Why there is talk of returning Yanukovych’s schemes to Naftogaz and Americans do not give money
A year ago, the Cabinet of Ministers carried out the first serious rotation during the war and transferred Oleksii Chernyshov from the post of Minister of Ministry for Communities and Territories Development to an even more attractive one – the head of Naftogaz. A couple of months later, there were rumors that a back office had been created in Naftogaz, and a year later, gas market participants said that the schemes of the Yanukovych era had returned to the company. Business.Censor tried to find out whether everything was really so bad and what caused complaints at Naftogaz.
Naftogaz's financial statements for 2022 were not published for a long time, although they were ready in April 2023. It came out only after President Volodymyr Zelenskyy's visit to Washington. It is possible not to give the United States an extra argument for complaints about the management of Naftogaz.
As you know, since the odious "shutdown" of the Supervisory Board of Naftogaz in April 2021, the United States has had complaints about the peculiarities of Naftogaz's management, the lack of competition for the head and the 7th member of the Supervisory Board. This member of the council must be elected by the state.
But it wasn't just the visit to the United States and the unwillingness to have another reason for a cold shower that caused the report to be delayed. If we pay little attention to the details, we can see, for example, that the huge losses of a state-owned company are being hidden behind an artificial increase in the value of the company's fixed assets.
"The Group applies the revaluation model to further evaluate the fixed assets used in the Group's profile activities. As of 31 December 2022, the carrying amount of these assets was UAH 337,000 million, which is 93% of the Group's total value of fixed assets. Based on the results of this assessment, the Group recognized a revaluation of UAH 80,982 million in other comprehensive income (2021: UAH 84,593 million) and a reversal of impairment of UAH 692 million in current expenses of the period (2021: UAH 2,048 million impairment charge)," PWC's conclusions to Naftogaz's report read.
Can you imagine that in a country where such a full-scale war is going on for the second year, someone may decide that his assets here have risen in price.
The company's operating loss for 2022 is UAH 79 billion, while for the previous 2021 it was only — 12 billion. That is, the company lost 2 billion US dollars. For comparison: this is almost as much as Ukraine borrowed from the IMF in 2022 (US$2.7 billion) and more than Germany has given us in grant military aid (US$1.2 billion).
NJSC "Naftogaz" commented on the delay in reporting and the overlap of the failure to work with the revaluation of assets.
"The consolidated financial statements for 2022 were published immediately after the audit of its data by an independent auditor and within the deadlines established by law and external credit agreements. The revaluation of fixed assets was carried out with the involvement of an independent certified appraiser, in compliance with the requirements of the International Accounting Standard. The increase in the value of fixed assets was mainly due to revaluation of oil and gas assets. The direct impact on the financial result is disclosed in the consolidated statement of profit or loss for 2022," the company says.
As for the losses, which actually amount to UAH 79 billion for 2022, while for the previous 2021 it was only — 12 billion, the company is advised not to compare the "pre-war" 2021 and 2022.
"We need to take into account the situation of a full-scale war. Factors that affected the financial result: During the war, the government imposed Public Special Obligations (PSO) on the group to supply gas to households and energy producers at a bargain price The total number of households is 12.3 million. Despite the bargain prices, many consumers — households and energy producers — did not pay for the gas supplied. There are objective explanations for this — military actions, migration of the population, the difficult economic situation. But in the end, the crisis of non-payments falls on the main supplier of energy, Naftogaz. In the first half of 2023, the Group managed to significantly improve its consolidated net profit, which amounted to UAH 6.6 billion. Whereas for the same period in 2022, this figure amounted to UAH 57.2 billion in losses," reads the response to a request from Censor.NET.
However, despite the optimistic reassurances from Naftogaz, the report itself raises many questions. And some pages clearly do not speak in favor of the company. For example, you can see how the funds were lost on page 21 of the report.
In particular, in the natural gas sales segment alone, Naftogaz lost more than 75 billion hryvnias. And for some reason, the segment of work with the Russians turned out to be the most profitable - gas transit allowed to receive 4.2 billion in profit.
How the company "found a way out":
1. Critically reduced gas reserves in storage facilities:
"As of the date of approval of the consolidated financial statements, the gas reserves accumulated by the Group in underground gas storage facilities amount to approximately 5.9 billion cubic meters," the report said.
That is, in December 2022, the company had less than 6 billion cubic meters of gas reserves. For comparison: in September 2021, stocks were about 19 billion cubes, and even in November of this year Chernyshov announced the accumulation of 15 billion cubes.
2. They took out loans:
During 2022, the Group expected to receive UAH 90 billion as a result of the implementation of the provisions of the Anti-Crisis Law. But it was not approved.
