Energy billions

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«We are all winners. And that is great. And I want to win more», — Rinat Akhmetov commented on the achievements of FC Shakhtar in a recently released interview with the eloquent title» We have a bright future».

The successes of the richest man’s sport club in Ukraine can be reliably transferred to his business success as well. Despite political changing and military actions in the country, Mr Akhmetov ranked 282th place among the richest people in the world, according to last month’s Bloomberg rating. For the latest data, estimated value of his capital has increased in 1.3 billion dollars (June, this year).

Of course, Mr. Akhmetov’s ownership is not only energy industry, but metallurgy, telecommunications, banks, etc. But, specifically, the energy costs have increased for the recent time. If we analyze the financial statements of the company, we will see that DTEK “Energo” completed the first quarter of 2018 with a profit at UAH 4.3 billion.

In the last 2017 profits also increased. Thus, according to Concorde Capital, last year net profit of DTEK “Energo” grew by 10%, around UAH 141 billion. According to calculations, EBITDA (operating profit before paying interest, taxes, depreciation, and amortization) of the company improved on 29%, around UAH 23 billion.

Only in the 4th quarter of 2017 DTEK “Energo”’s net income amounted UAH 41.4 billion (an increase by 34%, compared to the previous quarter), and EBITDA – UAH 8.8 billion (an increase by 92% compared to the previous quarter).

Most Ukrainians probably do not even realize that they are actively involved in replenishing the «treasury» of the Donetsk oligarch. There is an illustrative example of how it works, showed below.

Rules of the Game 

Nowadays, electricity business in Ukraine is expecting dramatic changes. In April 2017, the Verkhovna Rada adopted the Law «On the Electricity Market». As from August 2019, Ukraine will provide a model of the electricity market that will be work in accordance with European standards.

Unfortunately, modern power engineering is one of the most problematic sectors of the economy of Ukraine. And this situation has been influenced by a number of factors.

How does the electricity market work today? Consumers pay for the power to oblenergos. The same companies, having left the share for their services of the energy supply and distribution, transfer funds to the State Enterprise «Energorynok». In its turn, the company, as the only wholesale buyer-seller, distributes received payments between electric energy manufactures.

The algorithm of the funds distribution for manufacturers is also provided. All generation of supply electricity has established tariffs. Therefore, the distribution of funds from «Energorynok» is formed in accordance with: a) the established tariff and b) the amount of supplied electricity. As a result, approximately 50% of all funds, received by “Energorynok”, should be given to heat power engineering, about 40% to atomic industry, and the rest goes to green energy and hydropower industries.

Such a mechanism is due to the fact that the cost of the energy, produced at thermal power plants and heating plants is much more expensive than nuclear power.

As “Energorynok” reported, the structure of the electricity sector, sold to the Wholesale Market in 2017, is characterized by the following parameters:

The NNEGC «Energoatom» produced 56.58% of all electricity production in Ukraine. This is more than 80 502 million kWh a year. At cost price is above 38 UAH 366 million.

Instead, the generating companies of the thermal power plants produced 28.48% of the country’s electricity (more than 40 526 million kWh a year). However, its cost price is more than UAH 64 665 million. That is, heat power system generates much less electricity with a higher cost.

Structure of the volume and cost of the electric energy, purchased by the SE “Energorynok” from electricity producers and sold to energy suppliers for each of energy sources in 2017.

Primary energy sources Share in volume of electric energy, % Share in cost of electric energy, %
Nuclear power plants (NPPs) 56.46 27.85
Generation companies of thermal power plants (CC TPPs) 28.49 47.31
Hydroelectric power stations (HES) (except for small ones) 7.04 4.40
Thermal Power Plants (CHP) 6.54 12.98
Hydroelectric power stations (HES) (small) 0.15 0.55
Wind power plants (WES) 0.68 2.34
Solar energy 0.50 4.05
Biomass 0.07 0.27
Others 0.07 0.25
Total 100.00 100.00

Details from CEK

In fact, SE «Energorynok» is actually serves as an administrator to payment system and distributes funds between all electricity consumers, and oblenergos, and producers. Then, the company allocates funds to manufacturers of nuclear energy, hydropower, and thermal power.

However, over the past 3.5 years has been traced a clear line of support for thermal generation companies from the regulator (NCCRECU) and the Ministry of Energy and Coal Industry.

