How hundreds of millions of hryvnias of Ukrenergo ended up in private pockets while the energy system was restored by 7%

On October 10, 2023, judge of the Kiev District Administrative Court Yevgeniy Marich confirmed by his decision that due to a number of violations of the Electricity Market Rules by the National Energy Company Ukrenergo, the operator of the electricity transmission system lost 1.13 billion hryvnia, which “settled” in a private company and was not could be used to upgrade the Ukrainian energy system damaged by Russian missile attacks. What could this lead to?

As is known, in the fall and winter of 2022, Russian occupiers tried to destroy the Ukrainian energy system by firing more than 270 missiles and drones at Ukrenergo facilities. As a result of this, the capacity of Ukraine's energy system decreased by 68%, and, according to DTEK executive director Dmitry Sakharuk, Ukraine ended the last heating season with destruction or damage to thermal generation at the level of 75%. Damage to power plants, substations, transformers and power lines caused a total of $11 billion in damage to Ukraine, which is a colossal amount for our country.

Energy Minister German Galushchenko and Prime Minister Denis Shmygal assure that the resumption of large-scale destruction of the energy system is going according to plan. However, on August 5, 2023, Konstantin Ushchapovsky, chairman of the National Commission that carries out state regulation in the energy sector, presented shocking figures at a meeting of the energy committee of the Verkhovna Rada. According to him, before the next heating season, the volume of emergency restoration work performed by thermal generation facilities is only 1.6% of the volume of damage caused by Russian strikes. In Ukrenergo this figure is also far from optimistic 7%.

“Unfortunately, the figures that we have today regarding the implementation of emergency restoration work, and this is reporting as of July 1 of this year, do not give us a positive opinion regarding the successful completion of the (future) heating season,” he emphasized.

He noted that as a result of Russian aggression, thermal power plants and thermal power plants suffered damage to equipment worth UAH 29.9 billion, but emergency restoration work was completed for only UAH 482 million. In addition, according to Ushchapovsky, the networks of the transmission system operator NEC Ukrenergo suffered damage amounting to UAH 9.6 billion, but restoration work was completed for only UAH 681 million.

One would think that the state company Ukrenergo, which operates the entire electricity transmission system in Ukraine, does not have enough money to carry out repair work and prepare for next winter. However, one after another, corruption scandals within the energy companies are being revealed - there is money, but not where it should be.

Thus, the editors have at their disposal data from criminal proceedings No. 42023000000000754, according to which NEC Ukrenergo actually “donated” more than UAH 1.13 billion to the private company - energy trader United Energy. Back in September 2021, Alliance Bank provided a bank guarantee in the amount of UAH 1.85 billion to PJSC NEK Ukrenergo to ensure the fulfillment of the monetary obligations of United Energy LLC to Ukrenergo under an agreement for settling imbalances of electrical energy for payment for electricity purchased energy trader at Ukrenergo.

During February-April 2022, Ukrenergo sold electricity imbalances worth almost UAH 1.92 billion to United Energy, but it did not fully pay for them, leaving Ukrenergo to blame for more than UAH 1.13 billion. Taking this into account, Ukrenergo, according to the Electricity Market Rules, was obliged to provide the debtor company with “Default” status and send certificates to Oschadbank about the unpaid debts of United Energy, so that the bank would stop the movement of funds in the company’s accounts. But Ukrenergo officials did not do this for unknown reasons.

Moreover, having notified the bank on March 2 about the large outstanding debt of United Energy, Ukrenergo, according to the conclusion of the State Audit Service, on the contrary, twice - on March 9 and March 11 - informed Oschadbank that United Energy had an overdue debt. in front of Ukrenergo there is no. Thanks to this, the United Energy company, within two weeks in March 2022, instead of paying off the debt, “withdrew” hundreds of millions of hryvnias, actually obtained by criminal means, to the accounts of companies associated with it, thus committing money laundering on an especially large scale. In particular, the audit report of the audit service speaks of the withdrawal of UAH 479 million in this way.

