Who bought the Kyiv-based Soviet electronics powerhouse, and why

Just yesterday, Ukraine’s state property fund held an auction for the sale of the Electronmash plant. The winner is Incom Rent LLC, with a bid of UAH 120.8 million (USD 3.3 million), which is almost twice the starting price of UAH 61.2 million.

Incom Rent is owned by Liudmila Yaroshenko and Oleh Mahalias.

Mr Mahalias is a long-time business partner of Ihor Balenko, a member of the Kyiv city council from the European Solidarity party and former owner of the Furshet chain of stores. In particular, they co-founded Group Centre LLC back in 1999.

The Electronmash plant was one of the giants of the Soviet Union's electronics industry. It developed the first personal computers in the USSR; produced electronic computing equipment, household gas metres, and power supplies for urban electric transport.

In addition, Electronmash produced electronic remote control boards for equipment used in the aftermath of the Chornobyl nuclear accident. When Ukraine proclaimed independence, Electronmash went on to produce cash registers.

However, the company failed to find itself in the new market conditions. In recent years, production has been halted, and the company could earn money by only renting out its premises.

According to the state property fund, Electronmash turns no profit and has overdue loans of almost UAH 21.4 million. In many respects, its fate resembles that of the former Bilshovyk defence plant, which was sold to businessman Vasyl Khmelnytsky in 2021.

The only valuable things left at Electronmash are likely Olena Hniedash's stained-glass windows in the plant's cultural centre.

In September 2021, the Kyiv city council included them in the list of cultural heritage sites, meaning a ban on reconstruction and major repairs. Then, in the autumn, the cultural centre caught fire several times, but the stained-glass windows remained almost undamaged.

As in the case of Bilshovyk, the new owners’ main value is not the production of electronics devices but the land on which the Electronmash workshops are located. The complex of Electronmash covers 13.76 hectares of land around Kiltseva Road.

This land is located in the Sviatoshynskyi district of Kyiv and in the village of Petropavlivska Borshchahivka, in the Kyiv region. The ‘bonus’ is that the new owner gets a recreation centre in the village of Sokolivka, in the Chernihiv region, and a plot of land in the village of Dzvinkove, in the Kyiv region.

Currently, the Electronmash land is allowed only for ‘industrial use’, meaning nothing but industrial enterprises can be built there. However, the Kyiv city council can change the designated purpose of the land under the former plant’s workshops.

And the political opportunities are in place.

Mr Balenko, whose business partner bought the plant, is a member of the Kyiv city council and a member of the European Solidarity faction, which, together with the UDAR faction, has a majority in the council.

Moreover, Mr Balenko sits in the council’s standing committee on urban development, architecture and land use, adding to the new owners' influence. It is this committee that has the power to propose – and enact – changes in land use in Kyiv.

This might be Mr Balenko’s second attempt to acquire or have a stake in the Electronmash land.

Early last year, Ukrainskyi Image, a company which, according to Forbes, is linked to Mr Balenko, wanted to buy the plant, too. At that time, the bid was UAH 430 million. Mr Balenko denied any involvement in the purchase. However, the auction was declared null and void.

Mr Balenko had been interested in the land around the capital’sKiltseva Road for a long time. Together with his partners, Mr Mahalias and Oleksandr Sokor, he was involved in the strange acquisition of the warehouses at 4 Kiltseva Road, located close to Electronmash. Later, the Promenada Park shopping centre, owned by Mr Balenko, was built there.

Therefore, his desire to gain control of Electronmash is not surprising. This ownership would allow building a whole series of shopping malls – or a large neighbourhood.

Mr Balenko’s business partners were thorough in how they dealt with the purchase of Electronmash.

While Inkom Rent won the tender, the second place with an offer of UAH 100,000 less was by BSK Group, owned by Oleksandr Sokor. Mr Sokor and the auction winner, Mr Mahalias, are co-founders of Plates 2 LLC, and Mr Balenko is a beneficiary of Realty City LLC, where Mr Sokor is director.