Halushchenko’s ministry has merged state-owned Regional Power Distribution Companies into private hands. Who will receive billions of dollars in revenue?

Halushchenko’s ministry has merged state-owned Regional Power Distribution Companies into private hands. Who will receive billions of dollars in revenue?

IIn December 2023, six regional power distribution companies (oblenergos), where the main shareholder is the state-owned company Ukrainian Distribution Networks (UDN), changed the composition of their supervisory boards (SBs). The majority of members in the five oblenergos (with the exception of Mykolaivoblenergo) were elected at the request of minority shareholders.

The state majority owner of UDN, controlled by Energy Minister Herman Halushchenko, voted in favour of transferring power to minority shareholders in all cases. This is a considerable piece of the pie - in 2022, the total revenue of the six state-owned regional power distribution companies was UAH 14 billion. Only Rinat Akhmetov’s group had more - UAH 22 billion. Surkis, Hryhoryshyn, Kolomoiskyi and others earned much less.

Rostyslav Shurma, the energy deputy head of the Presidential Office, has already publicly denied Galushchenko’s deal. And the market has been filled with rumours about possible beneficiaries of the "re-privatisation" of regional power companies.

The private minority shareholders who seized power in the supervisory boards of state-owned oblenergos are mostly employees of the oblenergos themselves, owning a small number of shares at the level of 0.00001%. These are, most likely, shares that were distributed to people during voucher privatization in the 90s of the last century. But these minority shareholders delegated difficult candidates.

For example, an ordinary engineer of Ternopiloblenergo nominated people who had previously represented other shareholders in Mykolaiv and Cherkasy oblenergos to the supervisory board of her company. The corporate secretary of Cherkasyoblenergo nominated a representative of Energoatom to the SB. The clerk of Khmelnytskoblenergo proposed to elect two members of the supervisory board of Kharkivoblenergo to the SB of his company.

What’s the point? Now the newly elected supervisory boards have every right to appoint the heads of the boards of oblenergos, who already manage the operational activities of natural monopolists. It depends on them which private structures the oblenergo will work with to connect customers and who will order repairs of power lines worth tens and hundreds of millions of hryvnia (here is an example of how the state oblenergo breaks the records of private oblenergos). These are the largest cash flows of oblenergos, through which company owners usually withdraw funds. The market player who wants to gain control over the flows of one or another oblenergo must correctly find a decision-making center, where he can obtain permission to appoint the desired chairman of the board. That is, go through the so-called whitening process at the central cash desk.

Now state-owned oblenergos are managed by an invisible network of ordinary minority shareholders. They are the ones who should instruct their supervisory board members on how to vote on the appointment of board chairs. However, their subordinate status as salaried employees makes it appear that they are following external orders.

Given the composition of the SB appointed by minority shareholders, there is reason to believe that the decision-making centre is likely to be in the Ministry of Energy under the leadership of Herman Halushchenko. Many of the candidates proposed by the minority shareholders represent Energoatom, from which Halushchenko came to the Ministry. Among them is the former first deputy head of the State Property Fund of Ukraine, Dmytro Parfenenko, who is now an adviser to the head of Energoatom, 

Naturally, two months after the election of supervisory boards, the market was filled with rumours about those wishing to acquire this or that oblenergo. At the moment, only the fate of Kharkivoblenergo is beyond doubt. It falls within the sphere of influence of Oleh Tatarov, the deputy head of the Presidential Office, so there is no question of any changes in flows. "Ternopiloblenergo may be of interest to the Surkis group, while Mykolaivoblenergo and Zaporizhzhyaoblenergo may be of interest to David Arakhamiya’s entourage. However, we would like to emphasise that these are just rumours about the possible interest of certain people who may take over someone else’s status.

But here’s what is not a rumour. The ideologist behind the transfer of six state-owned regional power distribution companies to the management of the UDN was Rostyslav Shurma, deputy head of the President’s Office. However, his adviser recently told Forbes that Shurma has nothing to do with what Halushchenko’s ministry is doing now.

The first to notice this process in 2023 was a well-known energy market expert, Oleksandr Vizir. During the Poroshenko-Kononenko era, he worked for the State Property Fund and the Kyiv City Council. In 2021, it was reported that President Volodymyr Zelenskyy had entrusted Energoatom with the management of state-owned regional power distribution companies. At that time, Oleksandr Vizir was an assistant to the head of Energoatom and an advisor to the Minister of Energy. However, Halushchenko subsequently changed all the processes and dismissed the no longer needed advisor in autumn 2022. As a result, Vizir left for free and since December 2022 has been working for the NGO Association of Energy Efficiency and Energy Saving, and from April to December 2023 - for Cherkasyoblenergo. According to him, he was involved in closing the bankruptcy proceedings of Cherkasyoblenergo (the bankruptcy was closed).

 raised the alarm about the "shadow privatisation" of regional power distribution companies in December 2023, posting information on his appointment to supervisory boards on Facebook. But he was prosecuted for this. Why? Because he got a job, received a salary and spent it at his discretion (see scan).

Direct speech from the accuser: “After I published a post on FB, they immediately began to send greetings to me through acquaintances in the industry. Before the New Year, the head of UDN JSC, Artem Martynyuk, even called me and said that the Ministry of Energy was forcing him to write me a statement to the prosecutor’s office, and suggested that he somehow make peace with the minister. I said that this was impossible in principle, because I did not quarrel with him, but only illuminated the objective reality.