Therefore, during 2022, the Group:
- additional internal financing in the amount of 13.4 billion hryvnias was attracted;
- a loan from the European Bank for Reconstruction and Development (EBRD) guaranteed by G7 states and countries amounting to up to EUR 300 billion has been released and its sampling has been started;
- It has been agreed to receive grant funding from the EBRD's Special Crisis Response Fund of up to EUR 189 billion, guaranteed by the Government of Norway.
3. Withdrew money from another state-owned company
"JSC "Ukrtransgaz" concluded an agreement with the OGTSU (OPERATOR OF THE GAS TRANSPORTATION SYSTEM OF UKRAINE) on reimbursement of the lost necessary income from gas transportation, obliging the latter to compensate for the lost income from gas transportation for the regulatory period 2020-2024 in the amount of UAH 47,943 million of receivables, of which UAH 27,000 million was received on October 4, 2021, and the remaining debtor obligations should be paid monthly in the amount of 50% of OGTSU's revenues from gas transit starting from December 2021. In accordance with this agreement, JSC "Ukrtransgaz" retains the right to reimbursement of the adjustment of the lost income from the transportation of gas, which was previously included in the initial fair value of debtor obligations under the purchase and sale agreement, if such compensation approved for OGTSU for the regulatory periods 2025-2034," Naftogaz said in its reporting.
And now for comparison, two more sentences from the report. For 2022, the Group received eleven monthly payments totaling UAH 14.4 billion. Whereas in the previous year 2021 there were four monthly payments totaling 3.7 billion hryvnias.
4. They took money from the government.
In 2022, Naftogaz received state funding from the Cabinet of Ministers in the amount of 12.7 billion hryvnias through a special program, which is implemented through an agreement with the Government of Canada. Despite this, "Naftogaz" still accused the Cabinet of the government of defaulting because of the ban on repayment of Eurobonds.
At the same time, the company saw an increase in doubtful debts by UAH 39.9 billion. In particular, due to the deliberate transfer of gas to Firtash's gas sales companies in the first quarter of 2022. Firtash's gas was not paid and as a result, the debt to Naftogaz for gas increased by 37 billion, and the debtor obligations for balancing services, formed in 2021 and amounting to 35 billion, were not repaid.
All of this happened against the backdrop of Naftogaz being constantly "pumped up" with new assets and getting new business lines at the expense of the state.
"Only in recent years, it has taken over gas supplies to the population, regional gas companies, state-owned thermal power plants and district heating companies, started building solar power plants and bio thermal power plants," said Serhii Makohon, former head of OGTSU.
In May 2022, the Cabinet of Ministers issued a resolution transferring 100% of the corporate rights and assets of HLUSKO UKRAINE LLC, HLUSKO RETAIL LLC and other related entities (Hlusko Group) to Naftogaz.
We are talking about 229 facilities, including more than 120 gasoline stations. In September 2023, the government transferred these gasoline stations to the management of Ukrnafta.
In July 2022, Naftogaz signed an agreement with the Asset Recovery and Management Agency (ARMA) to manage 26 enterprises for a period of 5 years. All companies are operators of regional gas distribution networks.
"There have been several plans to make a national champion out of Naftogaz, but it always turns out to be a 'black hole' that needs to be filled with funds from the state budget," is a quote from the same Makohon column, where he expresses his opinion on how to effectively divide Naftogaz.
Since the management of Ukrnafta, Ukrtransnafta, and Ukrtatnafta has already been transferred to the Ministry of Defense and is to be transferred to the Sovereign Wealth Fund in the future, and all non-core businesses - state-owned thermal power plants, new "green" thermal power plants, and thermoelectric power station - are to be privatized or transferred to other state-owned companies for management, the most important step remains - the separation of Ukrgazvydobuvannya from Naftogaz. But, of course, no one is going to give this gold mine away.
But at least then the company could do at least effective management there. But instead, they appoint either doubtful personnel or incomprehensible and unknown acting officials.
"Ukrgasvydobuvannya" periodically publishes some positive news about itself. Last — on the eve of winter, Ukraine launched two powerful gas wells. Together, they produce almost 500 thousand cubic meters of gas per day. One of the wells is exploratory, located on a recently discovered field. The other is operational, on a field that is more than 50 years old.
Another piece of news is that the company has drilled the deepest well at 6,600 meters.
However, according to the consulting company ExPro, in 2022, gas production in Ukraine due to the war showed the lowest value in the last 20 years.
In fact, a significant increase in volumes can give either the return of the Black Sea shelf, or horizontal drilling. This is about 5-6 wells, which in the future could give the Ukrainian economy up to 50 billion dollars. And global giants like Halliburton and Baker Hughes have to do it.
"This project should be funded in the form of a grant from the US government — $250 million. But this will not happen until changes are made in corporate governance. And there will be no changes in the management of Naftogaz, because Shmygal said in Washington that no one will conduct a competitive selection of the Chairman of the Board, board members and business leaders of NJSC Naftogaz during the war and change Chernyshov," says the gas market interlocutor.
