Ukraine is a fantastic opportunity for investment – Thomas Sillesen

Danish businessman Thomas Sillesen speaks to Bohdan Nahaylo about alternative energy, business environment and that Ukraine could easily have 7-8 percent growth GDP per year

Show hosts

Bohdan Nahaylo

Ukraine is a fantastic opportunity for investment – Thomas Sillesen
https://static.hromadske.radio/2019/01/hr-uc-19-01-27.mp3
https://static.hromadske.radio/2019/01/hr-uc-19-01-27.mp3
Ukraine is a fantastic opportunity for investment – Thomas Sillesen
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Hello and welcome to this week’s episode of Ukraine Calling. I’m Oksana Smerechuk for Hromadske Radio in Kyiv and we’re bringing you our feature in-depth interview followed by some new music from Ukraine.

In this week’s interview, our Bohdan Nahaylo talks to Thomas Sillesen on his experience with developing alternative energy sources in Ukraine, such as wind power. That will be a little further on, but first of all, this week’s news.

Feature interview: Danish businessman Thomas Sillesen speaks to Bohdan Nahaylo about alternative energy for Ukraine

Nahaylo: I am very happy to have as my guest on this week’s program, a representative of a Danish company very active in Ukraine. It’s Thomas Sillesen, Chairman of the BIIR group, which stands for Bojer Innovative Engineering Advisors. He is going to tell us a little bit about what they actually do here, but I would like for us to use this opportunity, Thomas, to talk more broadly about the challenges of getting alternative ecological types of energy for Ukraine. So welcome to the program.

Sillesen: Thank you Bohdan it’s a pleasure being here, I’m happy to be invited. Just to give your listeners a brief introduction to our company, we started 10 years ago in Denmark. We mostly focus on renewable energy. We have in Denmark about a 150 engineers working on wind turbine designs. We are a specialist company to which people come to seek help when they design wind turbines. So, our customer database is basically are the largest wind turbine companies in the world. The two largest are our main customers. Well, the three largest, actually.

Nahaylo: And when did you get involved in Ukraine?

Sillesen: About 5 years ago. And it was actually a side project, because our group consisted of many companies. We have plastic tool manufacturing factories in Denmark and Malaysia. We have companies for renovating oil rigs, so we have a broad spectrum of businesses. But a client approached us asking us to do software development and we realized, from a friendship I have with a Danish IT entrepreneur, that we most likely should use Ukrainians.

Nahaylo: So, you were initially involved on the IT side, that was the opening you used.

Sillesen: Exactly

Nahaylo: And that’s a scene that is really booming in Ukraine

Sillesen: For sure it is. The funniest thing was that being an economist, I checked the cost of wages in Ukraine and compared to the offers of I got of IT companies in Ukraine, and I realized that there was a mismatch because the official statistics were much lower than the offers I got. I realized later that IT was a relatively high price product in Ukraine. Not knowing that, I decided to find somebody myself in the country that could help us. I knew some Russians who knew a girl in Lugansk, so we ended up in Lugansk. I took off with a friend of mine, and my knowledge of Ukraine was zero, I had never been in Ukraine before, I had not really cared about the country, so I came to Lugansk, or should I say Luhansk (Ukrainian form) as you would say nowadays.

Thomas Sillesen and Bohdan Nahaylo Hromadske Radio

Nahaylo: What were your first impressions?

Sillesen: It was fantastic, I loved the city, the people were so kind and it was so nice. Of course it was very different from Denmark but in reality, even though the marshrutka (mini-buses providing local transportation), or whatever you call them, looked like sh*t they functioned and I could use them, and it was like: “Yeah, OK, it works”. The girl found us two guys, and one of them still works for us now, so it was fantastic. Having that I came home to my two partners in BIIR and I told them “guys we should actually use Ukrainian engineers”. And they are, like me, pretty dynamic so they said yes.

Nahaylo: Were you approached from within Ukraine for ecological energy opportunities, or is it something through exploration that you offered yourselves?