Heat power engineering first!

The electricity market needs urgent reorganization, first of all, because of the fantastic amounts of debt.

As reported by NCCRECU, as of May 1, 2018, the electricity consumers owed UAH 29.753 billion to SE «Energorynok» (through power suppliers and, in most cases, through the oblenergos).

Currently SE «Energorynok» is the largest debtor in the electricity market. According to NCCRECU, the total debt of the state enterprise for the electric energy to producers and the state-owned enterprise NEC «Ukrenergo» almost reached UAH 24 billion.

The head of NCCRECU Oksana Kryvenko notes that «the main reason for incomplete calculations by the “Energorynok” to the producers of the electric energy is the consumers’ debts for the electricity consumption.»

According to the regulator, the largest non-payers are the enterprises of the coal industry (as of May 1, 2018, more than USD 14.235 billion); enterprises providing central water supply and water disposal services (over 5.6 UAH billion); consumers (more than UAH 5.4 billion).

The SE «Energorynok», the NCCRECU, and the Ministry of Energy and Coal Industry of Ukraine have common ground that consumer’s arrears in payments depends, in particular, on the effective work of power-supplier, who is responsible for all economic activities and electricity power supply.

So, how does it all relate to the richest person in the country?

There is a strategic holding of DTEK, which belongs to the oligarch Rinat Akhmetov.

According to the data of DTEK, which is confirmed by the data of the State Statistics Service of Ukraine, DTEK Energo produces a quarter of the country’s electricity. The production capacities of the company are represented by the enterprises of the thermal generation in the structure of DTEK “Vostokenergo”, DTEK “Dneproenergo”, DTEK “Zakhidenergo”, “Kievenergo”, TPP “Myronivska”, and affiliate of DTEK “Donetskoblenergo”.

The DTEK Energo also includes 5 distribution companies serving 3.4 million customers: DTEK “Dniprooblenergo”, “Kyivenergo”, DTEK “Donetskoblenergo”, DTEK High Voltage Networks, and DTEK PES “Energougol”.

It means that the energy holding includes companies that generate and supply heating and electricity to the end consumers.

According to the Ministry of Energy and Coal Industry, the DTEK Group controls about 80% of the thermal power generation. This information has been confirmed by the AMCU, where since 2015, the case of abuse of a monopoly position by a group of companies of DTEK is being investigated.

At the beginning of this investigation, the head of the Antimonopoly Committee of Ukraine Yuriy Terentyev reported that DTEK’s companies produce 25% of all electricity in the country.

The director of SE “Energorynok” Yuriy Hnatyuk noted that, as of June 1, 2018, the total debts of the energy supply “Dniprooblenergo”, “Donetskoblenergo”, High Voltage Grids, “Krimenergo”, “Kyivenergo”, PSE “EnergoEnergy” and SE «Energorynok» companies consists UAH 7.9 billion.

The debt of SE “Energorynok” to the generating “Zakhidenergo”, “Dneproenergo”, “Vostokenergo”, and “Kyivenergo” companies amounts UAH 3.5 billion.

Simple arithmetic — companies from the DTEK group owe UAH 4.4 billion to SE «Energorynok».

Dmitry Saharuk, the CEO of DTEK Energo, said that the company «does not perform any actions related to the production and electricity trading and has no relationship with SE «Energorynok» regarding any payments within the wholesale electricity market.»

«The enterprises that were listed in your appeal, conduct the specified types of economic activities, in accordance with the provisions of the Commercial Code of Ukraine, are separate economic entities, and, therefore, they are independent participants in contractual relationship with SE «Energorynok»».

It should be noted that the decision about the mechanism of distribution of funds between electricity manufactures for the released electricity, initially approved by the Council of WEM (wholesale electricity market). And it is not surprising, why a one-side game goes in favor of heat power system. After all, four out of ten members of the Verkhovna Rada are representatives of DTEK companies, and Council Leader Boris Lisovy is an advisor of the General Director of DTEK High Voltage Network LLC.

To whom and how SE «Energorynok» returns debts

If we analyze debt repayment and debt accumulation over the past few years, there is a natural tendency of the invisible, at first glance, privilege to the participants in the Wholesale Market with the prejudice to the interest of others.