Based on this statement, criminal proceedings were opened on January 1, 2024 (still factual), although at that time I had already resigned from Cherkasyoblenergo PJSC.

In the early days of 2024, the Ministry of Energy began to spread the news about the fact that I was evading, and that inspections were being carried out and a criminal case had been opened. As can be seen from the text of the criminal complaint, it is not about “evasion”, but about my “improper” work.

On February 27, 2024, I was already summoned for questioning in this case. I do not believe in its prospects, at least because I completed all the necessary work tasks, and transferred the funds received to the needs of the Armed Forces of Ukraine, and all this was done in the corresponding statement of UDN JSC. In my opinion, the main purpose of these “measures” is to intimidate me. Because of my position regarding the need to change the management of Kharkivoblenergo JSC due to the terrible results of the financial activities of this enterprise (now under the control of Oleh Tatarov), SBI investigators conducted a search in my apartment on August 16, 2022 (and the decision to search was issued by Lychakovskyi district court of the city of Lvov, and live and registered in Vyshhorod), computer equipment, telephone, documents and cash were confiscated. After that, the SBI never called me or took any action against me.

On 05/09/2023, I canceled the arrest imposed on my property, but on 06/15/2023, the SBI, due to the Pecherskyi District Court of Kyiv, re-seized my property.

On 03/06/2024, I canceled the arrest again and contacted the SBI to return my property. In January 2024, I also filed an application with the European Court of Human Rights alleging a violation of my rights to dispose of the property that belongs to me.”

So, the conclusions are as follows.

Herman Halushchenko’s group, in cooperation with Oleh Tatarov’s law enforcement vertical, is conducting another operation to redistribute the energy market. Last year, they tried to remove the state-owned Ukrenergo from the flow of international financial assistance. And now they have arranged a not very elegant privatisation of state-owned regional power distribution companies.

Volodymyr Zelenskyy’s reaction will tell us whether this was a "guerrilla raid", which the Presidential Administration does not tolerate under any sauce, or a concerted operation.

This story also proves once again the ineffectiveness of the best of the best Western practices in our latitudes. Without effective and inevitable punishment of corrupt officials, all these proven Western recipes can easily be transformed into schemes here.

It is important to note that on March 5, 2024, the President signed the draft Law of Ukraine “On amendments to certain legislative acts of Ukraine to improve the corporate governance of legal entities whose shareholder (founder, participant) is the state” No. 5593-d, which unblocked Ukraine from receiving 1, €5 billion in macro-financial assistance from the World Bank. The provisions of this law precisely strengthen corporate governance in state-owned companies and expand the powers of supervisory boards. It does not really correlate with the fact that the state actually allows state-owned companies to have supervisory boards that do not comply with the best practices of transparency and responsibility.

The supervisory board of Ternopiloblenergo was captured by representatives of Hryhoryshyn and an ordinary employee of the oblenergo

The state shareholder "Ukrainian Distribution Networks" received one of the seven members of HP, having 51% of the shares. The offshore Bikontia enterprises limited from the Hryhoryshyn group received three members with a 25% stake. And also three members were received by the engineer of this oblenergo, Halyna Naumik, who owns 0.000001% of the shares. The majority shareholder, the state-owned URM JSC, voted for this decision.

The supervisory board of Cherkassyoblenergo captured minority shareholder Gorstka

Vasyl Horstka, who holds 0.00006% of the shares, also known as the corporate secretary of Cherkasyoblenergo, received four of the seven SB members. Two more members were appointed by Hryhoryshyn’s group with 24% of the shares. And only one can be called a representative of the state, which controls 71% of the oblenergo’s shares. However, it is noteworthy that virtually all of the members proposed by Horstka are somehow connected to the public sector.

The supervisory board of Kharkivoblenergo was captured by minority lawyers with 0.0000...%

Of the seven SB members, only three represent UDN with 65% of the shares. The rest were nominated by minority shareholders who own only a few shares in the oblenergo. Three were nominated by Yaroslav Nechyporenko (whose name matches the owner of the law firm "Yurydychna Dopomoga", Kyiv) and one by Hanna Kvitsinska (a lawyer with the same name represents Kharkivoblenergo in courts).

Vasyl Fedoronchak, head of labour protection at Zaporizhzhyaoblenergo, received four of the seven seats on the SB with 0.001% of shares. Two more were won by offshore companies of private shareholders. The state-owned JSC UDN with 60% of the shares voted for this arrangement, which received only one representative.

Four of the seven members of the SB were nominated by Borys Kravets, a distinguished CIS power engineer with a 0.00026% stake who works in the company’s staff. Another member was minority shareholder Yevhen Sytnychenko with 0.2355% of shares, who nominated himself. The state-owned JSC UDN agreed to this arrangement, as it received only two representatives for its 70% stake.

The state received the supervisory board of Mykolaivoblenergo

The Mykolaiv oblenergo stood out from the rest. Here, five out of seven members represent state-owned JSC UDN. Another two are representatives of the minority owner of Renome-2008, an AMC that was previously associated with the Russian ex-owners of Ukrainian power companies VSE Babakov-Voyevodin-Hiner.