AMIC ENERGY: How war and Ukrainian law enforcement affected business

The war in Ukraine has had a substantial influence on the country's energy sector, producing a number of issues with fuel supply and pricing. Long lineups at gas stations became commonplace during the first few weeks of the full-scale invasion. Not all of them dealt with logistics issues, a scarcity of gasoline, and a labour shortage: in April 2022, only a third of the country's petrol stations were operational – 2.5 thousand out of 7.5 thousand.

AMIC ENERGY, one of Ukraine's leading petrol station networks, encountered numerous problems yet managed to endure.

LIGA.net talked to the company's shareholders, Günter Maier and, Andreas Sernetz, who also run the business. In the material, which is published with the support of AMIC ENERGY, we talk about the situation around the company's Ukrainian business, the consequences of Russian aggression on the gas station chain, and assistance to Ukraine in the war.

How the full-scale invasion affected AMIC ENERGY

Tell us how the war has impacted AMIC ENERGY's business in Ukraine. How much damage have you incurred? How many assets have you left in the occupied or frontline areas?

Günter Maier: Before the full-scale invasion, 227 stations were operating in Ukraine. Currently, 200 of them are in operation. As a result of the Russian invasion, the business suffered losses of about €30 million. 36 stations were damaged, in particular, by the occupiers' air strikes. Among them, one oil terminal in Borodyanka was damaged in February 2022.

Andreas Sernetz: Currently, 19 stations are located in the temporarily occupied territories. We are restoring all the stations that are located far from the front line. We have already restored 17 stations. We have plans to rebuild the station in Vorzel.

What is the origin of the petroleum products that AMIC ENERGY sells at its stations in Ukraine?

Günter Maier:  Currently, most of the fuel comes from Lithuania, Poland and Romania.

In the first days of the full-scale invasion, the company focused on resuming fuel supplies. The transportation route that usually delivered fuel – from Lithuania through Belarus and directly to Ukraine – was not working. Therefore, the focus was on restructuring the logistics and the fuel depots, which our colleagues in Ukraine did very well. 

Company's financial results and forecast of oil products prices

What are the financial outcomes in Ukraine for the last year?

Günter Maier: The company is proud of the results for 2023. It was much more successful for us than in 2022: we had a business growth of about 20%.

Currently, the situation with the company's Ukrainian business is stable, although the cash flow situation is certainly not as good as it was before the war.

In terms of revenue, now we have about 25% less than before the war, but this is just the situation in Ukraine. We are an international company, that is presented in different countries, so collectively we always have a positive cash balance, which allows us to cover our obligations promptly, and most importantly: pay taxes and salaries to all our employees.

A lot of gas stations had generators way before the full-scale invasion, therefore they could operate even during power outages at the end of 2022 – beginning of 2023. We have additionally equipped around 40 more stations with new generators, so the entire network is ready for emergency outages and has backup generators in case of force majeure.

What are your expectations for the dynamics of petroleum product pricing in Ukraine in 2024?

Günter Maier: We are not experts on the Ukrainian market, as we do not live here. I believe that fuel prices are likely to remain at about the same level. 

However, the market is being tested, as transportation logistics are still a challenge. We are making more efforts than before when you had more centralized fuel storage and it was transported by rail. Now it is different, it is actually transported by trucks and brought to the actual station.

The investigation of the Economic Security Bureau of Ukraine — how the company comments on it

AMIC ENERGY is often associated with Russian capital. In 2022, the Economic Security Bureau of Ukraine (ESBU) seized some of the company's real estate because of this. How far along is the ESBU's investigation? And what can you comment on it? 

Günter Maier: I should start by saying that this is a so-called pre-trial investigation. In other words, there are no charges and no court proceedings. It is a pre-investigation, as it was from the very beginning, and its status has not changed since the summer of 2022. AMIC Energy's assets were temporarily frozen for security reasons. The main theme of the accusations was the assumption of non-payment of taxes. During all this time, we have been trying to cooperate in a civilized manner with the ESBU and the Ukrainian authorities on these issues.

At the end of last year, the Ukrainian tax authority conducted a comprehensive tax audit covering compliance with tax, currency, and other legislation for the period from 2017 to June 2023. As for the calculation and payment of the unified social tax, the audit covered 12 years, which is even longer than our company has owned these assets.