As the head of NCCRECU Oksana Kryvenko announced, the total debt of SE «Energorynok» to nuclear power plants, as of 01.06.2016, amounted more than UAH 11.744 billion. During the last years, it took almost UAH 11.6 billion. In fact, it has remained at the same level.

Instead, the debt of SE “Energorynok” to energy manufacture companies of TPP is over UAH 9.177 billion, as of June 2016, and decreased to USD 3.94 billion over the same period.

So, as the numbers say, debts to heat generators are systematically repaid. And as we have noted, 80% of all thermal energy is produced by DTEK companies.

And this is often done bypassing the algorithm of the payments distribution in the proportion to the cost of the produced electricity. After all, there is a disproportional distribution happens, because, first of all, they pay attention to the thermal power sector, which is the essence of the problem.

For example, as «Our Money» noted, at the end of 2016, «Energorynok» distributed around USD 686 million. Not a single penny of this amount received either nuclear power plants or hydropower. According to the decision of the NCCRECU and the decision of the Ministry of Energy and Coal Industry of Ukraine, the UAH 676 million from the SE “Energorynok” were received by DTEK’s “Vostokenergo”, “Zakhidenergo” and “Dniproenergo” companies.

It is not the first occasion in Ukraine of such a tacit support of thermal generation companies.

For example, on 18 October, 2017, the CMU adopted the Decree No. 776-p «On Measures to Stabilize Energy Generating Companies of Thermal Power Plants.»

In accordance with this order, SE «Energorynok» takes out a loan of UAH 2 billion from the «Oschadbank». These funds should repay all debts to the generating companies producing electricity, which were made by “Energorynok”, as of 01.09.2017.

However, as the Cabinet of Ministers decides, most of funds are allocated in thermal generation sector.

On January 9, 2018, NCCRECU adopted the Resolution No. 9, about the distribution of funds.

According to Oksana Kryvenko, almost UAH 1.307 billion out of UAH 2 billion received PJSC DTEK “Dneproenergo”, DTEK “Zakhidenergo” and DTEK “Vostokenergo” LLC companies.

Such commitment, from the NCCRECU, the Cabinet of Ministers and the Ministry of Energy and Coal Industry to the DTEK companies, captured the attention of the NABU.

As reported by «Our Money,» the National Anti-Corruption Bureau of Ukraine in February 2018 opened two criminal proceedings «concerning the abuse of official authority of the NCCRECU executives in making regulatory decisions in favor of the DTEK holding company».

Regarding such support of thermal generation companies, the response was received from the Secretariat of the Cabinet of Ministers, signed by the Head of the Department of Access to Public Information Roksolana Stadnyk, who indicated that the Ministry of Energy and the Coal Industry represents as the developer of the above-mentioned Decree No. 776-p.

Instead, First Deputy Minister Tetyana Maksymets explained such an initiative by the need to calculate the energy generating companies of thermal power plants for coal product suppliers.

By the way, according to the Ministry of Energy and Coal Industry, in 2017 DTEK group companies produced more than 80% of coal energy in Ukraine.

«It is obvious that such «manual» decisions, with the help of which the “Energoatom», Ukrhydroenergo» and “Ukrenergo» do not have any benefits, and all the money goes to the thermal generation system, where Akhmetov owns 80% of the enterprises. Unfortunately, the Energy Secretary and the NCCRECU, in that way, showed their loyalty to Akhmetov, when at the same time, all government enterprises were in a loss», — commented the Association of Energy Consumers and Utilities.

However, not all experts agree with this position. Thus, Yuriy Sakva, First Deputy of the Union Council of the All-Ukrainian Energy Assembly, holds a fundamentally opposite point of view:

«This is a false claim that only heat power engineering has the major supporting. Partial calculation from TPP is a situational but necessary start. Tomorrow the government can make decisions about the NPP, the day after tomorrow about the CHP, etc. It can continue until the debts to all participants have been settled. I want to express my opinion one more time that it is very difficult, impossible and unreasonable to achieve even distribution of debt obligations during the procedure of debt repayment», — insists Yuriy Sakva.

Loans repayment through the citizens  

If we mark out the main problem, described above, it will be the distribution of “Energorynok” funds in favor of the thermal generation of DTEK, which is disproportionate to their share of the electricity cost.