But the lack of competition for the position of the head of Naftogaz is actually only the tip of the iceberg. All the main enterprises are headed by Acting Directors. This is the usual pattern for the Ukrainian authorities because then the leader becomes much more loyal. As a result, the acting head has been working in "Ukrgazvydobuvannya" since May 2022, in "Ukrtransgaz" - from January 6, 2023, in the Gas Supplier Company "Naftogaz" - from August 2021.
So, from May 2022 to the present day, the head of UkrGasVydobuvannya has not been fired, but only dismissed. Until January 2023, Oleksandr Romaniuk was the acting director, and then he was replaced by a new acting director, Oleh Tolmachov.
There are objective doubts about Tolmachev's managerial competences. Eclipse Resources, where he held senior positions from 2013 to 2020, actually bankrupted.
After the liquidation of Eclipse Resources, Tolmachev did not work anywhere for more than a year until his employment at UkrGasVydobuvannya.
Also, until recently, Tolmacheva's assistant Daria Taranova worked in Tolmachev's reception. What exactly Taranova helped is unknown, but she was released only after the intervention of the SSU about her Russian citizenship.
Russian passport of Taranova
Although the company denies it.
"According to information received in the personnel department of UkrGasVydobuvannya, Daria Taranova worked in the company since 2019, having all permits for official employment, until June of this year. Termination of employment with Ms. Taranova was not related to any external factors," Naftogaz said in response to Censor.NET's request.
Permanent residence permit in Ukraine
Another "specialist", a citizen of the Republic of Azerbaijan Akshin Mekhdiev, became the Director of Drilling and In-Well Operations of UkrGasVydobuvannya. This is a key unit of the company, on which gas production depends.
Mekhdiev does not have a specialized higher education. He gave false information in his resume. He deliberately concealed information about his experience of working with Schlumberger Services Ukraine LLC (which was recognized by the NACP as an international war sponsor) at well No. 888 of the Shebelynka gas condensate field and his experience of working in Russia during 2006-2009.
Mekhdiev was hired by UkrGasVydobuvannya despite the fact that back in 2022, criminal case No. 6202200000000638 (Part 5 of Article 191 of the Criminal Code of Ukraine) was initiated on the fact of overestimating the cost of engineering support services (for which Akshin Mekhdiev was responsible) for a total amount of more than 154 million hryvnias.
He also remained the owner of the oil and gas business, which in principle is a direct conflict of interest. In particular, he is a director of WELLPATH LIMITED in the UK, and the company's website lists projects in Ukraine.
The Union of Drillers of Ukraine has already addressed this issue with an open letter to NJSC "Naftogaz of Ukraine".
But the company denies problems with this staff.
"Akhin Mekhdiev was hired by the decision of UkrGasVydobuvannya management as a candidate who, in terms of education, experience and competencies, meets the qualification criteria determined by the job description. During the appointment, an internal audit was carried out by the personnel security sector of the Department of Security, Protection and Protection of UkrGasVydobuvannya, as a result of which the procedural status of Akshin Mekhdiev as a suspect in any criminal proceedings was not established," Naftogaz said in response.
Sources of the publication assure that recently most of the middle managers of the UkrGasVydobuvannya were transferred to employment contracts for three months. NJSC "Naftogaz" denied this fact. But there are people with contracts that it really happened.
"There has never been such a practice. This creates an atmosphere of complete uncertainty in the team, because who will work for you normally with the prospect of being fired in three months. Unless you obediently follow orders to survive," notes one of the interlocutors.
"This, in turn, leads to the return of schemes with Yanukovych-era 'supervisors' who actually make major management decisions not based on industry expertise and company interests, but on private mercantile interests," he adds.
It is said in the market that there is a man named Oleksandr Serhieiev in Chernyshov's office, he is called Chernyshov's assistant and can be contacted to discuss almost any issue.
"For example, you can agree to pay UkrGasVydobuvannya the amount of debt to private creditors for 30-50% of the amount that must be returned in cash for resolving the issue," says the interlocutor of the publication.
His 25-year-old daughter was Deputy Minister of Social Policy.
Serhieiev's daughter
Of course, as long as someone does not film Serhieiev on a hidden camera for NABU, it will all look like slander of opponents. Which Naftogaz bravely rejects: "This information is not true. Our principles of work are to comply with the values of business ethics, namely, honesty, reliability and transparency. All payments of UkrGasVydobuvannya to counterparties are made in a timely manner, in accordance with the terms of existing contracts. At the same time, if you have other information, we suggest that you contact the authorized bodies in accordance with the established procedure with these facts."
But it is obvious that there is no smoke without fire. And if they have been talking about the back office for a year, and the number of dissatisfied people is growing, then sooner or later all this will come out sideways for the authorities.
Tetiana Nikolaienko
