whether the Ukrainian ports will really have to wait for the necessary UAH 17 billion for more than 15 years. Which of the Ministries will insist on its own – we will find out by the end of the year.

But there is one more thing. If Olexandr Kubrakov is able to agree on a reduction in dividend payments, will the state not “thank” him with legal proceedings, as ex-Minister of Infrastructure Volodymyr Omelyan in the case of reducing port dues?

Olha Horbenko.