The national police "caught" officials of "Kyivteploenergo" in massive "cuts" of the budget

The national police "caught" officials of "Kyivteploenergo" in massive "cuts" of the budget

The capital’s National Police, as part of a “fresh” criminal proceeding, is investigating the facts of massive “budget cuts” by officials of the Kyivteploenergo enterprise. According to preliminary information, during 2022-2023, as a result of some purchases by this enterprise of various parts, equipment and work, it suffered losses in the amount of about 136 million hryvnia.

Investigators found that the tender documentation was written by public utility companies in such a way that not everyone was allowed to bid, but only the “correct” suppliers and contractors - law enforcement officers counted 6 of them. Moreover, in the future, these business entities probably inflated the cost of their services by up to 40%, and also received more funds than were provided for in the contracts as a result of the conclusion of additional agreements. All this is happening against the background of the adoption by the Kyiv City State Administration and the Kyiv City Council of decisions to allocate significant additional funding to Kyivteploenergo to improve the energy sustainability of the capital.

As it became known to KV , the capital’s law enforcement officers are studying the facts of massive misappropriation of budget funds during procurement by the public utility enterprise "Kyivteploenergo".

The investigation is being carried out within the framework of criminal proceedings No. 12024100060000583, which was opened by the Pechersk Department of the National Police of Kyiv on March 15, 2024. This case is being investigated on the grounds of a criminal offense under Part 4 of Art. 191 of the Criminal Code (CC) of Ukraine – embezzlement and misappropriation of property through abuse of official position, committed under martial law.

What did the investigators “find”?

During this investigation, law enforcement officers became interested in the purchases that were carried out by Kyivteploenergo during 2022-2023.

In particular, the company purchased cranes, valves, gates and couplings worth a total of UAH 143.7 million from four business entities - Grand-Arma LLC (UAH 57.7 million), Production and Engineering Firm (PEF) Etna LLC (UAH 37 million), Etna-Industry LLC (UAH 38.8 million) and Development Solutions LLC (formerly Garant Engineering LLC, UAH 10.2 million).

The National Police found that the cost of each type of goods was overstated by about 40% when implementing these contracts. At the same time, in order to withdraw funds from Kyivteploenergo and disguise criminal actions, "the said business entities carried out contractual relations with each other", and it was during these financial and economic transactions that the cost of the relevant goods increased significantly. For example, Kyivteploenergo purchased steel flanged standard bore water taps DN100 and PN1 from Grand Arm LLC at a price of UAH 7.3 thousand per unit. At the same time, this company, which is not a manufacturer of such products, had previously purchased the same taps from another supplier of Kyivteploenergo, the aforementioned WIF Etna LLC, at a price of UAH 3 thousand per unit.

Also, as part of this case, law enforcement officers drew attention to a contract for the supply of a steam boiler, which was concluded between Kyivteploenergo and Vesta Building LLC on 20 June 2022. According to this agreement, the company was to receive UAH 23 million for its services, but, according to law enforcement, Kyivteploenergo eventually transferred UAH 11.7 million to the company.

Among other things, the investigators were interested in the fact that most of this amount - UAH 8.7 million - was transferred by Vesta Building LLC to the manufacturer of such equipment, Monastyryshche Boiler Plant LLC, for a "partial purchase". What exactly law enforcement officers mean by the word "partial" is not specified in the court ruling in this case. However, according to the investigation, this indicates that the "difference in the transaction" is UAH 2.8 million, and the "total cost" is UAH 5.6 million. In other words, it seems that both Vesta Building LLC, as the supplier of the steam boiler, and Monastyryshche Boiler Plant LLC, as its manufacturer, overstated the cost of this equipment.

The investigators also learned that Vesta Building LLC transferred funds in the amount of UAH 9.3 million to Vazum LLC and UAH 6 million to Amod LLC, which is a defendant in a criminal proceeding under Article 212 of the Criminal Code of Ukraine (tax evasion). It is possible that in this case, law enforcement officers were referring to Vesta Building’s "own" funds, rather than those received by the company from Kyivteploenergo. The investigators did not specify what exactly the violation was in this case, but it is likely that such transfers of funds allowed them to be "withdrawn" in the future.