None of the ESBU's assumptions were confirmed. 

In other words, the results of the tax audit show that there were no significant systemic violations, the company did everything right and strictly complied with the law.

There were two other components to this case, which I have to highlight. One of them was the payment of dividends and the circumstances of their taxation. But we never paid out a single euro from Ukraine because every time we made money, we invested it in the network, and it's very easy to see and very easy to prove. I can guarantee it, and everyone can see it from the financial statements. Also, the tax audit did not detect any violations in this area. 

Another public aspect of it was that AMIC ENERGY is allegedly connected to Russia. This is not true. We have no private or corporate ties to the Russians. The only connection is the historical fact of buying assets from a Russian company in 2014. However, it is important to note that although it was in the public "halo" of the case discussion, it was never a legal component of the case, which is exclusively about tax issues.  

As soon as we complete all the necessary formalities, we will submit the tax audit materials on all issues with our additional explanations to the ESBU so that they can process them on their part. We hope that after finalizing the results of the tax audit, the ESBU will be convinced that their assumptions have not been confirmed and will close the case.

What are your thoughts on cooperating with Ukrainian law enforcement agencies?

Günter Maier: We have certain questions about the consideration of our petitions and the presumption of innocence. The law enforcement system has many institutional problems, but Ukraine still has procedures and institutions that will allow investors to move the case into a civilized direction. Unfortunately, our work with the ESBU is a bit one-sided; we provide evidence and documents, but the company has not received any meaningful response from the ESBU. There has been no real news in this case since 2022.

Ukraine is a candidate for membership in the European Union, and the observance of equality before the law and the rule of law in everything should be among the top state priorities. 

Assistance to Ukraine in the war, attitude to anti-Russian sanctions

How does AMIC ENERGY assist Ukraine combat Russian aggression? 

Günter Maier: AMIC ENERGY has been supporting the Ukrainian Armed Forces since the beginning of the Russian full-scale invasion. The company has donated about 400,000 liters of fuel, personal protective equipment, power banks and drone control systems to the Ukrainian Armed Forces, as well as other military units, the police and the Security Service of Ukraine. In total, we have provided about 200 drones to the Ukrainian Armed Forces for reconnaissance.

How many of your staff have been mobilised, and do you have any programmes in place to help veterans find work and adapt?

Andreas Sernetz:  A total of 103 people from the company were mobilized, two of whom were killed and three are missing. The company financially supports the recovery of wounded mobilized employees.

In your opinion, are the sanctions against Russia justified? What are your forecasts for the EU's sanctions policy?

Günter Maier:  The sanctions are, of course, fully justified. There is no doubt about that. I think they are effective and will have an impact on Russia, but it will take time. The Russian people will feel it. I hope the sanctions will be a factor that will accelerate the victory of Ukraine.

Our company also supports the idea that the blocked Russian assets should be used to rebuild Ukraine. This would be a logical step, in my opinion. Sanctions alone are not enough.

"Small children and babies who live, love and play here. How can we dare to be threatened by coming here?"

What recommendations would you give to investors looking to invest in the Ukrainian market?

Andreas Sernetz: Of course, the Ukrainian market has huge potential. It would be a mistake to miss it. But you need a deep analysis, including a risk analysis, to choose how to invest and think about further business expansion. I would advise investors to start gradually and invest more when there is confidence in security.

The situation with the law enforcement agencies, such as ESBU, is also important for the investment climate in Ukraine. Especially after the head of the Bureau has has been replaced at least twice in the last year. We all see that this is a very important authority, but, unfortunately, things are not going well with it. 

Do you feel secure staying in Ukraine during the war? What are your thoughts on the future of our country?

Günter Maier: I would like to answer with a quote. One of our colleagues comes here regularly. He said: "Small children and babies who live, love and play here. How can we dare to be threatened by coming here?" Right?

I see that Ukraine is moving in the right direction. I believe in your victory and the development of the country. Furthermore, I predict rapid economic growth and impressive reconstruction after the war is over. It is important and pleasant for our company to support Ukraine on this path.