Editor’s Note: This is issue 138 of Ukrainian State-Owned Enterprises Weekly, covering events from June 24-29, 2024. The Kyiv Independent is reposting it with permission.
Corporate governance of SOEs
Updated IMF Memorandum. On June 28, the International Monetary Fund (IMF) published an updated Memorandum of Economic and Financial Policies (MEFP) after its fourth review under the Extended Fund Facility (EFF) for Ukraine.
Ukraine’s key commitments related to state-owned enterprises and banks include the following:
- All banks with majority state ownership will remain the responsibility of the Finance Ministry. Any nationalized non-systemic banks will be immediately given to the Individuals Deposit Guarantee Fund (DGF) for resolution (Continuous Structural Benchmark). According to the Cabinet of Ministers, it is preparing to sell two systemic state-owned banks, Sense Bank and Ukrgasbank, and plans to appoint an internationally recognized financial adviser by end-September 2024.
As we wrote in Issue 116, foreign investors were interested in buying Ukrgasbank and Sense Bank.
- The authorities will prepare a bank rehabilitation framework in consultation with the DGF and IMF staff (Structural Benchmark; end-December 2024).
- Ukraine will produce a state ownership policy, dividend policy, and privatization strategy for SOEs (end-October 2024).
In the earlier, December 2023 version of the IMF Memorandum, the deadline for this benchmark was end-August 2024.
Ukraine receives $2.2 billion from IMF
“These funds will help finance critical budget expenditures, social benefits, and the salaries of doctors and teachers,” Prime Minister Denys Shmyhal said.
- The authorities will analyze the debts and assess financial conditions of district heating companies (DHCs) through a desk review by a reputable audit firm, including by separating arrears until and after February 2022 (Structural Benchmark; end-October 2024 – modified and reset from end-June 2024).
Gerhard Bosch resigns as PrivatBank’s CEO. On June 26, Ekonomichna Pravda (EP) first reported the resignation, citing sources in the state-owned bank.
According to EP, the unofficial reason is the discrepancy between the tasks assigned to Bosch and the reality: When Bosch was elected as PrivatBank’s CEO in May 2021, his tasks included preparing the bank’s privatization. However, during the full-scale war, this process was put on hold, EP wrote.
On June 27, PrivatBank’s press office confirmed that the bank’s supervisory board had started the search for a new CEO. Bosch will stay on as the chief executive until a smooth transition of management and leadership of the executive board has been assured, the bank said.
Why are Ukrainian banks so profitable during war?
Ukraine’s banks are flush with cash. An influx of foreign aid, high interest rates on government bonds, pay rises for soldiers, and central bank policies after the start of the full-scale invasion boosted the sector’s profits to 40.5 billion hryvnia ($1 billion) in the first three months of
Naftogaz replaces Ukrgasvydobuvannya’s acting CEO. On June 28, Naftogaz’s supervisory board replaced Oleh Tolmachev with Serhiy Lahno.
Naftogaz owns 100% of Ukrgasvydobuvannya.
Prior to his appointment, Serhiy Lahno worked as Ukrgasvydobuvannya’s chief engineer.
According to Ekonomichna Pravda (EP), on June 25, Oleh Tolmachev filed a letter of resignation, which was approved by Naftogaz’s executive board. Tolmachev has been the acting CEO of Ukrgasvydobuvannya since January 2023.
Naftogaz did not specify the reasons for his resignation.
Centrenergo replaces its CEO, the company’s press office reported on June 24. The company’s supervisory board appointed Yevhenii Harkavyi, Centrenergo’s technical director, as the new CEO. He replaced Andriy Churkin, who had been running the company since Aug. 15, 2023. He is moving to a new role at Centrenergo.
“Last year, Centrenergo needed a crisis manager who could improve the company’s financial position and fill the warehouses of our thermal power plants (TPPs) with coal. The team led by Andriy Churkin coped with these tasks: For the first time in many years, Centrenergo started to operate at a profit; the company exceeded the fuel supply plan by 200%, and, as a result, we successfully completed the 2023/2024 heating season.