This, as stated in the materials of the criminal proceedings, made it possible to “realize the criminal intent by implementing the bank guarantee of Bank Alliance JSC, due to which the debt was partially repaid and the preconditions were created for collecting additional funds from the bank in the amount of UAH 1.13 billion.”

Thus, while the investigation is ongoing, for a year and a half, a private company has actually been using a billion hryvnia from the state energy company Ukrenergo, which, in turn, must spend these funds on repairs and restoration of its facilities and equipment, preparing the country for a safe winter.

And this is not the only story when Ukrenergo “donated” money to United Energy. In the same 2022, the national energy operator sold electricity to United Energy LLC for another 117.6 million UAH, for which the latter also did not pay, which may well indicate some kind of collusion between NEC and a private company: Ukrenergo sells electricity, United Energy” does not pay for it, after which “Ukrenergo” tries through the court to “knock out” this money from the bank that provided the bank guarantee. Meanwhile, the state suffers.

It is noteworthy that NEC Ukrenergo tried to appeal the findings of the State Audit Service, which revealed violations by Ukrenergo regarding failure to report to Oschadbank about the debt of United Energy LLC. But judge Evgeniy Marych, having considered the arguments of the parties, confirmed: “Ukrenergo” violated the current legislation, which caused damage to the state in the amount of 1 billion 130 million 632 thousand 999 UAH.

At the court hearing, Ukrenergo confirmed that United Energy was supposed to pay the operator’s bills until March 2, 2022 inclusive, but did not do so. According to the Market Rules, Ukrenergo was supposed to inform United Energy and the regulator on March 3 that it had received Pre-Default status, which Ukrenergo did only on March 7. The court also established and confirmed that Ukrenergo informed Oschadbank JSC about the amount of overdue debt of United Energy LLC only on March 8, 2022.

“The court agrees with the defendant’s arguments that the plaintiff belatedly informed the Regulator and market participant United Energy LLC about its acquisition of the “Pre-Default” status and did not comply with the deadlines for applying the requirements provided for in paragraph 4 of paragraph 1.7.2 of the Market Rules,” says the court order dated October 10, 2023.

The operator contacted Alliance Bank, which issued a bank guarantee to Ukrenergo under an agreement with United Energy, with a demand to cover the debt, also late, only on March 9, 2022, when United Energy had already been withdrawing money from its accounts for a week , and its debt to Ukrenergo artificially increased due to the operator’s violations. Therefore, Alliance Bank refused to pay United Energy's debt to Ukrenergo - it was increased due to the fault of the operator, and not the private company.

Thus, the court came to the conclusion that the untimely use of the financial guarantee and the failure of Ukrenergo to send certificates to the bank regarding the amount of overdue payment by United Energy LLC for the cost of its electricity imbalances precisely from March 3, 2022, influenced the date of acquisition of United Energy LLC “Default”, growth of debt and its failure to repay until the first certificate is issued to AT “Oshchadbank”, as well as the formation of its volumes of negative imbalances of electrical energy and their cost in March 2022.

However, Ukrenergo continues to try to close the self-created “hole” of more than a billion hryvnia through the Northern Economic Court of Appeal, where on October 26, 2023, judge Gennady Korobenko should consider its claim against Alliance Bank, from which the national energy company is trying to recover this money as a bank guarantee. Considering that in April 2017, the Center for Democracy and Rule of Law, having analyzed information about questionable decisions, involvement in corruption or violation of human rights, opacity or redundancy of property, added Judge Korobenko to the list of candidates who should not become judges of the Supreme Court of Ukraine, as dishonest, it is possible that the judge may take the side of Ukrenergo and “strip” the bank for more than a billion hryvnia, which United Energy owes to Ukrenergo.

However, this is not all the money “lost” by NEC “Ukrenergo” intentionally or due to negligence. Ukrenergo’s activities in using money provided by international financial organizations for construction work and the purchase of necessary equipment for the damaged energy system of Ukraine resulted in losses of at least UAH 666.4 million. During the audit, the State Audit Service discovered that Ukrenergo had entered into a number of contracts with foreign companies (the Spanish Instalaciones Inabensa SA, the Azerbaijani Azenco ASC and others) and the Ukrainian Khoros LLC and the Soyuz Corporation of Industrial and Commercial Enterprises for certain amounts. But, as it turned out, the work was actually performed by other domestic subcontractors for amounts of money significantly less than specified in the contracts.