Sillesen: When we started engineering work in Ukraine, it was because in Denmark we were losing orders to Indian companies who could offer their services cheaper than we could. And we wanted to have an engineering base in Ukraine that could make us competitive with Indian companies. The craziest thing is that last week I was in Las Vegas talking to a potential customer and we were talking about outcompeting Chinese engineers. So actually, you know, we have an edge here. But first of all, we started off in Luhansk. It was pretty straightforward, and then came the war and we had to move. We moved to Odesa because I thought the war would be over in two months: I was pretty optimistic. I was thought my staff should be in a nice place in the summer of 2014. As we all know, it has all lasted a lot longer. So we continued to grow in Odesa and we’re still there, we are happy to be there.

Nahaylo: You’re talking about the IT component, the engineering side, or both?

Sillesen: That’s the engineering. We have now about 140 engineers, making mechanical designs for wind turbines and we have other customers. We have about 20 in software and electricity doing more IT related stuff

Nahaylo: Where are the main locations where the wind turbines are employed? Where are the growth areas?

Sillesen: I mean we are strategic partner for Vestas in Denmark, so they use us extensively for designs for wind turbines. You can say we are in the basic designs of the turbines before it actually is a product, we are involved. We will do the design of the nacelle, which is the house you see at the top. And we would help with propellers.

Nahaylo: What are the main areas of Ukraine, is it the South, or the East of Ukraine? Where are they being employed?

Sillesen: Once the wind turbines are designed, companies like Vestas, Siemens, whoever we work for, will get orders. And orders are normally based on analysis of areas where you have a good wind load, where you could have a profitable wind turbine. It could be in the South, it could be in the sea, it could actually be somewhere…

Nahaylo: In areas that are open, basically? What we used to call the Steppes.

Sillesen: Exactly, you need to be in the areas where you don’t have a lot of turbulence because that will make the production less profitable. You can say Ukraine is open for renewable energy and that there is no doubt about it.

Nahaylo: Can you give us an idea about the scale of the development from zero to a hundred, Is it an area that is growing quickly? We see that the EU is involved in this area now and providing Ukraine with grants. It seems to be a very topical issue.

Sillesen: It is a huge industry and it’s probably the largest industry in Denmark because Siemens and Vestas both have their headquarters in Denmark. In certain situation there days during the year when all electricity is supplied in Denmark by wind turbines. So, in reality it’s now a huge thing in our country.

Nahaylo: For the listeners, please explain what the wind turbines are.  Are they giant windmills?

Sillesen: Well, for example, we are very much involved in the design of the Vestas V164, which is the world’s largest wind turbine. It’s an 8-megawatt wind turbine, so it’s a huge one. It is so huge that if you lay it flat and you have the propellers circulating, like, flat on the earth, it would cover the whole of Wembley arena.

Nahaylo: Oh, that is huge.

Sillesen: It is a huge wind turbine, yes. And therefore, it is a huge engineering task where you have many thousand guys working on it. So, it’s very impressive.

Nahaylo: And who is paying for the installation of these turbines? Is it Ukrainians themselves, the government, is it private, is it businesses?

Sillesen: Normally countries, including Ukraine, have some kind of incentive to put up these things. You can say they are not as cost effective as having a nuclear power plant for instance. But on the other hand, you have, how should I put it, the feeling that it’s green, that it’s renewable. You also have the strategic consideration that you cannot place nuclear power plants all over the place.

Nahaylo: And we have, you know, the horrible memory of Chornobyl here, which doesn’t exactly make the idea of new nuclear power plants popular.

Sillesen: It’s also a memory for Danes. I was a young kid when it happened (the Chornobyl nuclear plant accident in April 1986), and I still remember it.  It was a huge thing in Denmark too.

Nahaylo: So here in Ukraine we’ve got the challenge not only of avoiding reliance on the obsolete and maybe still, in some respects potentially dangerous for the long-term, nuclear power plants, but also on the old industries: coal, on oil, the traditional, what do we call them, carbon energy sources.  You’re providing a real alternative to it, which we see happening elsewhere. Where? In France, Germany, in other countries, that are increasingly making this transition.

