Author`s name Pravda.Ru

Togliattiazot wasted no time to announce its accomplishments

An ammonia pipeline accident likely to become an alarming signal about the state of affairs in the company.

Alarming news came from the Ternovo district of the Voronezh region on June 21. It was said that ammonia pipeline Togliatti-Odessa, which transports the bulk of JSC Togliattiazot-produced ammonia, ruptured. As many as 800 people were evacuated. Reportedly, about five tons of deadly poison polluted the environment as a result of the accident. Several people were said to have been injured.

The day after the accident, independent environmental organization Green Patrol said that the maximum permissible concentration (MPC) of ammonia exceeded the norm 29 times just 150 meters away from the site of the pipe rupture. The emission led to serious pollution of air, surrounding soil and water sources. The accident caused irreparable harm to local flora and fauna: agricultural crops and the forest nearby died, whereas thousands of dead fish surfaced in the river of Sukhoi Karachan. The damage caused with the loss of crops alone was evaluated at 10.2 million rubles ($182,000).

At a meeting of the regional government, Governor of the region Alexei Gordeyev instructed to arrange a lawsuit against the owners of the ammonia pipeline and have prosecutors and supervisory agencies involved in the investigation of the accident. Russian President Vladimir Putin ordered to take the situation with the rupture of the pipeline under special control, as nearly 1,400 kilometers of the ammonia pipeline run through the territory of Russia - via Samara, Saratov, Tambov, Voronezh and Belgorod regions.

Interestingly, the accident happened amid press reports from Togliattiazot about the company's unprecedented progress. Reports mentioned the growth of production volumes, improved financial performance, multi-billion dollar investment in production and the growth of the average salary.

The situation does not seem so rosy, if we try to look into it in detail. Did the accident on the ammonia pipeline come like a thunderbolt from a clear sky, an unfortunate surprise, to which no one is immune, or was it the outcome of the policies of major shareholders - the Makhlai family and Swiss businessman Andreas Zivy?

Noteworthy, members of the Makhlai family have not appeared in Russia for about ten years. It has been repeatedly reported in the media that Sergei Makhlai (the sitting Chairman of the Board of Directors of JSC Togliattiazot) moved to the United States in 1994, where he subsequently became a US citizen. Vladimir Makhlai left his motherland in 2005 after a criminal case on charges of grand fraud and tax evasion, having eventually settled in London. Former general manager of the company Evgeny Korolev, suspected of large scale fraud, moved to London in 2013. As a result, it was the former head of the department for telecommunications, security equipment and automatic fire alarm systems, Vyacheslav Suslov, who was left to manage the whole factory. It remains unclear how the shareholders were administering a giant and dangerous production without visiting it once. Not a single meeting of the board of directors of the company has been held in Russia in the last ten years, media reports say. "They were gathering to Hungary, Switzerland and London, but not in Russia, where Togliattiazot is located. The company that deals with millions of cubic meters of explosive natural gas and thousands of tons of highly toxic ammonia was actually left without strategic and operational management." Therefore, the pipeline rupture could be a small part of the trouble that could happen. So far, it has been a matter of good luck.

Being one of the youngest companies in the Russian agrochemical industry, where some factories get ready to celebrate their 100th anniversary, Togliattiazot, as it can be seen from the news, can hardly be referred to as the most technologically advanced company. The inspection conducted by the Russian Technical Supervisory Authority in 2011, revealed more than 500 serious violations of the rules of industrial security. The inspection, conducted by the Samara interdistrict environmental prosecutor's office, confirmed the facts of discharge of untreated wastewater into the Volga River and the Saratov Water Reservoir. The wastes contained above-the-norm concentrations of nitrate ion, sulfates and other pollutants that are regarded as deadly to humans and environment. A dump site of hazardous chemicals was found in the immediate vicinity of the company.

