14 March 2019, Thursday, 14:41 489

Yongzhi Chen: “Ukrainian citizens might pay for corrupt actions of the Ministry of Internal Affairs and the Security Service of Ukraine in relation to the Chinese State Corporation”

Редактор: Микола Поліщук

Director General of CNBM New Energy Engineering told about the peculiarities of work of the Chinese state corporation in Ukraine

On the eve of the elections, Ukrainian law enforcement agencies are giving more and more reasons to foreign companies operating in Ukraine think about the investment climate. The day before mass media published the message on attempt of illegal takeover by power officers of one of the facilities belonging to the Chinese state corporation CNBM in Mykolayiv region. In view of this situation, the Director General of CNBM New Energy Engineering, Yongzhi Chen, arrived in Ukraine. In an interview with XXX, he told about the Chinese party’s projection of the conflict, its influence on bilateral trade and political relations and the prospects for China’s further investment activity in Ukraine.

- How can you comment the situation involving Voshod Solar?

- My visit to Ukraine had been planned before the situation with Voshod Solar became public.

As a state-owned corporation, we constantly monitor the performance of our assets, and report to the relevant ministry. But we were informed that March 1, 2019 there were an illegal attempt to suspend operation of our company, and a property arrest by employees of the National Police and the Security Service of Ukraine due to the investigation into criminal cases under a far-fetched pretext. That was an additional reason to come to Ukraine and try to figure the situation out.

- What are those criminal cases, and what is their background?

- Voshod Solar LLC has a dispute with Active Bank, which is currently undergoing closedown procedures, as to a loan drawn for construction purposes. The initial amount of the loan was about USD 10 million. Currently the outstanding loan amount is a shade less than USD 400,000. The bank considered that the amount was USD 10 million, as it did not recognize the offset of loans and deposits placed with the same Active Bank before the Chinese part appearance.

There has been an economic dispute lasting over three years. In December 2018, Active Bank was replaced with another creditor, some FC Vesta, where the court decides on the invalidity of credit-deposit offsets and fixes the amount of debt in the amount of 9.5 million USD dollars. Our legal consultants challenged the ruling, and relevant documents were filed on appeal. As far as I know, the dates of further hearings and revisions have not been scheduled yet.

On the whole, the situation is uncertain; there is no final court ruling. Noteworthy is the fact that the court passed its ruling immediately after the sale of the debt to another creditor, however, I cannot make any comments on anything here. Let our legal consultants and our embassy's advisers fully understand the situation. In any case, the dispute is still underway, and it is too early to announce the verdict.

We were very surprised that law enforcement agencies were involved in the economic dispute between the two companies. And what's more, the Security Service of Ukraine.

- What were the searches motivated by?

- Our company was accused of fraud, a criminal case was opened in January 2019. Allegedly Voshod Solar transferred the same modules as a security to two different banks. And most importantly, installed the modules, and allegedly did not notify Active Bank of that. At the same time, the modules were allegedly built into a single unit with inverter stations in order not to allow their dismantle in case no money is received within the dispute with the bank. Therefore, during the searches, law enforcement officers were apparently looking for those very modules, and also wanted to seize the assets and suspend the enterprise's operation. All that was accompanied by provision of invalid documents, and intimidation of the management.

Indeed, the points we are accused of are not documented. Certainly, we did not transfer the same modules as a pledge to two different banks. They are even produced by another manufacturer.

Moreover, the installation of the equipment had taken place before the loan was received, and not after. Thus there are no facts about the fraud or other violations, it is easy to check through studying respective documents. In addition, a photo is enough for any specialist to see that the modules and stations are separated, and nothing is physically interconnected.

Even before we became the owners, the already assembled modules had been transferred as a security to Active Bank. It is also easy to check by examining the documents with us or bank representatives. The installation was completed in March 2013, and pledged in December 2013. Acts on pledge inspection were also signed by Active Bank employees. And if we think logically, why did the modules have to be kept in the boxes, if the money was needed for their further installation.

- Why did law enforcement officers come to you?

- Our vision is to put pressure on the management, probably to help the new creditor of FC Vesta, perhaps the objective was different. In any case, the order of the court to disconnect the stations from the network was excessive because it violates the principle under which restrictive measures should not disrupt the activity of an enterprise.

We in China, by default, consider all law enforcement actions to be legitimate. Moreover, as a state-owned company we respect other governmental agencies. However, all actions must be documented, all court rulings must take effect, and most importantly, everything must follow a correct order to ensure efficiency of investigations.

If law enforcement officials have any questions, we are ready to answer them, to explain, to provide all the necessary documents. However, in order to answer a question, it must first be asked, before imposition of any arrest, intimidation of the management, production of invalid documents, and demands for suspension of stations' operation. By the way, there has not been a single request from law enforcement officers.

Once again: Voshod Solar has no debts defined in any court judgments. We regard the behavior of the law enforcement agencies as illegal interference in economic activity. I would like to say it again, notification about an opened criminal case during searches, illegal arrests, attempts to disconnect the facility – other than the pressure on the business or raiding cannot be called.

- Who stands to benefit from this?