Sillesen: Yes, you see it in many places in Europe. It is also evident in Spain, Portugal, and England, and so on. It’s just a matter of countries realizing that relying on one source is not very healthy. You know, because you have the situation with the gas supply from Russia. So in order to be strategic and independent, it’s wise to have a broad mix of supplies.

Nahaylo: So, there’s also this other factor, that apart from the economic side, there’s the political element, the need for a safety net, a safeguard if you want, in times of political complications. But tell me, in terms of the ratio, the proportion of the Ukrainian content in the business that you do — I have no idea what it is — is it 5 percent, 2 percent, 10 percent?

Sillesen: It’s around zero. You can say it like this: Our office in Odesa only supply our Danish office with help, at the moment. And Veronica, whom I’m with this week, who is our manager in Kyiv, and I are setting up a sales office because we want to also target Ukrainian businesses because we have a lot of know-how we can transfer it to Ukraine. We would be happy to have customers. I think that you can say that our core business is helping really big companies, but we would also be happy to help small one. Also in in Ukraine you have to have the maturity. We can say, “Now you have the maturity to set up the wind turbines.”

Nahaylo: Is the political will there? Is the interest there?

Sillesen: The political will is super simple, it’s just a matter of getting the money, the incentive to, to know you get some kick-back per kilo that you produce off your wind turbine. And your country is supplying that so that is step one.

Nahaylo: But I’ve suggested that Ukraine seems to be getting grants, incentives if you want in simplified terminology, from the EU and others to invest in alternative sources of energy.

Sillesen: I think that from the European perspective all of us have an interest in Ukraine becoming truly independent without having to rely on, or be subjected to force from other countries in regards to energy supply, so it’s a strategically important thing for your country to be able to stand on its own feet.  So I think the IMF, EU will support that very strongly. Our government in Denmark will do the same. Denmark has energy advisors helping your energy ministry while we speak, sitting here in Kyiv, I know them very well.

Nahaylo: And have you seen progress being made in the last 5 years?

Sillesen: I think your country has changed a lot, yes. But I think it’s how it is in life, that if you are in the middle of something it’s difficult to see it, but when, like me, you come back and forth all the time, you see changes all the time. I think your country is growing economically and also in the quality of buildings, and so on. But, I would say though that your country could definitely do more. It’s like when we had what we call the energy crisis in Denmark, which was back in the 70s when the oil producing countries decided to raise prices dramatically. At that time I was very young and living with my mom and dad. The house we had had only one pane of glass in the windows, which is actually often still the case in Ukraine. My father responded by putting plastic in front of all the windows to provide better insulation. And it started a trend in Denmark which has gone on to this day on how to be energy competitive. Our country is relying a lot on it because until we got oil from the North Sea and then started making wind turbines, we had to buy everything from outside. So, reducing cost, by being efficient, was very important. And you see in Denmark today that many houses are being built of a quality that basically you don’t need to heat them because they are so well insulated.  They will retain the same temperature all day, all year.

Nahaylo: I would like to remind listeners that I am talking to Thomas Sillesen, who’s the chairman of the BIIR Group from Denmark, a leading, cutting-edge Danish engineering consulting company, increasingly active here in Ukraine. My question now would be more about the way you operate. I’ve been doing a little bit of homework and I’m quite impressed about the quality of the staff, the lengths that you go to ensure that they are of the right standard, have the right training, and they’re team players. Yes? But, one other thing that I noticed, that you pride yourselves on being creative, that you’re up for any challenges.

Sillesen: Thank you.

Nahaylo: But, how do you sustain this, how do you guarantee this? Is it through close personal connections between staff, mutual trust and support, or how do you cultivate this ethos?

Sillesen: You see, Danish business culture is very different from Ukrainian. If you come to our Odesa office, the lady we have here, who is an outstandingly good director, has made it function very in a very precise and orderly manner. If you come to our Danish office, you will feel like it’s anarchy. You will come in through the front door, and there will be nobody there. You will look for a cup of coffee, you can’t find the coffee machine. You’ll go up two flights of stairs before you find someone working there and they will be not have time to talk with you because they are so focused on their task. Our culture in this respect is so different, and does it work? It definitely does…

Nahaylo: But why is this? Because of the degree of autonomy and trust that exists?

