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Energy Minister Herman Halushchenko (C) inspect a gas transportation system in Poltava Oblast, Ukraine, on Jan. 31, 2024. (meetband/Energoatom/Global Images Ukraine via Getty Images)
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Editor’s Note: This is issue 137 of Ukrainian State-Owned Enterprises Weekly, covering events from June 17-23, 2024. The Kyiv Independent is reposting it with permission.

Corporate governance of SOEs

Cabinet appoints Energoatom’s supervisory board.

Ukraine's Cabinet of Ministers appointed all five members of state-owned nuclear giant Energoatom's supervisory board on June 21. The board consists of three independent members and two state representatives nominated by the Energy Ministry.

  • Timothy John Stone (U.K.): Independent member. Current non-executive director at Great British Nuclear; former non-executive director of Horizon Nuclear Power and former expert of the board at the European Investment Bank (EIB).
  • Michael Elliott Kirst (U.S.): Independent member. Founder and managing director at consultancy company EuroAtlantic Partners in Belgium; former vice president of Westinghouse Electric Company.
  • Jarek Neverovych (Lithuania): Independent member. Former Minister of Energy of Lithuania and Chief Advisor to the President of Lithuania on Environment and Infrastructure.
  • Vitalii Petruk (Ukraine): State representative. Current state secretary at the Economy Ministry ; former deputy head of the Ukrainian Sea Ports Authority (USPA); former head of the State Agency of Ukraine on Exclusion Zone Management.
  • Tymofiy Mylovanov (Ukraine): State representative. President of the Kyiv School of Economics; Associate Professor at the University of Pittsburgh; former Minister of Economy (August 2019 to March 2020); former chair of Ukroboronprom’s supervisory board.
Finland’s Gasum to cease Russian LNG imports in compliance with EU sanctions
Finland’s Gasum, a major gas supplier to the Nordic region, announced on June 25 that it will cease purchasing and importing Russian liquefied natural gas (LNG) in July in accordance with new European Union sanctions.

In Issue 74, we reported that on Feb. 6, 2023, the Verkhovna Rada passed Draft Law No. 8067 on the corporatization of Energoatom. Establishing good corporate governance of state-owned enterprises (SOEs) is one of Ukraine’s obligations under the Association Agreement with the EU. Energoatom, 100% state-owned, cannot have its shares privatized or otherwise alienated.

Decisions to launch Energoatom’s corporatization have been in the works for a decade, beginning with the National Action Plan for 2012 on the Implementation of the Programme of Economic Reforms in Ukraine for 2010-2014 (Issue 40). Over a year ago (Issue 79), we reported that corporate governance reform of Energoatom was among the government’s top priorities for 2023. According to the Cabinet of Ministers’ Priority Action Plan, Energoatom was to be converted into a joint-stock company by May 2023 and receive a competitively selected supervisory board with an independent majority by November 2023.

In Issue 80, we reported that President Volodymyr Zelensky signed a law on the corporatization of Energoatom on March 17, 2023. In Issue 86, we noted the Cabinet approved the conversion of Energoatom into a joint-stock company to comply with the law and established a commission for this purpose.

As reported in Issue 113, on Dec. 1, 2023, the Ministry of Energy announced an agreement with Executive Search Ukraine LLC (doing business as Amrop – SOE Weekly) to find Energoatom a supervisory board. In Issue 115, on Dec. 29, 2023, the Cabinet of Ministers approved the transformation of Energoatom into a joint-stock company. According to YouControl, Joint-Stock Company Energoatom was registered on Jan. 11, 2024.

Acting executive board members have been appointed until a permanent board is established. Petro Kotin, CEO of SE NNEGC Energoatom, was appointed as the acting CEO of the newly established Joint-Stock Company Energoatom (Issue 115).

Rhe government announced on Feb. 5, 2024, a competitive selection for three supervisory board members for Energoatom (Issue 118).

For a detailed account of the corporatization of Energoatom, see SOE Weekly’s Issues 40, 41, 53, 58, 69, 74, 79, 80, 86, 113, 115, and 118.

Statistics service: Ukraine’s GDP up 6.5% in first quarter
Preliminary estimates suggest that Ukraine’s gross domestic product (GDP) increased by 6.5% in the first quarter of 2024 compared to the first quarter of 2023, Ukraine’s State Statistics Service reported on June 25.

NBU approves Ponomarenko as Ukreximbank’s new CEO.

