Editor’s Note: This is issue 146 of Ukrainian State-Owned Enterprises Weekly, covering events from Sept. 1-7, 2024. The Kyiv Independent is reposting it with permission.
Corporate governance of SOEs
Ukrenergo’s supervisory board dismisses CEO Kudrytskyi despite objections of international partners; two independent board members step down due to political pressure. On Sept. 2, numerous reputable media — including Ekonomichna Pravda (EP), Forbes Ukraine, and Suspilne — reported that Ukrenergo’s supervisory board had dismissed the company’s CEO Volodymyr Kudrytskyi by a majority vote.
According to Suspilne, three state members (Yuriy Boyko, Yuriy Tokarskyi, and Oleksandr Baraniuk) and one independent (Roman Pionkowski) voted for the dismissal, while two other independent members, Peder Andreasen and Daniel Dobbeni, voted against.
According to EP, before the board’s meeting, green energy investors and representatives of international organizations (EU, EBRD, IFC and the Business Ombudsman) called on the company’s supervisory board, President Zelensky, and the Cabinet of Ministers not to rush with personnel decisions until Ukrenergo’s operations are analyzed and one independent board member is appointed.
According to Ukrenergo’s charter, the supervisory board should consist of seven members: four independent members and three state representatives.
As we reported in June 2023, the Cabinet still had to select and approve one independent member for Ukrenergo’s supervisory board. Hence, independent members did not constitute a majority of the board, which did not meet the requirements of the law or Ukrenergo’s charter. See our Issue 95 for more detail.
Chris York
On Sept. 3, Kudrytskyi confirmed the termination of his powers by the supervisory board’s decision. He said that the board appointed executive board member Oleksii Brekht as an acting CEO and decided to hold a competitive selection for a new CEO. He added that Sept. 4 would be his last working day at Ukrenergo.
“I initiated the extraordinary meeting of the supervisory board because I am convinced that the dismissal and appointment of Ukrenergo’s CEO is the sole responsibility of the board,” Kudrytskyi wrote on his Facebook page.
According to EP, during the meeting of the Supreme Commander-in-Chief’s Staff on Aug. 30, Energy Minister Herman Halushchenko and then deputy dead of the President’s Office Rostyslav Shurma sought Kudrytskyi’s dismissal. The ostensible reason was allegedly insufficient protection of Ukrenergo’s facilities and, as a result, problems with electricity that arose after Russian attacks on Aug. 26. See our Issue 145 for more detail.
Kudrytskyi denied this reason for his resignation. “The board’s decision to dismiss me has nothing to do with the security of Ukrenergo’s substations. I provided the board members with a detailed report on each facility. And (they) had no questions about it. I cannot go into details, but more than 60 anti-drone shelters have been built at Ukrenergo’s substations, almost at every substation. Such engineering structures have only been built at Ukrenergo’s facilities", he wrote.
On the same day, Daniel Dobbeni (independent member and supervisory board chair) and Peder Andreasen (independent member) announced that they filed their resignation notices.
“We strongly believe that the decision on the early dismissal of the CEO of Ukrenergo is politically motivated and, based on the results of the presented report, there are no valid grounds for it,” they said in a statement.
“Ukrenergo successfully fulfilled its core strategic goals despite the Russian invasion. The company is a member of the power system of Continental Europe ENTSO-E. More than 60 objects of unique complex anti-drone protection have been built at high-voltage substations. The pace of restoration of the high-voltage grid after unprecedented missile and drone attacks allows the company to fully perform the function of the power system operator.
Kateryna Denisova
During the full-scale war, Ukrenergo attracted more than 1.5 billion euros of international support for restoring the power system, maintaining liquidity and building engineering protections. This demonstrates the transparent procurement processes in the company and its undisputed reputation among international stakeholders,” Dobbeni and Andreasen added.
They emphasized that starting from their first days on Ukrenergo’s supervisory board in December 2021, they had felt political pressure and “observed constant attempts to bypass the competition to appoint people whose professional qualities were doubtful to the executive board of the company."