Sillesen: You know, when we started our company in Ukraine, we were faced with an unexpected challenge. Our initial plan was that I should be director, and a national staff member called Dinara, should be the manager of the office. But we realized I could not get a work permit before the company was established, so we had to make her director. Obtaining my work permit took also took a long time. We had a situation when we had to send about 2 million hryvnias to open the office and I talked with Jonas Bojer, my partner, and I said, “Jonas, you know, Dinara needs 2 million hryvnias.” And he said, “Yeah, I’ll send it to her, she looks trustworthy.” So, we sent it to this young woman we had met only two times in our life. We sent 2 million hryvnias to a bank account which she has full control over. I do not think a lot of Ukrainians would do that.

Nahaylo: No!

Sillesen: But that is typical of the Danes. We believe in people until proven wrong.

Nahaylo: But you have had some legal challenges here, and some problems. But I hear that you have been successful in getting justice done without resorting to the usual way that people tend to do this, you know, through bribes and what-not, in a system that’s far from perfect.

Sillesen: It is far from perfect, but actually I can tell you, just recently — just two weeks ago, we won a court case against the [Ukrainian] Pension Fund again, and they have now to pay us one million hryvnias. So, but they didn’t follow the law.

Nahaylo: How long did that take, to get that victory?

Sillesen: It’s the fourth time we took them to court. We won the three previous times, and now we won this case as well.

Nahaylo: In Odesa?

Sillesen: It was in Odesa, yes. Of course, we expect them to appeal. They have done so before, but once we appeal they normally stop, so we’re pretty confident. We’re not even publicizing it, you know. This is the first time you hear, because it’s not something we go to the press with. Denmark, is the most non-corrupt country in the world, in general. And you can tell. It means that we are so used to…

Nahaylo: Zero-tolerance!

Sillesen: Zero-tolerance! No corruption! I can give you many examples. For instance, we had the huge Athea scandal, and in reality it was only about some guys getting a cheap laptop, getting a nice dinner in a restaurant, and one of them got a trip to Dubai. But it was headline news in all the newspapers for months, you know. I imagine that if you had a scandal on that level in Ukraine nobody would even notice.

Nahaylo: No, indeed. So there is a lot for you to teach us, and for you to convey to us. But what have you learned from Ukraine working in this environment which provides such opportunities but has its challenges and difficulties? Are there any lessons that you have taken from Ukraine?

Sillesen: I would say this – I love Ukraine, I think that sounds enough already. But going deeper, I would say one of the things I’ve noticed is the social understanding you have of each other, the care you have for each other. It impresses me to a level that I nearly tears in my eyes telling you this. It’s something outstanding. When we have a new staff member and I see what the others in the office will do to help him or her, how much they are prepared to help them with from their salaries, it’s fantastic.  I love that side. It’s so good. There are areas where you can teach us a lot. On the other hand you know the principles of justice and fairness taught to you by your mum and dad when you were kids, but growing up you realize your society is not like that and but society should be like that. And there we Danes are a little bit stubborn because we are only 5 million out of all the people in the whole world because we say we are right on this point so will uphold this position to the end. When we won our big case in Odesa against the raiders’ attack I phoned my partner and said “Jonas we won!”

Nahaylo: What was this raiders’ attack? Can you tell us?

Sillesen: Some person had not paid the mortgage for ten years and the building had been taken away from him before it was sold to us. Then on the night when it was already known that we had taken over the ownership he calls us and says he was a victim of fraud by the bank, that they had stolen the building from him. It was so pathetic and so crazy that I could not believe it be true. So, I took it up with President Poroshenko on 17 April in Copenhagen when he was there last year. t I was confident we would win in the courts because the entire case was so absurd. But on 17 August we lost the building in the first court hearing and I was shocked. I had to pull myself together and start fighting anew, until we I won in Odesa appeal court in Odessa.

Nahaylo: I suppose the current mayor Trukhanov who is a very controversial figure, was involved.