The National Bank of Ukraine (NBU) approved Viktor Ponomarenko as the new CEO of Ukreximbank, the bank's press office reported on June 20, 2024. He will assume his new role on July 1, 2024.

As we reported in Issue 130, on May 3, 2024, Ukreximbank’s supervisory board elected Ponomarenko as the bank’s new CEO following a competitive selection process.

Ponomarenko has over 24 years of experience in the banking sector, including 20 years at ProCredit Bank Ukraine, part of the German financial company ProCredit Holding. He has been ProCredit Bank’s CEO since 2012. See Issue 130 for more details.

Statistics service: Ukraine’s GDP up 6.5% in first quarter
Preliminary estimates suggest that Ukraine’s gross domestic product (GDP) increased by 6.5% in the first quarter of 2024 compared to the first quarter of 2023, Ukraine’s State Statistics Service reported on June 25.

Energy sector

Ukrainian energy facilities suffer 2 more attacks.

The Ministry of Energy reported early in the morning of June 20, 2024, that Russian troops damaged Ukraine’s energy infrastructure in Dnipropetrovsk, Donetsk, Vinnytsia, and Kyiv oblasts. Seven employees were injured, the ministry added. The ministry later reported that a power crew came under fire in Donetsk Oblast while working on a power line. One power engineer died in the hospital after being wounded.

This was the seventh enemy missile attack on Ukrainian power plants since the end of March 2024, according to Ukrenergo. Due to power shortages caused by the massive attack, Ukrenergo was forced to increase restrictions on electricity supply to industry and business.

The Ministry of Energy reported another attack on energy infrastructure on June 22, 2024, the eighth in the last three months. The facilities of a transmission system operator in the southern and western regions were attacked, and equipment was damaged. A gas industry facility was attacked in a western oblast. Two power engineers were injured at one of the facilities, the ministry added. Later, Ukrenergo confirmed the death of one of its substation dispatchers in the southern region.

Ukrenergo reported damage to equipment at its facilities in the Zaporizhzhia and Lviv oblasts. Due to power shortages, Ukrenergo was forced to apply hourly outage schedules.

From March 22 to June 19, 2024, Ukraine faced six massive missile and drone strikes on energy facilities. See Issues 124, 125, 127, 129, 131, and 134 for more detail.

After every Russian mass missile attack on Ukraine’s critical infrastructure, emergency outages take place, lasting for days due to ongoing repair works. During such outages, people in Ukraine are often left without electricity, heating, water supply, or access to mobile phone networks.

MP Yaroslav Zhelezniak: Developments in Ukraine’s parliament on economic reforms, international obligations — Issue 61
Editor’s note: This is issue 61 of Ukrainian lawmaker Yaroslav Zhelezniak’s weekly “Ukrainian Economy in Brief” newsletter, covering events from June 10–June 16, 2024. The digest highlights steps taken in the Ukrainian parliament related to business, economics, and international financial programs.…

Ukraine increases natural gas reserves in underground storage facilities.

Naftogaz Group reported on June 18, 2024, that Ukraine had increased its natural gas reserves in underground storage facilities to 9 billion cubic meters. As of June 17, 2024, Ukraine had pumped about 1.6 billion cubic meters into underground gas storage facilities, 390 million cubic meters more than in the same period in 2023.

“This volume is in line with the plan to prepare natural gas reserves for the next heating season. All our companies continue to operate as usual,” Naftogaz CEO Oleksiy Chernyshov said.

As we reported in Issue 120, European traders earned about $320 million from using Ukraine’s underground storages. According to Naftogaz, foreign traders and energy companies stored 2.5 billion cubic meters of gas in Ukraine in 2023. Naftogaz aims to increase this to 4 billion cubic meters in 2024. Naftogaz said Ukraine offered foreign customers up to 10 billion cubic meters of storage capacity this year, a third of Ukraine’s total underground capacity.

Foreign traders transported over 60 million cubic meters of gas to Ukraine in January-February 2024 (see Issue 123). As we wrote in Issue 126, Ukrtransgaz reported the end of the 2023/2024 heating season and the start of a new season of gas injection into underground storage on April 2.

As we reported in Issue 129, on April 27, 2024, Russian forces attacked a gas infrastructure facility in western Ukraine. Naftogaz said that no one was injured and the attack did not affect customer utility access.

See Issues 125 and 127 for previous attacks on underground gas storage facilities.