“And today, … when the corporate governance of the company … is called into question, we do not see the possibility of continuing (to serve) on the supervisory board of Ukrenergo. Violation of the principles of corporate governance and the decision to dismiss its CEO without proven mismanagement is unacceptable and may affect further cooperation of Ukrenergo with ENTSO-E members,” Dobbeni and Andreasen added.
On Sept. 6, Bridget Brink, the U.S. ambassador to Ukraine, said that Ukraine should complete Ukrenergo’s supervisory board after independent members resigned in protest against Kudrytskyi’s dismissal.
Brink confirmed that the U.S. is raising this issue with Ukrainian officials, although she declined to elaborate on what signals were exchanged with Ukraine. However, she linked the development of this situation to the volume of investment in the Ukrainian energy sector.
“Our recommendation is to fill the three vacant positions on the supervisory board and elect a new CEO according to OECD guidelines,” she emphasized.
Energoatom’s new supervisory board has not been operational for three months. According to Forbes Ukraine, Energoatom’s supervisory board, appointed in June 2024, was supposed to be launched by the end of July 2024, but this has not happened yet.
As we wrote in Issue 137, on June 21, the Cabinet of Ministers appointed all five board members — Timothy John Stone, Michael Elliott Kirst and Jarek Neverovych as independent members, and Vitalii Petruk and Tymofiy Mylovanov, as state representatives nominated by the Energy Ministry.
Forbes Ukraine asked Energoatom’s press office to explain why the board has not yet started working, but the company did not respond within the five-day period established by law. Deputy Economy Minister Oleksiy Sobolev, who was involved in the process of forming the supervisory board, forwarded the information request to the ministry's press office, which never provided a response, the media added.
Elsa Court
According to Forbes Ukraine, only Ukrainian members of the board have signed the contracts, while foreign independent members believe that the first meeting can only be held after the contracts are signed. In order not to violate the law, the first meeting was started within 30 days after board appointment, but the board has not made any decisions and cannot complete the meeting — it still has the status of being postponed, the media’s source said.
During the Verkhovna Rada’s meeting on Sept. 6, Energy Minister Herman Halushchenko said that Energoatom’s supervisory board had met – the board meeting was opened. According to Halushchenko, contracts are being finalized, and the supervisory board is competent.
“Foreign members of the board do not understand our contracts because Ukraine has different legislation. They are afraid, they ask questions, they ask to change something, and often it is impossible to change it,” the source said. They are reluctant to start working because they do not yet have reliable insurance against the consequences of their potential poor decisions, he added. “They are used to civil law, and we have criminal law. And there is no insurance against criminal law,” the source explained. Foreign members would need at least another month to “understand and come to terms with Ukrainian legislation” and start working, he concluded.
In August, Sergiy Makogon, former CEO of the Gas Transmission System Operator of Ukraine (GTSOU), suggested that Energoatom’s acting CEO Petro Kotin and his boss Energy Minister Herman Halushchenko were not very satisfied with the selected board members, so Energoatom was sabotaging the signing of contracts with them. In particular, the remuneration proposed in their draft contracts was significantly lower than what was discussed at the selection stage.
One lawmaker confirmed this version. “Perhaps, the surprise with remunerations was prepared on purpose, and the process has slowed down. If the new supervisory board starts its work, a competitive selection for Energoatom’s CEO would have to be announced, and current acting CEO Petro Kotin may not be selected, while Halushchenko would not benefit from replacing his loyal manager,” he supposed.
SPFU head Koval resigns to head the Agriculture Ministry. On Sept. 3, Vitaliy Koval, head of the State Property Fund of Ukraine (SPFU), filed his resignation letter to the Verkhovna Rada, Ukraine's Parliament. The next day, the Rada failed to approve it, but did so on the second attempt on Sept. 5. On the same day, the Rada appointed Koval as the new agrarian policy manager.
According to Ukrainska Pravda’s (UP) sources in President Zelensky’s team, Koval is close to Andriy Yermak, the head of the President’s Office. According to UP, Koval also has business ties with Timur Mindich, a former partner of tycoon Ihor Kolomoisky and co-owner of Kvartal 95 LLC that was also co-owned by Volodymyr Zelensky before his presidency.