There are two important points in obtaining credits from SE «Energorynok»: the first is interest repayment for using credit lines. And the second is to whom and how these funds are provided.

First of all, how many have taken and how much they paid to banks.

According to the information, provided by SE “Energorynok”, in the period from 2015 to June 2018, the company deposited more than UAH 35.7 billion of the “Oschadbank” and “UkrGasBank” funds.

In general, during the current period, the SE «Energorynok» paid almost USD 3,319 billion, because of the credit using.

So why does the state enterprise need loans? In previous years this money was provided to electricity manufactures in the form of advance repayments, as the commercial products payment for the future billing periods.

This means, that SE «Energorynok» takes loans, and provides them to the manufactures as advances, so that the energy generation companies can have enough funds to pay for fuel and coal supply.

Consequently, generating electricity companies are using these funds for free.

The SE «Energorynok» is paying out all interests, but where does the company get money from?

Based on the NCRECP’s data, the interests of using credit funds is included in the costs estimate of SE “Energorynok”: «In accordance with the provisions of the Order of the forecast wholesale market price of electric energy formation, approved by the NERCP from 03.03.2016, No. 289, which was agreed-upon by the Ministry of Energy and Coal Industry, the Antimonopoly Committee of Ukraine and the State Regulatory Service of Ukraine and registered with the Ministry of Justice of Ukraine on March 23, 2016 under # 428/28558, one of the components of the forecasted wholesale market price of electric energy is  the costs estimate of the SE “Energorynok”, — explained NCRECP executives.

It turns out that the interest of the free loans, using by producing electricity manufactures is ultimately paid by each of us, the end consumer of the electricity. After all, these funds are included in the final wholesale price. And although electricity prices for the population are regulated and lower than market ones, the business sector pays the full price with all the costs, plus the cross-subsidizing prices for the population, which ultimately affects the prices of products and services.

Therefore, it is not surprising that over the past 3.5 years, the OCR (wholesale market price) of electricity in Ukraine has increased in more than 2 times, according to the SE “Energorynok”. By the information on the website of the National Commission, which performs state regulation of the energy and utilities sphere since April 2015, this price has increased in 2.4.

Whom we subsidize

To whom have free loans been provided over the past years?

The NERCP provided calculations, according to which more than UAH 13.29 billion of loans borrowed in 2015, exceeded UAH 8.533 billion by companies: DTEK “Dneproenergo”, DTEK “Zakhidenergo”, LLS DTEK “Vostokenergo”.

More than UAH 10.8 billion, attracted by Energorynok in 2016, the same companies and «Kyivenergo» received almost UAH 6.485 billion.

Out of UAH 8.27 billion in 2017 — more than UAH 5,107 billion were received as well.

During 5 months in 2018, from the total amount of UAH 3.372 billion, more than UAH 2.014 billion was granted to DTEK “Dneproenergo”, DTEK “Zakhidenergo”, DTEK “Vostokenergo”, and “Kyivenergo”.

In total, these companies provided approximately 62% of all borrowed funds from 2015.

Thus, the oligarch Akhmetov’s company used these free loans predominately.

Interests of the using loans were included in the estimates of the SE «Energorynok». This estimate was laid down in the formation of the Wholesale market price of electricity.

From this price, respectively the electricity cost for the population was formed.

Also industry sector, for which the tariff is much higher, but in the end, it is mostly paid by Ukrainians.

After all, companies and manufactures, which pay for the electricity, include their expenses in the product cost. So, going to the store, or paying for water services, every Ukrainian also pays for the high cost of electricity tariffs for non-domestic consumers.

Since the beginning of 2015 more than UAH 3 318 830 300 have being included into the tariffs.

Despite the patronage from both NCCRECU and “Energorynok”, and the Ministry of Energy and Coal Industry for the heat power sphere, recall that more than 80% of which is DTEK companies, public representatives continue to support the business of the country’s richest man.

In this regard, the term of return of advance payments, which “Energorynok” was obliged to pay back in April 2018, was extended to 2019.

So, the electric power producers will be able to use these loans for free for almost a year.

By the way, the SE “Energorynok”, as of June 1, 2018, announced that the total amount of the advances is UAH 1.78 billion, of which UAH 1.04 billion was provided to the companies from the DTEK group (“Zakhidenergo”, “Dniproenergo”, “Vostokenergo» and «Kyivenergo»).