- We consider it to be the links in a chain: the change of the creditor, the prompt court's decision, criminal cases based on far-fetched reasons, attempts to impede the company's activity - and this is with an unresolved economic dispute about money. They are obviously putting pressure on us and trying to deprive us of property or money, and are doing that using the police and state security services. At the same time, the investment climate in Ukraine and significant improvements in it continue being discussed at various international platforms. It's not even funny...

- They say that Pavel Fuks, an entrepreneur buying a lot of distressed debts in Ukraine, can stand behind FC Vesta. Do you know anything about that?

- Yes, we know it through our channels. But it doesn't matter. The debt dispute is one question. Debts must be paid under court's final ruling. Another thing is the pressure on the Chinese state company. It is especially alarming that the interests of a particular private businessman are served by employees of the Ministry of Internal Affairs and the Security Service of Ukraine. But this is a matter of a standalone investigation and respective reaction.

- What is the company planning to do to prevent repetition of such a situation in the future?

- In China, we do not work in a hurry, and there is no situation in which we may not be in time somewhere. We act only in accordance with the law. Voshod Solar is a Chinese state-owned asset. For us it is now important to study the situation thoroughly and identify all those involved in illegal decisions and actions. With the help of our legal advisers, a comprehensive analysis of documents and events has been carried out to expose illegal or unjustified actions. We will find out who made the courts to pass illegal decisions, who demanded their execution, and who executed them.

Based on the results of the investigation, I will be able to report the situation to the embassy and our ministry.

The debt dispute will go its own way. We will always fulfill all legal decisions and pay all debts. At the same time, we will demand the same from our partners.

Hurry can be in the case of two private companies, since the companies can cease operation, go bankrupt and the debts will not be paid and no compensation of losses will be paid. In our case, we are sure nothing will happen to us, to the state of China, and Ukraine.

And those responsible for illegal actions will definitely be brought to justice.

I also count on a fair trial on this matter. Currently the situation does not look quite like that, the court in Nikolaev almost completely recovers the loan amount less than a month after replacing the Bank with a certain Vesta. The Pechersk court makes search and arrests warrants for obviously contrived circumstances and at the same time tries to stop the activity of the enterprise. Lawyers, by the way, note that foreign investor’s restrictions on access to justice are grounds for lawsuits directly against the state. I really would not like the Ukrainian people to pay for illegal actions of the state bodies acting in someone’s private interests.

Investment Climate And Prospects For Solar Energy

- How do you estimate the work of CNBM assets in Ukraine?

- According to performance results for 2018, all CNBM SPVs in Ukraine produced a total of 309 million kWh of electric energy, which made it possible to ensure annual electricity consumption for more than 70,000 households. The latter one also contributed to the reduction of Ukraine’s dependence on imports of fossil fuels. The activity of the CNBM’s parks ensures the decrease in costs during transportation of electric energy due to consumption at the production sites and also ensures the development and modernization of the network infrastructure.

In 2018, we paid UAH 426.5 million in taxes, fees and payments to budgets of different levels. Repeatedly, the group provided assistance to local communities by implementing social projects in the regions. Preschool institutions were repaired, energy-saving windows were installed at local secondary schools, playgrounds were built, local roads were repaired, certain assistance was also provided to the military, etc.

- Do you consider possible expansion in Ukraine in the next 3-5 years? Are you ready to build projects from scratch or planning to buy facilities from other market participants?

- We were the first Chinese State Corporation to invest in energy assets in Ukraine. I'm talking about direct investments. And we are ready to continue our operation in Ukraine. In 2016, a memorandum on cooperation was signed between our company and the Ministry of Energy and Coal Industry of Ukraine. However, the priority task for us now is to solve the problems with our current assets in Ukraine. Up to this point it is difficult to talk about any expansion or other investments. However, once the issue is solved, we will have almost limitless abilities to expand in Ukraine.

- In your opinion, how promising is the trend of installing solar panels on house roofs in the private sector and urban areas?

- This trend is very promising. Especially, in case of balanced policy and assistance of the state. In my opinion, partial state compensation of the cost of roof-mounted solar power station equipment would be a very good incentive for households to install such stations, even at the usual tariff.

- If we talk about the investment climate in Ukraine as a whole, how has it changed over the past four years? Is the green energy market competitive? How do you estimate the prospects for introduction of the mechanisms of so-called “new” electricity market?

- We entered the market under specific conditions, later the tariff for electricity production by our parks backdating of existing laws was reduced by 44%. Initially, this was interpreted as a temporary solution related to problems in the energy sector. Later, the temporary solution was made permanent, which caused significant damage to our investments. But this is a separate issue that is being resolved at international courts.

In speaking of the "new" electricity market, I may say that we have supplied solar energy equipment for over 15 years. During this time, markets of many countries went through certain stages: fixed high tariff to attract the first investors, decrease in the tariff for new facilities following a decrease in equipment's cost, and finally, holding of auctions to create competitive conditions compared to traditional energy.

Current Ukraine's pace is definitely correct and meets international practices. The most important idea is to create equal and competitive conditions for different players. Guarantees must be preserved for existing manufacturers and incentives created for new players, who show the lowest resource and equipment costs - will be able to earn. As a result, everyone will benefit. Those who have already invested will know their investments are protected and will be ready to continue operation in Ukraine. I have certain doubts that everything will be as successful, however, I remain optimistic.

Author

Grigory Petruk