11 Mar 2021

Due to inaction of the State Property Fund of Ukraine, 100 million UAH of dividends to the state have to be postponed indefinitely

On March 5 the website of the Ministry of Economic Development, Trade, and Agriculture of Ukraine announced the selection process for the position of the independent member of the Supervisory Board at Khmelnytskoblenergo.

JSC Khmelnytskoblenergo welcomes the decision of the Ministry of Economy made at the request of the State Property Fund of Ukraine («SPFU») to conduct this competitive selection of candidates for the position of independent member of the Supervisory Board of Khmelnytskoblenergo, which is a company with more than 50% of shares belonging to the state.

«We want to congratulate the SPFU on this — albeit belated — but the right decision, which we in the Directorate [of Khmelnytskoblenergo] perceive as a victory for both common sense and the rule of law» — Acting General Director of the Company, Oleg Kozachuk commented on the news. He continued, «what we have talked about many times and what we have been repeatedly calling for throughout the last year, finally has a chance to happen. Finally, we will have a Supervisory Board with independent members, and as this is the basis of an effective corporate governance system, it is very much needed by Khmelnytskoblenergo both in terms of future privatization and in terms of the efficiency as the state-owned enterprise.»

However, the strange conditions and the requirements of the competition for candidates are a separate issue, which the Directorate of Khmelnytskoblenergo will adress openly in the special comment to the press next week.

As for now the management of Khmelnytskoblenergo particularly wants to comment on the timing of the decision to hold this competition, namely its desperate tardiness in terms of the timely distribution of the Company's profit for 2020. Unfortunately Khmelnytskoblenergo will not have time to distribute the profits to shareholders for 2020 in the timeframe established by law. Including the profit that belongs to the State of Ukraine as the owners of 70% of the Company's share capital.

In 2020 Khmelnytskoblenergo earned a profit of 146 million UAH, 70% of this amount to 102.2 mil UAH.

«The actions of the SPFU have led to a situation, in which Khmelnytskoblenergo will not be able to quickly distribute the record profit [historically and as compared to other stateowned electricity DSOs] for 2020 — 146 million UAH, of which the state share is over 100 million UAH. The blame for the delay in receipt of this amount by the budget of Ukraine lies entirely with the State Property Fund of Ukraine,» — Mr. Kozachuk does not mince words. — «For our part, we have repeatedly warned that we cannot work effectively without appropriately formed Supervisory Board, which only the SPFU has the right to form. And the management have repeatedly said (both in Letters to the SPF and in public statements) that a decision of the Supervisory Board, — something we have not had for a year, — is imperative for the distribution of profits. Nobody listened. And now we see the result.»

The Directorate emphasises that the timely distribution of profits to shareholders (and in particular to the State of Ukraine) is impossible within the timeframe established by law and that raises the threat of penalties to the Company. And as the result Khmelnytskoblenergo’s success may be decimated by the SPFU’s inaction.
Is this what the State Property Fund of Ukraine’s leadership wants to achieve?

We take this opportunity to remind you that Khmelnytskoblenergo has been operating since mid-spring 2020 without a Supervisory Board, a fact stated in the decision of the Supreme Court of Ukraine on 11/02/2021. The powers of the Supervisory Board include, inter alia, the issue of holding a Shareholders’ Meeting, which duly decides on the distribution of profits to the Company's shareholders. Including the part of profit attributable to the State of Ukraine as the owners of 70% of the shares of Khmelnytskoblenergo, which are in turn managed by the SPFU. Only the SPFU, which ignored the appeals of Khmelnytskoblenergo throughout 2020, can form a Supervisory Board for Khmelnytskoblenergo.

«What can I tell… It will take several months until there is a competition for independent members of the Supervisory Board, until they are then appointed, and until the Supervisory Board is formed and is thus able to make these decisions. By then the timeframe established by law for the preparation of the Shareholders' Meeting will have passed. And all until then the state budget will not receive their 100+ million UAH in dividends, earned by Khmelnytskoblenergo last year,» concludes Mr. Kozachuk frustratingly.

Press office