Their good-will gesture the Ministry of Energy and Coal Industry of Ukraine explained briefly and concisely. They allegedly delayed the repayment of the advance payments, since SE “Energorynok” has large debts towards the indicated companies. Accordingly, the company will pay back its debt until 2019, the DTEK companies are going to receive funds so then they will be able to return the advances.

For some reason the Ministry of Energy and Coal Industry is not mention the fact that the companies of the DTEK holding have already owed SE “Energorynok” more than UAH 4.4 billion.

The Ministry of Energy and Coal Industry also explains that «the repayment of these advance payments by companies may negatively affect the enterprises financial condition».

Why do Ukrainians have to subsidize the oligarch’s business if Akhmetov’s companies can take their own loans from commercial banks and pay their interests?

The Ministry of Energy and Coal Industry covers its actions with good intentions and consumer concern: «Deferred repayment of advances will allow heat generation companies to accumulate funds for reliable preparation and passing of the autumn-winter period 2018/2019», — wrote Deputy Minister Anatoly Korzun.

Instead, Svetlana Golikova, a member of the Strategic Council of the Kyiv Institute of Energy Studies, believes that one of the main problems in this field is cross-subsidization:

«In the electric power industry in recent years, the level of cross-subsidization by industrial consumers of the cost of electric energy, which is released to certain categories of consumers at fixed rates, remains high. The total amount of the compensation of losses for the energy supply companies to certain categories of consumers in 2015 amounted UAH 43.8 billion, in 2016 — UAH 45.5 billion «, — Golikova said at the round table «How to protect the consumer during the difficult reforms of the energy markets».

The Ministry of Energy and Coal Industry and its balance

Despite of all the above mentioned, thermal-power area continue to receive regular preferences from the government.

Thus, the approved by the Ministry of Energy and Coal Industry balance sheet for 2018 will reduce the production of cheaper electricity of nuclear power plants and, accordingly, increase the release of more expensive electricity of thermal power plants (TPPs).

Here we have a result. As reported by NCCREC, in 4 months of 2018, the share of the SE NNEGC “Energoatom» production in total decreased to 50.2% (compared with 56.6% for the same period in 2017). Instead, the share of TPP generating companies increased to 29.2% (from 28.5%).

Such actions in the Ministry explained as the need to «increase the duration of repairs at power generating units in connection with the scheduled work volume increase».

Experts agree that repair work issue and safety of the nuclear facilities are one of the country’s top priorities. But along with this, there is another reason: “Energoatom’s production is systematically underestimated in order to make profits for heat generation (Akhmetov’s DTEK), ​​although this scenario signifies a higher tariff for the consumer”, — express its position the Association of Energy Consumers and Utilities.

In return Yuriy Sakva, the first deputy of the Council of the Union of “All-Ukrainian Energy Assembly”, said that all this is about security issues:

«The main reason is an increase of scheduled repairs according to the approved schedule for 2018. Recall that in 2017, NPPs power generating was higher due to the introduction of a special condition for the replacement of the stopped TPPs on AS (from February to August).

The second is due to the unplanned repair of the block at the Khelnitskiy NPP in April-May 2017, production was reduced by about 1 billion kilowatt-hours per gram, with the corresponding replacement of production at thermal power plants by burning approximately 590 thousand tons of coal. I accent, this is a completely ordinary situation, it happens, such regimes are predicted and sure that before the autumn-winter peak load energy coal reserves in the warehouses will be restored. The «hot» and «cold» reserve regime at the TPP to ensure the reliability of the UES in the case of an unplanned change in the operating conditions of the NPP is set by the NPC Ukrenergo permanently. Despite all the mutual complaints that exist between manufacturers, there is should be understanding that TPPs and nuclear power plants in the modern united system are an «inseparable pair»», -Yuri Sakva insists.

Debts of the oligarchs — on the consumers’ shoulders

Meanwhile, in Ukraine there are sharp discussions regarding the draft law No. 8253 «On specifics of debt repayment, formed on the wholesale electricity market», developed by the Ministry of Energy and Coal Industry.

After all, in accordance with the Law of Ukraine «On the Electricity Market», in order to reform the energy market, the entire debt to the WEM Automation should be repaid / settled by 30.06.2019, because of the WEM closedown and the SE “Energorynok” reorganization.