In late April, Chernyshov called on EU countries to help protect Naftogaz’s gas storage facilities from a spate of Russian attacks so that these facilities can continue contributing to lower gas prices across the continent. See Issue 130 for more detail.

US bans Kaspersky antivirus software due to ‘national security risk’
The Biden administration announced a ban on Kaspersky antivirus software on June 21, citing national security concerns due to the company’s links with Russia.

Naftogaz Group pays Hr 9.3 billion in taxes for May 2024.

Naftogaz Group paid Hr 9.3 billion ($230 million) in taxes for May 2024, the company’s press office reported on June 19, 2024. The state budget received Hr 8.8 billion ($217 million), and local budgets received Hr 500 million ($12.3 million).

Naftogaz’s contributions for May 2024 make up 8% of Ukraine’s total tax revenues in that period, the company added.

As we reported in Issue 115, Naftogaz Group paid Hr 83.4 billion ($2 billion) in taxes to the state budget and another Hr 6.8 billion ($168 million) to local budgets in 2023. As we wrote in Issue 131, Naftogaz Group reported Hr 23.1 billion ($570 million) in consolidated net profit in 2023, a significant rebound from its Hr 79.1 billion ($2 billion) loss in 2022.

As we reported in Issue 132, Naftogaz Group paid Hr 28.3 billion ($ 698 million) in taxes for January-April 2024. Naftogaz paid Hr 6.1 billion ($151 million) in taxes to state and local budgets for January 2024 (see Issue 119), Hr 5.3 billion ($131 million) for February 2024 (see Issue 123), and Hr 8.3 billion ($205 million) for March 2024 (see Issue 128).

Ukraine Business Roundup — Russian assets for Ukraine
The following is the June 19, 2024 edition of our Ukraine Business Roundup weekly newsletter. To get the biggest news in business and tech from Ukraine directly in your inbox, subscribe here. The Group of Seven (G7) leaders confirmed on June 13 a plan to provide Ukraine with a $50

Ukrhydroenergo aims to restore 1 GW of generation by start of heating season.

Ukrhydroenergo aims to restore 1 GW of generation capacity by the start of the heating season, with another 2.5 GW planned for construction, the company’s press office reported on June 19, 2024.

The company’s short-term plans include the intensive restoration of 1,000 MW of capacity to ensure the normal passage of the autumn-winter period. The long-term plans include the construction of 2,500 MW of new capacities in the Dniester Pumped Storage Power Plant (PSP) and the Kaniv PSP. The reconstruction of the Kakhovka Hydroelectric Power Plant (HPP) is also a key project.

Since the beginning of the full-scale war, 118 missile strikes have been launched at Ukrhydroenergo’s plants. The company is stepping up cooperation with international partners to restore the energy infrastructure as soon as possible. Ukrhydroenergo is also accumulating water resources to help the power system during the months when it is most vulnerable.

Ukrhydroenergo reported on June 6, 2023,  that the Kakhovka HPP was destroyed beyond restoration after the Russians set off a massive explosion in the engine room. See Issue 91 for more detail.

Russian missiles also attacked Ukraine’s largest HPP, the Dnipro HPP in Zaporizhzhia, on March 22, 2024. See Issue 124 for more detail. During another missile attack on March 29, 2024, the Kaniv and Dniester HPPs were deliberately targeted by Russian forces. See Issue 125 for more detail.

As we wrote in Issue 135, on June 6, 2024, a year after Russian troops blew up the Kakhovka HPP, Ukrhydroenergo announced that it initiated an investment arbitration procedure with Russia to compensate for the damage caused by the destruction of the HPP. The preliminary estimate is about $2.5 billion. According to preliminary estimates, the Kakhovka HPP can be rebuilt in 6-7 years, requiring more than $1.3 billion. See Issue 135 for more detail.

Opinion: Tracking Ukraine’s reconstruction funds
It is safe to say that Ukraine’s reconstruction will be the most significant and expensive undertaking in Europe since the post-World War II Marshall Plan. The World Bank estimates that rebuilding the country will require nearly $500 billion over the next decade, dwarfing the costs of the most destr…

Glusco chain makes Hr 35 million for the state under Ukrnafta’s management.

The Glusco chain generated Hr 35 million ($864,000) for the state under Ukrnafta’s management from January to May 2024, the Asset Recovery and Management Agency (ARMA) reported on June 18, 2024.