Maxwell Kushnir
As we wrote in Issue 112, on Nov. 21, 2023, the Verkhovna Rada appointed Vitaliy Koval, then governor of Rivne Oblast, as the new head of the SPFU to replace Rustem Umerov.
According to Chesno, Vitaliy Koval had been governor since 2019. He was also a candidate for mayor of Rivne from the Sluha Narodu party in 2020. In the first round of the mayoral elections, Koval received 13.52% of the vote, taking third place.
In 2020, Koval was elected as a member of the Rivne City Council from Sluha Narodu.
He is also a member of the National Olympic Committee of Ukraine and the first vice president of the Greco-Roman Wrestling Federation of Ukraine.
In 2006-2019, he headed and co-founded enterprises in the agricultural, transport, and construction industries: Atlant-Trans LLC, InvesttradeService LLC, RGS-Logisticgroup LLC, BBB Montazh LLC, and Sanako LLC. See Issue 112 for more detail.
Smetanin leaves UDI to head up the Strategic Industries Ministry. On Sept. 4, Ukrainian Defence Industry’s (UDI) supervisory board terminated the powers of the company’s CEO, Herman Smetanin, and appointed Oleh Huliak as acting CEO.
According to UDI, Huliak has been in the Armed Forces of Ukraine since 1993. In 2021-2024, he was the Commander of the Logistics Forces of the Armed Forces of Ukraine. Since July 1, he has been working as the CEO’s advisor for military cooperation, strengthening the company’s ties with the Defence Forces.
The company’s supervisory board also said that it would announce a competitive selection for the new CEO as soon as possible.
On Sept. 5, the Verkhovna Rada appointed Smetanin as the new minister for strategic industries to replace Alexander Kamyshin, who later moved to the position of presidential advisor for strategic issues.
As we wrote in June 2023, the State Concern Ukroboronprom was dissolved and replaced by a joint-stock company called Ukrainian Defense Industry (UDI).
We also reported that Ukroboronprom’s CEO Yuriy Husiev resigned, and the Cabinet of Ministers appointed Herman Smetanin as the CEO of newly established UDI. See SOE Weekly’s Issue 95 for more detail.
PrivatBank’s CEO Gerhard Bosch to step down on Nov. 1, the bank’s press office told Forbes Ukraine. According to the bank, Bosch’s contract would be terminated on Nov. 1 on the basis of the Labor Code of Ukraine: dismissal at the initiative of the owner or his authorized body in connection with the termination of the powers.
“For the next two months, the CEO would continue to fully perform his duties until the smooth transfer of management of the bank,” the bank’s press office added.
As we reported in late June 2024 (Issue 138), Gerhard Bosch filed his resignation as PrivatBank’s CEO. According to Ekonomichna Pravda (EP), the unofficial reason was the discrepancy between the tasks assigned to Bosch and 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 then wrote.
Forbes Ukraine’s sources also confirmed this reason. Another possible reason is Bosch's age and the fact that his family lives in Austria, the media also wrote. “I am over 67 years old, and I agree that PrivatBank needs fresh blood. By the way, replacing a CEO of my age is a completely normal corporate governance practice in Europe,” Bosch told Forbes Ukraine.
Elsa Court
According to Forbes Ukraine, unless the winner of the competitive selection for the new CEO is determined by Nov. 1, one of the executive board members would start managing the bank as an acting CEO. [Except Bosch, PrivatBank’s executive board currently includes six members: Anton Razumnyi, Mariusz Kaczmarek, Ievgen Zaigraiev, Dmytro Musiyenko, Solvita Deglava, and Larysa Chernyshova.
“I think, this time, there is a request to elect a Ukrainian rather than a foreign CEO,” the source supposed.
Three of Forbes Ukraine’s sources, familiar with the competitive selection process, named Anton Tiutiun, deputy Oschadbank’s CEO in charge of retail business, as one of the candidates. Tiutiun neither confirmed nor denied his participation in the competitive selection, the media outlet wrote. One of the sources also said that PrivatBank’s current employees were participating in the competitive selection, but did not specify who exactly they were.
Timely announcements of approaching top management changes are a standard, good corporate practice, allowing for predictability and smooth transition of leadership.