In addition, the National Police came across contracts for the overhaul of boiler No. 5 of ST-1 and the overhaul with emergency repair of the main building of ST-1. These agreements were concluded between Kyivteploenergo and Atomrembud LLC in November and December 2023, and the total cost of work under these agreements was to be UAH 135 million. However, according to law enforcement officers, as a result of additional agreements to the contracts, the cost of the works increased to UAH 167 million, which was subsequently transferred to Atomrembud. Interestingly, this company was the only participant in the relevant tenders, and the cost of these works, according to the National Police, was overstated by 30-40%. At the same time, Atomrembud subsequently transferred part of the funds received from Kyivteploenergo in the amount of UAH 51.9 million to two companies - the aforementioned Vazum LLC and Kurs Titan LLC.

Law enforcement officers, having analysed all the above tenders, found that the terms of these tenders were "artificially created for specific participants", who were favoured by Kyivteploenergo. The point was that the officials of this utility company, when preparing the tender documentation, tried to limit the participation of other companies in procurement "by introducing discriminatory conditions into this documentation". In other words, such procurement conditions that other suppliers, "unfavourable" to Kyivteploenergo officials, could not fulfil. This, in particular, allowed Kyivteploenergo to purchase a steam boiler not from its direct manufacturer, but from the relevant "right" company.

In total, according to the investigation, during the implementation of all the above agreements, Kyivteploenergo suffered losses of UAH 136 million due to overpricing of goods and works, as well as the subsequent transfer of funds to the accounts of "controlled entities".

Screenshot of the court ruling on this investigation dated May 9, 2024

On 26 April 2024, National Police investigators conducted searches in the administrative buildings of Kyivteploenergo at 5 Ivan Franko Street and 15 Mokrai Street (formerly Kudryashova Street). A number of documents (original contracts for the supply of goods, invoices, balance sheets, etc.) and a computer system unit were seized. Subsequently, on 9 May, the Pechersk District Court seized this property to preserve it as material evidence in this criminal proceeding.

About the defendants

According to the Clarity Project public procurement analytics database, most of the above-mentioned contractors and suppliers of the Kyivteploenergo enterprise are active participants in tenders held by the enterprise. In total, they have 71 contracts for a total amount of about 745 million hryvnia. It seems that Atomrembud LLC received the most funds from Kyivteploenergo - this company entered into 7 transactions with the specified CP in the amount of 407.8 million hryvnia. This is followed by Etna-Industry LLC (7 contracts for 143.4 million), VIF Etna LLC (17 contracts for 80.7 million), Grand-Arma LLC (34 contracts for 52.5 million), LLC "Developer Solutions" (5 contracts for 33.9 million) and LLC "Vesta Building" (mentioned one contract for 23 million hryvnia).

As KV has repeatedly reported, the heat supply sector and specifically the activities of KP Kyivteploenergo have repeatedly been the object of criticism from the public and government officials at various levels.

So, in 2020, deputies of the capital city council drew attention to the fact that KP Kyivteploenergo seems to be hiding information about how it spent 2.3 billion hryvnia of the authorized fund formed from the city budget. In particular, the company reported that 350 million hryvnia were spent on the purchase of thermal energy, which, they say, needs to be written off. However, in responses to requests from deputies of the Kyiv City Council, it is said that the Communist Party received more than 50% of these funds back in the form of payment for services by the population.

And in 2021, it became known that the Kyivteploenergo enterprise annually spends hundreds of millions of hryvnia on the repair and modernization of the city’s heating networks, but their condition has not improved at all since 2018 (it was noted that at that time 80% of the networks were in critical condition). The Verkhovna Rada, which studied these issues, suggested that there was simply manipulation with indicators in order to “eternally” write off funds as an expense item without assessing the effectiveness of investments.

Let us also recall that the activities of this enterprise are accompanied by regular scandals due to the questionable use of budget funds.