“Ukrnafta’s monthly reports are regularly reviewed by ARMA and show a positive trend in revenue growth. We expect that the amount of monthly budget revenues would increase significantly in the second half of 2024,” ARMA head Olena Duma said.

In 2021-2023, the previous manager, Naftogaz Oil Trading, paid Hr 1.5 million ($37,000) into the budget.

ARMA terminated its petrol station management agreement with Naftogaz Oil Trading on Aug. 3, 2023. The agency reported on Aug. 8, 2023, that the Ministry of Energy supported its proposal to transfer the Glusco network to Ukrnafta's management under a special procedure. See Issue 99 for detail.

In September 2023, the Cabinet of Ministers decided to place the Glusco chain under Ukrnafta’s management. Under the management agreement, Ukrnafta had to pay at least He 5 million per month ($123,000 at that time), regardless of financial results, and 85% of profits from managing Glusco’s assets into the state treasury, ARMA stated. See Issue 102 for detail.

On Jan. 9, 2024, ARMA accused Ukrnafta of failing to comply with the conditions and initiated the cancellation of the Cabinet’s decision. Later, as reported in Issue 117, ARMA agreed to let Ukrnafta manage Glusco after Ukrnafta paid Hr 21 million ($518,000) to the state budget as a guaranteed payment under the management agreement.

As written in Issue 123, on March 14, 2024, the Antimonopoly Committee of Ukraine (AMCU) allowed Ukrnafta to take over the management of Glusco’s assets.

As reported in Issue 124, Ukrnafta and ARMA announced the signing of acceptance certificates for the transfer of the seized Glusco chain assets on March 15, 2024. ARMA also changed the terms of the management agreement. The state would now receive 90% of the net profit instead of 85% agreed earlier; the other 10% is the management fee. At the same time, the minimum monthly guaranteed payment to be paid by Ukrnafta regardless of profit was increased from Hr 5 million to Hr 7 million ($177,000 at that time).

For more detail, see Issues 99, 100, 102, 117, 123, and 124.

Opinion: Why arguments against using Russian assets for Ukraine don’t hold water
If Ukraine is going to defeat Russia and rebuild itself after the war, it will need huge sums of money, probably exceeding what Western electorates and politicians are willing or able to provide. The good news is that there is a massive pot of non-Western money already available: the $300

Russian asset seizure

Ukrnafta gets permission to manage Tatneft Group’s assets.

Ukrnafta’s CEO Sergii Koretskyi reported on June 21, 2024, that the AMCU granted Ukrnafta permission to take over the management of the Russian conglomerate’s assets: Poltava-Capital LLC, Kharkiv-Capital LLC, and Tatneft-AZS-Ukraina LLC.

According to Koretskyi, the assets in the Poltava and Kharkiv regions include petrol stations, oil depots, and other commercial properties—a total of 110 units. Most of them are in unsatisfactory condition, and the vast majority cannot be restored.

Ukrnafta said that it would assess these assets on a case-by-case basis to calculate the required level of investment and the payback period.

ARMA and Ukrnafta are finalizing the asset management agreement.

ARMA declared its plans to transfer Tatneft filling stations to Ukrnafta’s management in July 2023 (see Issue 99), and the Cabinet transferred them on August 15, 2023 (see Issue 100).

As written in Issue 131, on May 6, 2024, Ukrnafta and ARMA applied for merger clearance to manage Tatneft Group’s assets. It is unclear why ARMA and Ukrnafta had not applied for merger clearance earlier, and how the assets have been maintained in the meantime.

Ukraine, Moldova begin EU accession talks in Luxembourg
“We have surpassed the barrier of promise to delivery,” Deputy Prime Minister for European and Euro-Atlantic Integration Olha Stefanishyna told the Financial Times (FT) ahead of the opening of the negotiations.

Ukrainian SOE Weekly is an independent weekly digest based on a compilation of the most important news related to state-owned enterprises (SOEs) and state-owned banks in Ukraine.

The contents of this publication are the sole responsibility of the editorial team of the Ukrainian SOE Weekly.

The SOE Weekly is produced and financed by Andriy Boytsun. Communications support is provided and financed by CFC Big Ideas. The SOE Weekly is not financed or influenced by any external party.

Editorial team: Andriy Boytsun, Oleksiy Pavlysh, Dmytro Yablonovskyi, and Oleksandr Lysenko.

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