Preparing the Enerhoatom National Energy Company for market competition is the goal of the corporate development strategy set out in a TACIS institutional support project presented on October 22 by the leaders of the Ministry for Fuel and Energy and Ukraine’s nuclear sector.
According to Enerhoatom President Serhiy Tulub, today almost all the world’s energy-generating companies are corporations that comprise nuclear power plants, research-and-development institutions, and other units. Accordingly, he opined that the main direction of Enerhoatom development should be its gradual transformation from a state-run enterprise into a state- run corporation because, in his words, the root cause of most Enerhoatom problems is its inability to use universally-accepted economic mechanisms, including those of long-term borrowing and investment. As an example, let us recall the lengthy and sometimes even flagging process of how the European Bank for Reconstruction and Development has been extending credit for the construction of the Khmelnytsky and Rivne nuclear reactors. This process recently got a new shot in the arm, though, when the bank’s president Jean Lemierre visited Ukraine. But most probably, it is not only institutional and legal shortcomings that have adversely affected the investment attractiveness of Enerhoatom, a company that produces, as Mr. Tulub pointed out, half Ukraine’s electricity and is therefore of strategic importance to the country’s energy security. At the same time, in Mr. Tulub’s view, with billions in debts still unpaid, formal corporatization will evoke “no serious interest among potential investors.”
The current transformations in Enerhoatom aim to make the company “competitive and profitable,” Prime Minister Anatoly Kinakh said recently, expressing regret that “in connection with certain events, the company has amassed enormous accounts payable and receivable, especially with respect to the state budget,” while it had also allowed “numerous irregularities” in buying equipment at prices “tens of times higher than their true value.”
It will be recalled here that the Prosecutor General’s Office opened a criminal case last August against a number of former Enerhoatom executives (no names have been disclosed so far) under Article 364, part 2, of the Criminal Code of Ukraine, Abuse of Power or Office Entailing Grievous Consequences. Investigators estimate that the former Enerhoatom executives inflicted losses of UAH 200 million on the state, Interfax-Ukraine quotes Volodymyr Hohol, acting department head at the Prosecutor General’s Office, as saying. In his view, from 1998 to 2001 former company executives knowingly signed a number of unfavorable contracts to pay bills of exchange through commercial banks, thus inflicting huge losses on the company. He also revealed his office was prosecuting not only Enerhoatom executives but also those of some businesses with whom the detrimental contracts were knowingly signed. However, many of them are on the run and being sought by law-enforcement bodies. The Enerhoatom public relations department claims that in 2001 and the first quarter of 2002 alone the company received over 150 court orders to pay make than UAH 460 million in debts. It is time the company paid the debts it incurred for the past few years in barter transactions. Thus department employees ask a rhetorical question: who could afford, with billions in artificial debts unpaid, to buy apartments worth almost one million hryvnias at the company’s expense? As a result, Enerhoatom is now forced to map out a concept of rescheduling the accounts receivable and payable. As of September 1, the company’s accounts receivable were about UAH 8.8 billion (including a debt of almost UAH 7.4 billion from the Enerhorynok state enterprise) and accounts payable over UAH 5.1 billion. Moreover, Mr. Tulub thinks that half this amount covers indebtedness to commercial entities and “is of an artificial nature,” for it arose when promissory notes, barter, and other non-money forms of settlement were used.”
Meanwhile, still unfulfilled remains President Kuchma’s July demand to inquire into the Enerhoatom situation. “We must look into this and name the ‘heroes’, the head of state said at a meeting focusing on serious problems in the nuclear energy sector: “The enterprise should work for the people, not the group that led it to bankruptcy.” According to Mr. Kuchma, Enerhoatom’s budget debt was written off by UAH 1.5 billion last year but had now again risen to UAH 1.2 billion.
The Day’s experts believe the company was deliberately led to bankruptcy. Experts recall in this connection the uranium concentrate sales operation in 2000. At that time, Enerhoatom received 524 tons from the Ministry for Fuel and Energy reserves at the price of UAH 352 a kilogram, i.e., for UAH 284.5 million. But this concentrate was then supplied to the Russian Tvel Company for UAH 50.9 million (an outright loss of UAH 133.5 million), and experts suppose this was precisely the way some companies close to then top governmental officials made a shadow payment for Russian natural gas.
And how many financial intermediaries made millions by pumping money out of Enerhoatom without forgetting, quite possibly, to pay kickbacks to the former company management? To grasp the procedure, suffice it to take the case of the Southern Ukrainian Nuclear Power Plant which produced electricity in 1999 at an actual cost of 1.45 kopecks instead of the planned 1.72 kopecks. Yet, this electric energy went on the wholesale market at 7.6 kopecks. As a result, after putting aside more than UAH 100 million for buying the nuclear fuel, this station could as well save UAH 640 million — quite sufficient for making payments for the nuclear fuel to all the other nuclear stations. But middlemen in fact managed the nuclear money at that time. Experts think the company management created favorable conditions for the former to incur arrears to be cleared at a 50-70% discount. As a result, about UAH 800 million in liquid assets of the Ukrainian nuclear plants were laundered and seut abroad in 1998- 2000. For example, Enerhoatom handed over UAH 480 million in bills of exchange to the prominent Brinkford firm for “services rendered,” as a result of which the firm received UAH 118.4 million in cash and goods, while Enerhoatom, the owner of the supplied electricity, got only UAH 2.7 million, i.e., 44 times less. Quite significantly, Viktor Yushchenko (the Our Ukraine parliamentary bloc includes Brinkford clients Zhvaniya and Martynenko) adamantly defended Yury Nedashkivsky who was dismissed as Enerhoatom president. Hence, the corporatization intended, according to Ministry for Fuel and Energy Deputy State Secretary Mykola Shternberh, to make the nuclear power sector fully transparent is quite timely.