For example, the agreement between Ukrenergo and the Kazakh LLC Joint Kazakh-Ukrainian Enterprise Soyuzkomplekt for the technical re-equipment of one of the Kyiv substations specifies the supply and installation of equipment in the amount of 31 million 286 thousand dollars. In reality, the cost of the work was 32.7% less, that is, UAH 280.5 million. “This indicates an unreasonable excessive expenditure of funds from NPC Ukrenergo and an overestimation of the need to attract credit funds from microfinance organizations,” the auditors’ report says.

And a couple of months ago, another scandal erupted around the fact that during January-May 2023, the state enterprise “Guaranteed Buyer” paid 367 million UAH to a number of solar energy enterprises located in the territories of Ukraine temporarily occupied by Russian troops in the Zaporozhye and Kherson regions, when it is unknown whether they even work or produce electricity. Not to mention whether this electricity enters the unified energy system of Ukraine.

The story received even more resonance due to the fact that solar stations that received money, such as “KD Energy 2”, “Natsprod”, “Renewable Energy of Zaporozhye”, “Green Energy Tokmak” and “Grandpower LLC”, journalists from Bihus.info associated with Rostislav Shurma, Deputy Chairman of the Office of the President of Ukraine Andriy Ermak.

Why is Ukrenergo here? Immediately after the publication of this information, the Guaranteed Buyer State Enterprise, which buys electricity from its producers from renewable sources and then sells it on the market, released its explanation of the situation. In it, the company stated that it makes payments to energy producers solely according to the data provided to it by Ukrenergo, signed by its authorized representative.

“According to NEC Ukrenergo, in these territories (temporarily occupied - ed.) there are 73 stations (62 legal entities) of producers of renewable energy sources. By the second half of June 2023, NEC “Ukrenergo” provided the “Guaranteed Buyer” with operational data on the volume of commercial output for each generating unit for calculations, which, including in the volume column, indicated actual data on the volume of electrical energy supplied to the network.” , says the statement of the State Enterprise “Guaranteed Buyer”.

And only starting in July 2023, Ukrenergo began sending “zeros” to GarPok opposite solar stations located in territories not controlled by the Ukrainian government, and later generally provided corrected data for January-May 2023, which also indicated, that all this time the power system did not receive energy from these stations, and therefore did not have to pay for it. But thanks to the actions of Ukrenergo, 367 million UAH were lost, which today could also have worked for the urgently needed restoration of the Ukrainian energy system.

According to Forbes, the chairman of the board of NEC Ukrenergo, Vladimir Kudrytsky, who has held his post for three years, said that he has no idea whether this or that power plant is working or not, whether it is connected to the unified energy system. “We don’t see these power plants in our networks. We receive data from oblenergos. We don’t know when we receive data whether this power plant is operational and whether it works synchronously with the Ukrainian energy system,” he said.

How then can Ukrenergo, without checking the information, instruct the Guaranteed Buyer to make payments for specific amounts to stations, the operation of which Kudrytsky has no idea about, he did not explain. As I still haven’t explained how it happened with hundreds of millions of hryvnias lost in the pockets of private structures, for which Ukrenergo did everything possible.

Recently, at a briefing in Lviv, Vladimir Kudritsky admitted that the future heating season will take place under conditions of less safety margin in the energy system than a year ago. “We do not promise an easy winter, but we are absolutely sure that the Ukrainian energy system will survive,” he said. According to him, “no one can now say whether there will be blackouts, just as no one can guarantee that everything will be fine.”

Obviously, no one can guarantee that the listed corruption violations at Ukrenergo will not be the last. Recently, President of Ukraine Vladimir Zelensky proposed equating war-time corruption to high treason. Judging by everything that is happening today in Ukrenergo under the leadership of Vladimir Kudrytsky, this, in our opinion, is a more than reasonable decision.