Sillesen: I don’t know. I think there are a few guys who clean the streets in Odesa who were not involved, but anyway…

Nahaylo: But that’s a very important victory, Odesa with this particular mayor, who has been exposed quite a few times by the Kyiv Post and others, and then the whole previous story with Saakashvili reportedly battling corruption in the Odesa region making the headlines, and so on, you seem to have been in a very difficult place, but to have made it work for you. Okay, time is running out. Tell us a little bit more about your view, your assessment of the investment environment. Has it improved? Or is it still difficult? Do companies like yours have the confidence to invest in Ukraine?

Sillesen: We were naive when we came here, because we came with this Danish perspective. So we had not ever heard about things like this when we arrived. Now we have experienced it, but we also know how to win. I would say Ukraine is a fantastic opportunity for investment. But, as I have pointed out to many politicians in Ukraine, the big problem is that the politicians in Ukraine should understand that the first whom they have to defend are the foreign investors. Because locals will invest; they know how the system works. But if you want to attract foreign investment, you have to have a zero tolerance against attacks on these companies. If that was really implemented by this government, or the next government, it would be fantastic. Because then people would, you know… If you’re standing in Denmark, there’s 192 countries to invest in, so why Ukraine? It has potential, but you also have risk. If you can reduce the risk, there would be much more investment. And that will make your country grow. I think, realistically speaking, your country could easily have 7-8 percent growth GDP per year. And if you had that for a ten years’ period, you would be twice as rich as you are today, which would mean a substantial change in the country. It would also be substantial for one of the features you Ukrainians don’t like — the oligarchs, because suddenly all their business would have double-as-rich customers. They would earn more, even if they had to be more honest. So it’s the right path to take, to start with foreign investment. And that’s what I always say.

Nahaylo: I’m looking at the elections without commenting on the candidates. Is there anxiety about potentially instability? Or is there confidence that life will move on in the right direction?

Sillesen: I think you are the path; you are going the right way. I don’t think it really matters, because your population is so strong that if somebody tries to sidetrack this, it would produce a lot of noise. It’s a little bit like starting a snowball. You started the snowball in 2014 and it’s just getting bigger and bigger. And eventually that will change your country for sure, I have no doubt about that.

Nahaylo: OK, two final questions then. Short and longer-term plans here, and objectives of your company, BIIR, a major Danish company, and I’m talking to the chairman here, Thomas Sillesen.

Sillesen: We have three products which I’m very much focusing on. The first is of course that we want to expand our current business, hiring more engineers. We have very good cooperation with some universities now who educate students who will fit our business. Number two is that we have a company called Techno Tool which has factories in Malaysia and Denmark; we want to open a factory in Ukraine. Actually we want to close down our Malaysian factory, and focus on Ukraine. The final thing which is the one I’m mostly focused on is that I want to build a village for our staff. I believe that we have made probably the best office in Ukraine you can have for staff, but we also want that when they come home from work, they live in a very nice place. And frankly speaking, you have a lot of not very good apartments. So our idea is to offer this to our staff, and I think it’s an interesting project because now we’ve been talking a lot about renewable energy sources. It gives us a chance to show Ukraine how you make buildings to Danish building standards, with zero energy use, and so on. So these are our main goals for the new year here in Ukraine.

Nahaylo: Well, how generous and how progressive. A final question I always ask: messages, wishes, a last minute thought to share with the audience? About you in Ukraine, your company, your wishes for this country, your wishes for your business? Or maybe just a word of advice to young businessmen that are listening to you?

Sillesen: I think the biggest problem I see in Ukraine is people do not believe in their country. I see that people are moaning despite the fact that the economy has gone forward now for nearly three years. I think your country is making impressive steps forward, considering the conditions you are in, which is basically a small-scale war; and your biggest “partner” has kind of blocked you. So I think that your country is doing much better than the people here really know, but Ukrainians are so used to moan and groan that they don’t understand it. And this is what I find depressing, because otherwise I think Ukraine is just fantastic.