What about production? Currently, the company uses only 60 percent of its production capacity. No wonder the factory produced the total of 2.28 million tons in 2012 with the estimated capacity of at least 3 million tons of ammonia a year. One can hardly be proud of this indicator. In recent years, the indicator has slightly improved to 2.9 million tons in 2014. "We are about to catch up with a standard" - this is a doubtful achievement, taking into consideration the fact that Makhlai and his team came to the factory back during the Soviet years. Even if the company reaches the production level of three million tons of ammonia a year, one can't but ask oneself a logical question: what were those people doing at Togliattiazot for 30 years?

However, the dynamics of the financial performance of the company is promising indeed. The company reported a net profit of 6.18 billion rubles for the first six months of 2013 (calculated according to Russian accounting standards). The figure was 2.5 times larger than in the first half of 2012. The company's proceeds for the period increased by 48.4 percent, having exceeded 20 billion rubles. For such a breakthrough, the productivity of Togliattiazot was supposed to skyrocket (it would have been a world record). Another option would be a multifold increase in the price of ammonia in the reporting period. However, international prices for the product have not changed significantly, whereas the equipment performance has remained more or less on the not-so-high level. One may therefore conclude that majority shareholders had to legalize a part of the revenue that would disappear before. This is evidenced by the paid dividend: 2.9 billion rubles ($51 million) was paid in 2011, in 2012-2013 - 3.9 billion rubles ($69 million) and in 2014 - 5.3 billion rubles ($95 million). All this became possible owing to the actions of minority shareholders and investigators, who claimed to have found fraudulent schemes at Togliattiazot.

As it has been repeatedly said, in late 2012, the Investigative Committee opened a criminal case into the transfer of hundreds of millions of dollars of unaccounted income of the company to foreign accounts. Investigators believe that Togliattiazot was selling its products at underestimated prices to trader Nitrochem Distribution AG, a 100-percent subsidiary of  Ameropa AG owned by Andreas Zivy, who also owns 12 percent of shares of Togliattiazot. According to investigating authorities, the trader, in turn, was selling the products of Togliattiazotall over the world at market prices. According to investigators, the bizarre financial fraud caused $550 million of damage to the company. In 2013, a power abuse criminal case was filed against Togliattiazot CEO Evgeny Korolev into the withdrawal of most liquid assets from Togliattiazot - a methanol production with the land on which it was located. In addition, as investigators believe, a state-of-the-art ammonia unit was illegally removed from the company too. The damage caused by the unlawful actions of the company was evaluated at the total of$1.5 billion. Evgeny Korolev was arrested in absentia and is wanted internationally.

In late 2014, other directors of Togliattiazot were arrested in absentia as well: Chairman of the Board of Directors Sergei Makhlai, co-owner Vladimir Makhlai, the head of Ameropa Andreas Zivy and Director of Nitrochem Distribution Beat Ruprecht. All of them, including Korolev, were put on Interpol's international wanted list. It is hard to predict how it will affect the work of the company.

It is not easy to believe the statements from Togliattiazot about 15 billion rubles (about $300 mln) that were spent on the modernization and reconstruction of Togliattiazot in three years. Wasn't this huge amount enough to maintain stable operations of Togliatti-Odessa ammonia pipeline? This is actually the only distribution channel for the Togliatti-based company. If it stops even for a short period of time, it may entail millions in losses.

The company is being managed dreadfully, which is evidenced by a blatant fact. Under the Russian corporate law, all joint stock companies are required to hold annual general meetings of shareholders before June 30. As of the end of July, no such meeting has been conducted. The annual general meeting of shareholders of Togliattiazot scheduled for May 24 has not taken place due to "lack of quorum" and was rescheduled for June 28. The June meeting of shareholders has also been disrupted for the same reason. Meanwhile, the powers of the Board of Directors expired on June 30,and Togliattiazot was left without the governing body.

In a nutshell, it is a lot easier, especially when you are thousands of kilometers away, to do the emotional talk about the frantic pace of development and "large-scale modernization program" than to take on the development of the erstwhile leader of the Russian chemical industry. If law enforcement bodies manage to finally establish law and order at the factory,Togliattiazot will once again become an effective company.