Now that the Russians have completely destroyed the state’s coal energy capacity, the priority is now to prevent the enemy from blackmailing us with (shutting off) heat and light. Therefore, it was decided to strengthen Centrenergo’s team with technical expertise and elect a new CEO to meet new challenges,” Andrii Gota, chairman of Centrenergo’s supervisory board, explained.
Ukrenergo: Energy situation in Ukraine expected to improve in August
The strain on the country’s energy infrastructure will be alleviated after repairs at some nuclear power units are completed, which will provide more available capacity, while changes in the weather are also expected to help, according to Kudrytskyi, Volodymyr Kudrytskyi, the head of Ukraine’s state…
Centrenergo had three TPPs, which were essentially all the company’s assets: Trypilska in Kyiv Oblast, Zmiivska in Kharkiv Oblast, and Vuhlehirska in Donetsk Oblast.
On July 25, 2022, Russian troops occupied Vuhlehirska TPP. On 22 March 2024, Zmiivska TPP was completely destroyed.
On April 11, Trypilska TPP was completely destroyed by a large-scale Russian missile attack. The TPP provided electricity to almost 3 million people and was the largest electricity supplier in Kyiv, Zhytomyr, and Cherkasy oblasts. See SOE Weekly’s Issue 127 for more detail.
Thus, Centrenergo lost 100% of its generation.
On May 14, Harkavyi reported that Zmiivska and Trypilska TPPs were still clearing debris after the missile strikes. This should take at least another month or two, he said. See Issue 132 for more detail.
Energy sector
HACC lifted the seizure of shares in Firtash’s gas distribution companies, later they were returned to state control. On June 25, the High Anti-Corruption Court (HACC) cancelled the seizure of shares in gas distribution companies of fugitive tycoon Dmytro Firtash’s Regional Gas Company (RGC).
The court’s ruling was published on June 28. The reasoning would be disclosed in the full text of the ruling on July 1, the court added.
On the same day, the Asset Recovery and Management Agency (ARMA) reported that it had already appealed to the Prosecutor General’s Office to re-arrest the companies. Later that day, ARMA reported that Kyiv’s Pechersk District Court returned them to state ownership.
According to Stanislav Borys, co-founder of Vidar Law Firm, much depends on how well Firtash’s lawyers capitalized these three days of uncertainty. Theoretically, during this time, it would have been possible to sell assets, re-register them, change the ownership structure if the respective documents were prepared in advance, he told to Forbes Ukraine.
In our earlier issues, we reported on the wave of taking over Firtash’s gas distribution companies by Naftogaz:
- For Kharkivgaz and Dniprogaz, see SOE Weekly’s Issue 71.
- For Sumygaz, Vinnytsiagaz, and Dnipropetrovskgaz, see Issue 98.
- For Ivano-Frankivskgaz, Khmelnytskygaz, and Mykolaivgaz, see Issue 100.
- For Cherkasygaz, see Issue 104.
- For Volyngaz and Chernihivgaz, see Issue 108.
- For Zakarpatgaz, see Issue 111.
- For Rivnegaz, Zaporizhgaz, Chernivtsigaz, and Ternopilgaz, see Issue 113.
- For Tysmenytsiagaz, Korostyshivgaz, Luhanskgaz, and Melitopolgaz, see Issue 114. The two latter companies are located in the temporarily occupied territories, so their operational management would be carried out after de-occupation, Naftogaz said.
As a result, Naftogaz Group now operates 27 gas distribution companies, which were planned to be transferred to state control by the end of 2023, Naftogaz explained.
As we wrote in Issue 113, the integration of regional gas companies establishes Naftogaz as a monopoly in gas distribution, but it is a wartime measure, and they should be privatized via public auctions when “the situation allows this,” Naftogaz’s CEO Oleksii Cherny\
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