Nahaylo: Well thank you very much for those very encouraging, inspiring words. I’ve been talking to Thomas Sillesen, the chairman of the Danish BIIR Group, dealing with alternative energy sources, engineering consulting, now also in plastics and IT work here. And clearly somebody who can bring a lot to this country. Thank you, Thomas for being here.

Sillesen: Thank you Bohdan for inviting me.

NEWS

Passage through the Kerch Strait free and monitored 

Russia has agreed for France and Germany to monitor shipping traffic in the Kerch Strait. Russian Foreign Minister Sergei Lavrov said that German Chancellor, Angela Merkel, had asked President Putin for permission to send German specialists to the strait «over a month ago» and also had requested French observers to join the mission. «This can be done today, tomorrow, at any time,» Lavrov stated.

Meanwhile, German Foreign Minister Heiko Maas said that it is widely acknowledged that ships can pass through the Kerch Strait – a body of water shared between Russia and Ukraine. Earlier, Ukraine had imposed martial law in November, citing the threat of a full-scale invasion after Russia had captured three of its vessels in the Kerch Strait.

More sanctions

In February, European Union foreign ministers will discuss imposing more sanctions against Russia over its stand-off with Ukraine in the Azov Sea. The bloc will also deliver a demarch to Moscow as early as next week over Russia’s continued detention of 24 Ukrainian sailors captured during the incident in November.

EU members that have long taken a hard line on Russia, countries such as Lithuania, Sweden, Britain and Poland, have now been supported in proposing more sanctions by Denmark and Slovakia. They argued that pressure from France and Germany on Moscow to free the servicemen has so far not borne results.

Tymoshenko launched her campaign

On Tuesday, former Ukrainian prime minister Yulia Tymoshenko officially launched her bid for the presidency, with polls showing her as the frontrunner for the post. She made this announcement at a session of her party, Batkivshchyna. The 58-year-old, who is a highly divisive figure in Ukrainian politics, has been active on the Ukrainian political scene for the past two decades, coming to international prominence through her role in the 2004 Orange Revolution.

Speed up

IMF Managing Director Christine Lagarde said she had urged Ukraine’s President Petro Poroshenko to proceed with reforms more quickly, while reiterating that the International Monetary Fund was ready to continue supporting Ukraine. She stated that she had highlighted the urgency for Ukraine to accelerate reforms and transition to stronger growth, which is needed to improve people’s living standards in a sustainable manner.

Sentence for Yanukovich

А Ukrainian court this week found ex-President Viktor Yanukovych guilty of high treason and sentenced him in absentia to 13 years in prison for asking Russia’s Vladimir Putin to send troops to Ukraine.  In 2014, Yanukovych was ousted as a result of an uprising after his attempts to quell it had failed. He then fled the country and asked Putin to send troops to Ukraine to help restore control over the country. Judge Vladyslav Devyatko in Kiev’s Obolon district court stated that «Yanukovych committed a crime against the foundation of Ukraine’s national security,»

$200 million for Ukraine 

Horizon Capital, a U.S. private-equity firm investing in high growth and export-driven companies in Ukraine and the region, has closed its third fund, the Emerging Europe Growth Fund, at $200 million hard cap, surpassing its $150 million target. As the Horizon Capital’s Emerging Europe Growth Fund received strong backing from existing and new investors, attracted by the value, fast growth and opportunities in the Ukrainian market, and is the largest private equity fund raised for Ukraine in a decade.

MUSIC

Yura Samovilov released a new single with his new group Hurtom on his birthday last week. It’s called Кратери which means Craters. He said that the best gift for his special day was to share his new sound.

Next week we’ll be back with more commentary on events in Ukraine with interview host Bohdan Nahaylo. We would be happy to receive any feedback from you. Write to us at: [email protected]. This is Oksana Smerechuk in Kyiv. Thanks so much for listening.

Interview transcribed by Malika Navruzova, Caitilin O”Hare, Leah Wagner and Alexandra Wishart. News by Ira Zolomko. Music selected by Marta Dyczok. Sound engineers Andriy Izdryk and Dmitry Smiyan. Web support by Kyrylo Loukerenko. E-mail distribution Ilona Sviezhentseva.