Certification of Ukrenergo as an independent system-relevant operator and its transformation into a joint-stock company are preconditions required to receive macro-financial aid from the EU

12/18/18

On November 14, the Cabinet of Ministers entitled the Ministry of Finance to manage state company “NEK Ukrenergo”. This decision has been published today.

“The Ministry of Finance must accelerate the process of transforming Ukrenergo into a joint-stock company and implement high standards of corporate management at the company. This step is necessary to achieve a significant progress in the implementation of the legislation on the electricity supply market, to certify Ukrenergo as an independent operator for electricity transmission as well as to separate control over electricity generation and electricity transmission, which is the pre-condition required to receive the next tranches of macro-financial aid from the EU,” said Minister of Finance Oksana Markarova.

The Minister of Finance is not exposed to any functional conflicts as the body developing sector policy and the company owner, which is the basis for a successful implementation of the corporate management system at this state-owned company and its sustainable development.

“The Cabinet of Ministers, Ministry of Energy, Ministry of Infrastructure and the Minregion already act as owners of state-owned companies that operate on neighbouring markets. The Ministry of Economy is also entrusted with the management of the Ukrainian Railways that have a license for electricity distribution. This is the reason why these state bodies cannot run Ukrenergo – this is prohibited by the requirements to independent operators for electricity transmission. From this point of view, the Ministry of Finance is the best candidate among the bodies of executive power to run this company,” said Andriy Boytsun, advisor for reforms of state-owned companies and privatization at the Strategic Group of Advisors for the support of reforms in Ukraine (SAGSUR).

“The Ministry of Finance has an extensive institutional experience in managing state assets, especially banks. It also developed the reform of corporate management at state-owned banks that is aimed to implement international standards in this area,” Markarova specified.

Strategic management and control over the operations of Ukrenergo is a task for the company’s supervisory board consisting of four independent and experienced professionals possessing a significant international experience in transforming the energy sector as well as three representatives of the Ukrainian state.

It is a not uncommon international practice that the Ministry of Finance is entitled to manage state property. For instance, different countries own shares in 42 European electricity transmission operators with 12 of these shares managed by the Ministry of Finance.

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