The state's value-added tax (VAT) refund debt to Ferrexpo Group companies has reached $25 million. This happened after sanctions were imposed on Konstantin Zhevago, whom the state considers to be the owner of Poltava and Yeristovo mining and processing plants. The company claims that Zhevago is not a shareholder in the companies and insists on tax refunds in accordance with the law .

Kostyantyn Zhevago became the owner of Poltava Mining in 2002 when he purchased it from VS Energy, owned by Russians Evgeny Giner, Alexander Babakov and Ukrainian Mikhail Voevodin. Today, Poltava, Yeristovo and Bilanovo GOKs are owned by Swiss Ferrexpo AG, which, in turn, is owned by British Ferrexpo plc. And Ferrexpo plc has Luxembourg-based Fevamotinico S.a.r.l. as its main owner. Zhevago is the main beneficiary of this company. Ferrexpo plc's investors also include such entities as BlackRock, BNP Paribas, JPMorgan, Saxo Bank, etc .

Ferrexpo Group has challenged the recent actions of the tax authorities and informed the government of the possibility of applying to international arbitration. At the same time, the company was forced to shut down two of its three pelletizing lines in late March due to a delay in VAT refunds. This resulted in a reduction in production and salary payments, a decrease in social spending and potential tax revenues to budgets of various levels. Investment projects at the enterprises have been suspended.

What further steps does the company plan to take to resume operations in the near future? What strategic priorities are being pursued and what market conditions are expected? This was discussed in an interview with LIGA.net by Ferrexpo Group CFO Nikolay Kladiev.

Delay in VAT refunds has significantly affected Ferrexpo's liquidity

In late March, Poltava Mining shut down one of its pelletizing lines. The company attributed this to the government's refusal to refund VAT to the company, as well as to sanctions against Konstantin Zhevago. How exactly is all this connected?

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Like any exporter, according to Ukrainian law, we have the right to file our VAT return. The government checks it and refunds the amount that it confirms to be refundable. Poltava and Yeristovo GOKs, which are part of Ferrexpo Group, received VAT refunds on a regular monthly basis based on inspections by the State Tax Service.

Unfortunately, after the sanctions were imposed on Konstantin Zhevago, the tax authorities suspended his VAT refund, citing them. The agency explained that Zhevago is a sanctioned person and the owner of Poltava and Yeristovo GOKs. However, legally, according to Ukrainian law, Zhevago owns neither shares in Poltava Mining nor stakes in Yeristovo Mining. Therefore, he is not legally the owner of these companies .

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