Accordingly, the Ministry of Energy and Coal Industry is suggesting the solutions of the finances repayment issue. The amount of the debt is almost 30 billion dollars.

Initially, the department wanted to settle all repayment problems of the SE “Energorynok”’s debt at the expense of the national budget. Against these actions opposed the Ministry of Finance, during that period headed by Alexander Daniluk.

As Deputy Minister Sergey Marchenko said in  his response to a request, «The Ministry of Finance did not support the involvement of funds from the state budget for payments of the participants in the wholesale electricity market … As for the debt repayment of the wholesale electricity market, we inform that the debts were formed on the basis of economic results activity of business entities and should be paid in accordance with the current legislation of Ukraine that regulates  economic relationships», — replied the Ministry of Finance.

The Ministry of Energy and Coal Industry agreed with the position of the Ministry of Finance.

— … in the text of the legislation, the reference «at the expense of expenditures, envisaged by the law on the State Budget of Ukraine for current year» is replaced by «at the expense of sources not prohibited by the legislation of Ukraine», — wrote the first deputy minister Tetyana Maksymets.

From this answer, it was difficult to understand where the money would be made from. So a similar question was addressed to NCCRECU.

The president of the regulator, Oksana Krivenko, clearly informed about the issues that were not mentioned in the Ministry of Energy and Coal Industry of Ukraine.

The present draft law provides «the following mechanisms of debt repayment:

  • mutual settlements between WEM participants;
  • write off debts to WEM participants;
  • assignment of claim or replacement of a party in a liability;
  • the target surcharge establishment of the tariff of the distribution of electric energy by local electric networks to operators of the distribution system».

The last point, with regard to the target surcharge, is actually the banal ordinary mechanism to get into the wallets of the Ukrainians. After all, the target surcharge will definitely be included in the tariffs for non-domestic consumers.

The public deputy of the «Self-help» party Victoria Voitsitska started an active «war» with such proposals of the Ministry of Energy and Coal Industry.

First, in her column of the «Economic Truth», and later on the page on Facebook, the deputy made an inadmissibility of such an incident.

«It is proposed «to forgive» Akhmetov USD 7 billion, a group of Ukrainian oblenergos of the Russian oligarch Babakov UAH 0.8 billion, and «change» to the “Zakarpattyaoblenergo» (Boyko and Lyovochkin) UAH 150 million, “Vinnytsyaoblenergo» (Grigorishin and the well-known company ICU) — UAH 77 million, “Lvivoblenergo” and “Prykarpattyaoblenergo” (Surkis) — UAH 69 million. Instead of the afore-mentioned dear masters, debts to SE «Energorynok», in accordance with the Cabinet’s draft law, would have to pay Ukrainian electricity consumers», — Voitsitska wrote in a recent letter.

In addition, Voitsitska admitted that a number of debts on the wholesale energy market are schematic that is artificially created. The politician is convinced that in some enterprises already understood that it is impossible to pay and, in the future, simply write off debts at the expense of the state.

So, as an example, she names the shafts of DTEK “Rovenkyanthracite” and “Sverdlovantratsit” that situated on the occupied territories, which in the spring of 2016 stopped to pay “Luhansk Energy Union” LLC («LEO») for the supplied electricity.

It should be reminded that Ukrainian control over these enterprises was finally lost in March 2017.

It is noticed also that the «Self-help» fraction did not vote for the Law of Ukraine «On the Electricity Market».

Although many Ukrainian experts consider its adoption as extremely important law for the country development and for protecting ordinary citizens as well:

«The Law of Ukraine «On the Electricity Market» states that «vulnerable consumers» are only a part of domestic consumers. The powers of the Cabinet of Ministers of Ukraine include the establishment of a procedure that will enforce the right to statutory support for reimbursement of costs for the consumption of electricity and / or protection against disconnection in certain periods.

That is, the Ukrainian law has incorporated the general European norms, when the consumer can be provided in a monetary support (personal subsidy), and there is the impossibility of electricity disconnection from power supply, generally, during winter periods», — quotes Svetlana Golikova project «Ukrainian Energy».

Importantly also to say that, in spite of the deputy Voitsitska’s statements, on the other hand, the draft law number 8253 «On peculiarities of debt repayment, formed on the wholesale electricity market» provides the settlement of debts and state structures.