Thus, at the beginning of 2023, the State Audit Service reported that this enterprise had committed violations and shortcomings worth a record 20.28 billion hryvnia over 3.5 years, of which 3.26 billion hryvnia were finally lost. Almost a third of the total amount of violations – 7.7 billion hryvnias – were losses of heat and water as a result of the critical condition of the networks. Among other things: illegal expenses of funds without supporting documents, inflating the cost of ordered work, dubious “inheritance” of debts of PJSC “Kyivenergo”, overpayments for gas purchases, charging “extra money” to its employees.

Taking into account such a “bouquet” of problems, the auditors suggested that Vitaliy Klychko consider the issue of punishing the perpetrators, personnel changes in the management of Kyivteploenergo, and oblige this enterprise to compensate for the damage. However, the city authorities chose a different tactic - they indirectly accused the “auditors” of bias and announced their intention to appeal their actions in court.

We also recall that the National Police is studying facts of possible embezzlement of budget funds by officials of the Kyivteploenergo enterprise, who in 2022 purchased diesel transportable boiler houses for budgetary institutions of the capital in the amount of 112.7 million hryvnia. The extent of the losses is still being determined. At the same time, investigators believe that financial resources were misappropriated with the help of equipment supplier Ukrenergoprom LLC, which converted the funds into cash and distributed them among the participants in the scheme. In the near future, law enforcement officers also plan to find out whether the purchased boiler houses comply with legal norms and state standards.

Despite all these scandalous stories, city authorities regularly declare the need to modernize the capital’s energy industry and allocate significant amounts of budgetary and extra-budgetary funding for such needs.

Thus, during the large-scale war, in February 2023, the Kyiv City Council approved the City Heat Supply Scheme for the period up to 2030. According to it, Kyivteploenergo was allowed to spend UAH 115.3 billion from various sources (city budget, loans, etc.) in the coming years to modernise heat generation and transportation systems. However, no innovative approaches were envisaged. It was noted that these funds would be used, in particular, to build two new CHP plants in Holosiivskyi and Darnytskyi districts, install new cogeneration facilities at the existing CHP-5 and CHP-6, build and reconstruct district boiler houses, modernise 573 km of problematic sections of heating networks (emergency pipes and those laid in violation of regulatory requirements), etc. The Kyiv City State Administration claimed that the Scheme was developed before the full-scale war and needed to be revised, but officials promised to do so "after the victory".

At the same time, at the plenary session held on 16 May 2024, the Kyiv City Council, contrary to the approved Kyiv Heat Supply Scheme until 2030, decided to radically modernise and decentralise the Kyiv energy sector in 12-15 years and for €1.2 billion. The plan is to switch to so-called "distributed cogeneration" - when the city’s CHP plants and boiler houses, which are subordinated to Kyivteploenergo, will produce both heat and electricity, which will be supplied mainly within a specific territory. In particular, it is now planned to install the relevant equipment at three existing CHP plants and 11 boiler houses in the capital, as well as to build three new CHP plants. At the same "plenary session", as part of the approval of the new "energy constitution of the capital", Kyiv City Council members also voted to increase the authorised capital of Kyivteploenergo by another UAH 2.5 billion (it will increase to UAH 7.8 million).

In other words, Kyivteploenergo, which is accused of inefficient use of funds from all sides, will in any case be pumped up with budget money in the coming years. Time will tell whether the money will be stolen on a large scale and whether law enforcement officers will be able to prove it in court so that the perpetrators are punished.

Kyivteploenergo has been run by Vyacheslav Bind (pictured) since 22 December 2018. This enterprise is subordinated to the Department of Housing and Communal Services of the Kyiv City State Administration, which has been headed by the aforementioned Dmytro Naumenko since 17 July 2017. The latter, by the way, is currently under investigation for allegedly embezzling UAH 1.19 million in budget funds during the construction of a water supply system on Zroshuvannya Street. The housing and utilities sector in Kyiv has been under the control of the Deputy Head of the Kyiv City State Administration Petro Panteleyev since 2014.