The above announcement also suggests that PrivatBank may not require an interim CEO if the competitive selection of the new CEO is completed on time.
Note also that disclosing the names of potential CEO candidates would be a poor practice that harms competitive selection. Firstly, the potential employer should ensure the confidentiality of candidates, as applicants would rarely want their current employer to know about their application. Secondly, this information is typically market-sensitive.
Banks
Ukrainian banks post cumulative profits of Hr 120 billion ($2.9 billion) in January-July 2024; state-owned banks make 63% of the total, Opendatabot reported. The data provider also said that the top 10 banks on the market accounted for 86% of the total profits — Hr 80.13 billion (€1.8 billion at the average exchange rate over the respective period).
Five state-owned banks made 63% of Ukrainian banks’ total profits:
- As usual, PrivatBank made most of the money – Hr 37.16 billion ($901 million), or 63.2% of the sum of state-owned banks’ profits. PrivatBank made 8% more than in the first seven months of 2023, Opendatabot added.
As we wrote in Issue 119, the bank reported a net profit of Hr 37.8 billion (around $900 million) in 2023. As we reported in Issue 129, PrivatBank paid Hr 50 billion (around $1.2 million) in taxes and dividends. This was as much as 3% of total projected state budget revenues for 2024.
- Oschadbank is in second place with Hr 11 billion ($266 million), or 18.7% of state-owned banks’ profits.
Dominic Culverwell
As we reported in Issue 128, Oschadbank earned a record Hr 6 billion (around $140 million) profit in 2023. In Issue 121, we wrote that Oschadbank paid the state the first half of the 2023 dividends, Hr 700 million (around $16 million).
- Ukreximbank is third with Hr 4.74 billion, or $115 million (8.1%).
- Ukrgasbank earned Hr 3.73 billion, or $90 million (6.3%).
- The recently nationalized Sense Bank is fifth with Hr 2.21 billion, or $53 million (3.8%).
As we reported earlier, Sense Bank, previously owned by sanctioned Russian oligarchs Mikhail Fridman, Petr Aven, and Andrey Kosogov, was nationalized in late July 2023. See more in our Issue 98.
As we wrote in Issue 132, Ukrainian banks posted combined profits of Hr 40 billion (around $900 million) in Q1 2024, with state-owned banks making 60% of the total.
Infrastructure
Ukrzaliznytsia loses Hr 600-700 million ($13-15 million) in July-August and expects a minor loss by the end of 2024, the company’s CEO Yevhen Liashchenko told Forbes Ukraine.
Ukrzaliznytsia made a profit of up to Hr 3 billion ($ around 70 million) in the first half of 2024, but lost Hr 600-700 million ($13-15 million) in July 2024 due to a decline in profitable types of cargo, Liashchenko explained.
According to him, increased grain exports could improve the situation, but this will not prevent losses for the year. “If we start exporting grain, then the volumes of transportation would level off, and we would make a minor loss for the year. In any case, we are increasing transportation volumes, but losses on some shipments are also increasing,” Ukrzaliznytsia’s CEO also said.
As we reported in SOE Weekly (Issue 72), Ukrzaliznytsia took losses of Hr 10.8 billion in 2022 (318 million euros at that time). The loss from passenger transportation was Hr 13.3 billion (391 million euros), suggesting that the company’s other segments, such as cargo transportation, made a profit of Hr 2.5 billion (73 million euros).
As we wrote in Issue 80, in March 2023, after his appointment as Ukrzaliznytsia’s new CEO for the next two years, Liashchenko got several key tasks, one of which was for the company to break even.
In September 2023, Liashchenko said that Ukrzaliznytsia was reaching break-even and would finish the first nine months of 2023 with a profit (see Issue 103). Ultimately, the company finished 2023 with a net profit of Hr 5 billion (around $120 million). See Issue 127 for more detail.
On Nov. 20, 2023, the Cabinet of Ministers approved Ukrzaliznytsia’s financial plan for 2024, with forecast losses of Hr 12.6 billion ($305 million). See Issue 112 for more detail.
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.
Abbey Fenbert