Yuriy Sakwa believes that exactly these structures are one of the biggest non-payers of the electricity market.

«The country itself is still remaining the main non-payer for energy. The mining sector, water companies, heat communal services, subsidies — all this is the responsibility of the government that prohibits by law disconnecting individual debtors. The government continues to generate debt.

One of the main reasons for the accumulation of debts was a devastating consequence of the government’s decision to completely cancel subsidies from the state budget for the miners from 2015. Since then, state shafts almost completely stopped paying for electricity. But under the patronage of the government, they are still working, because the coal resource is absolutely necessary for the country. After this decision, the annual partial renewal of subsidies to cover the high cost of coal mining by state shafts did not solve the problem. The mechanism of free electricity supply to the state shafts has been launched. Shafts have not been paying for electricity for almost 4 years in a row and continue to work», — Yuriy Sakva summarizes.

Corruptive schemes

Experts say about payment scheme.

— Non-payment scheme is when some shafts and enterprises did not specifically pay their debts, expecting that this liability will cover the state, — reported the “Association of Energy Consumers and Utilities”.

Neither the Ministry of Energy and Coal Industry, nor SE “Energorynok”, and NCCRECU, explaining the reasons for the formation of debts on the wholesale energy market, do not mention both, non-payments or debts that occurred due to the manipulation of market participants.

In spite of this, law enforcement officers are aware of the situation.

So, by the initiative of NABU, in 2018, «the court made a decision, according to which over UAH 40 million were returned on the accounts of OJSC «Zaporizhzhyaoblenergo», lost due to the existence of a corrupt scheme of the enterprise».

As reported by NABU, detectives of the department exposed a number of schemes of the embezzlement of electricity industry.

«Thus, the leaders of one of the PAO and regional electric power companies, had the authorized capital that included more than 50% of the state property, «by concluding the agreements on the assignment of the right to claim and transfer the debt … took over funds, which in total is UAH 641,062,834.35 that were paid to debtor societies for a private stock company as a payment of electric energy, previously supplied by state-owned companies», — this kind of scheme was described for me in NABU.

Instead, PAO used the money for its own needs and did not transfer them to the oblenergo.

According to NABU, there is another common scheme exist. It is the offsetting of claims. Such criminal dealings have already detected to the amount of more than UAH 756 million.

It works in that way — oblenergos and the debtor sign on agreement about the provision of funds. The enterprise provides the supplier with funds. Oblenergo does not return money, counting them as the payment of the cost of purchased electricity. Naturally, leaves all the money for itself. Although, according to the current legislation, most of the money should be transferred to SE «Energorynok».

Next advances

Meanwhile, in May 2018, the SE «Energorynok» opened credit lines in total amount of UAH 3.4 billion.

According to the «Economic Truth», SE «Energorynok» will pay around UAH 391 million for the loan servicing.

Considering many years of practice, it is not a big secret to what of the energy producers will come on way another free credit pie.

***

«And we are paid a lot of money. Well, why should we refuse it», — said Rinat Akhmetov about the successful transfer of the football players to his club, in a recently published interview, under the loud title «We Have a Bright Future».

Based on the described above, «huge means» the Ukrainians and the whole state pays for the oligarch’s energy business, which, of course, does not refuse to do so.

Любомир Пелех,
координатор неурядової групи з моніторингу судових реформ, антикорупційний блогер
(використано фото з офіційної сторінки Любомира Пелеха www.facebook.com/pelekh3000)

Anticorruption blogger and human rights defender Lyubomyr Pelech believes that corruption in the energy sector is one of the causes of poorness among the population. «The cost of energy resources continues to be a corrupt component, and the economic behavior of energy companies is behind the scenes of the market. Power and business do not have a common understanding of energy industry as a meaningful sector of the economy. Their unlimited ambition in this sector is to provide profit with the maximum shadowing of businesses and market impact. As a result of the corruption conspiracy, there is an increase in the profit of energy companies and the poverty of Ukrainian citizens», — said Lyubomir Peleh.

*The investigation was conducted within the framework of the USAID “Transparent Energy” project. The position of the author may not coincide with the position of the US Agency for International Development and the DiXi Group Analytical Center.

Taras Zozulinsky