REAL REFORMS NOW: ON THE SUPERVISORY BOARD

Despite a three-month delay, one of the most important tasks of this year has been successfully accomplished.

The Cabinet of Ministers of Ukraine has finally approved the composition of the Supervisory Board of NPC Ukrenergo.

We have four independent directors (Sevki Acuner (Turkey), Peder Andreasen (Denmark), Luigi de Francisci (Italy) and Olivier Appert (France)) with fantastic experience and three representatives of the state (Maksym Nemchynov, Serhii Kushnir and Oleksandr Poplavskyi), each of whom will undoubtedly bring new benefits to our company.

Why is this important?

1. A new competitive electricity market to be launched in July next year is IMPOSSIBLE without an independent transmission system operator – Ukrenergo. This independence should be confirmed by the certification procedure under the supervision of the Energy Community. There are formal requirements for certification. However, there is also the essence of independence, which means that a company should not be influenced by political decisions, should not be affected by environmental conditions, and should be free of pressure on its current activities. At the same time, it should have a body of effective control over the company’s management. In all countries of the European Union and the majority of other countries in the world, this issue is solved precisely through the establishment of independent supervisory boards with broad powers. Both for private and state transmission system operators. This was the path chosen at the beginning of the corporate governance reforms of all state-owned enterprises in Ukraine. This is a right path and it is great that these reforms continue. Nevertheless, this system of governance is of particular value for the state-owned natural monopolies, like Ukrenergo.

2. Integration into the European Network of Transmission System Operators for Electricity (ENTSO-E) is a strategically important project for the Ukrainian energy system. Unlike gas pipelines, our power grid cannot be simultaneously synchronised with Russia and Europe. Our country has already made a true civilisation choice in the western direction. However, our dependence on Russia in the electricity sector remains critically high. We are working to eliminate this dependence. Similar to any other European integration processes, integration of power grids means not only technical solutions, but also compliance of legislation and TRUST. The independent Supervisory Board, the three directors of which are well-known and respected representatives of the European Energy Community and one of them the former ENTSO-E President, is both about the compliance with the principles (independence) and a new level of trust. This will definitely accelerate the synchronisation project. In addition, we should not forget that the new electricity market will operate as a full-fledged competitive market with high investment attractiveness not only for local oligarchs only after synchronisation, when we can integrate our market with the markets of neighbouring countries, provide free cross-border access for producers to consumers and vice versa.

3. Corporate culture. Strategic vision. Independent audit. Compliance.

It is no secret that during all the years of our independence, all state and the majority of private (or public) companies have evolved in their unique way. And I cannot add anything new about the 74-year-old Soviet experience. Unfortunately, the result is obvious – we are lagging behind the leaders of global economy and we are among the leaders in corruption ratings. Representatives of genuine European business culture in the supreme governing body of a strategic state enterprise will ensure a great benefit to the whole state.

4. Two representatives of the Cabinet of Ministers and the state secretary of the line Ministry – what could be better for accelerating the long-suffering bureaucratic processes of paper-making in Ukraine? I have no doubt that the view on the processes on the part of the enterprise, control over the implementation of the development strategy, understanding of the specifics and the decision-making process by the state apparatus will lead to a new qualitative level of cooperation between Ukrenergo and state executive authorities. As for me, the key role of government representatives in Supervisory Boards is to ensure a painless shift in the paradigm with respect to state-owned companies. “Ownership” does not necessarily mean “direct management”. “State” is not equivalent to “mine while I am in power”.

We have a lot to do: accomplishment of corporatisation, start of certification, introduction of OECD standards for the public sector. A lot of interesting, extremely important and responsible work.

Wishing success to the Supervisory Board and looking forward to the first meeting. I greatly appreciate the efforts of all who worked to make this victory happen.