1. CONFLICT HISTORY
Khmelnytskoblenergo is a state-owned electricity transmission service operator (TSO) - 70% of the company's shares belong to the State, the remaining 30% is held by private legal entities and individuals.
During the period from 2017 to 2019 the company demonstrated high efficiency of operating activities. Khmelnytskoblenergo's profit not only has an annual growth trend, but is also one of the most profitable state-owned energy companies in Ukraine. The net profit of Khmelnytskoblenergo for 2019 amounted to UAH 85,711,000, this figure exceeds the profit of 5 other state regional TSOs combined.
This year, according to the results of 2019, the company plans to pay UAH 30 million to the state budget as a dividend.
With such performance, the Khmelnytskoblenergo's staff and management were surprised by the decision of the State Property Fund (SPF) of Ukraine and the previous Cabinet of Ministers of Ukraine to change the Company's management.
On February 26, 2020, the Cabinet of Ministers, chaired by then Prime Minister Honcharuk, issued an order (№161) approving the appointment of V.M. Gaponov to the post of Acting General Director of Khmelnytskoblenergo. According to the text, this order was adopted in accordance to the request of the SPF. On the same day, similar orders were issued in respect of two other regional power companies, Kharkivoblenergo and Mykolayivoblenergo.
In order to dismiss the sitting Head of such Company and appoint a replacement, it is necessary for the Supervisory Board of that entity to make an appropriate decision. Given that out of 7 members of the Supervisory Board, 5 are employees of the SPFU and only 2 are representatives of minority shareholders, this looks like relatively easy to do. But on April 6, 2020, Khmelnytskoblenergo received applications from 2 members of the Supervisory Board asking to be excused of their duties. They stated that they no longer wished to be representatives of the SPF in the Khmelnytskoblenergo’s Supervisory Board. The requests asked that they be excluded from participation following a normal 2 week notice period, ie from April 20, 2020.
Information about this event was correctly promulgated by the Company on April 21, 2020. The following day, April 22, the Company received a notification from the SPF on the replacement of those retired Supervisory Board members, who are no longer in their roles. According to Articles 53 and 57 of the Law of Ukraine On Joint Stock Companies and a letter from the National Commission on Securities and Stock Market (dated 03.10.2019, reference № 28/01/22985) provided in response to the request from Khmelnytskoblenergo, replacement of a member of the Supervisory Board (who are shareholder's representatives) is only possible during the period when they have the right to exercise their powers. In other words, the SPF has no right to replace members of the Supervisory Board whose powers have already been terminated. Any attempt to do so is a gross violation of the Law of Ukraine On Joint Stock Companies. Logically on the same day Khmelnytskoblenergo sent the refusal to satisfy the order to replace or accept these new members of the Supervisory Board.
The SPF is trying to replace the retired representatives by issuing an order signed by the SPF Chairman. A copy of this order, together with the draft notice of replacement of members of the Supervisory Board representing the SPF, has been sent to the Company's e-mail. In response, Khmelnytskoblenergo points to the procedural violations committed in this attempt to replace retired members of the Supervisory Board, namely the need for candidates for members of a Supervisory Board to be identified through competitive selection process (as required by the Cabinet of Ministers Resolution №143 dated March 10, 2017) and the need to send a notice of replacement by letter, as required by the Company's Charter.
Due to the listed procedural violations Khmelnytskoblenergo has been forced to refuse to replace the members of the Supervisory Board.
It should be noted that for the period from the date of adoption of the order of the Cabinet of Ministers (26.02.2020) until today, no clear reason has been provided for the attempted change of the head of the Company, despite numerous appeals from MPs, the media, NGOs and trade unions.
On April 28, 2020, a so called “meeting of the Supervisory Board” of Khmelnytskoblenergo took place, at which the decision was made attempting to “dismiss” the acting General Director of the Company (Oleg Kozachuk) and appoint another person (Valery Gaponov) to this position. The word “attempted” is important here because this so called “Supervisory Board meeting” was attended by 2 people who had been appointed in violation of the procedure established by the Law On Joint Stock Companies. Namely that these appointments were not made publicly and were not as a result of open competitions.
The actions of the SPF in attempting to change the heads of the above-mentioned state-owned enterprises do not comply with the Cabinet of Ministers Resolution №256 of 25.03.2020, which recommends “to refrain from personnel changes in management bodies in public sector entities of strategic importance to the state economy and security work during the period of the pandemic quarantine.”
It seems that the SPF interpreted this recommendation in an entirely opposite way. There is also a hypothesis that when Ukraine is in quarantine a certain group of people with influence over the current management of the SPF (or having common interests with them), is trying to illegally and unreasonably change the leadership of Khmelnytskoblenergo and other state regional energy companies and are doing so to gain access to the financial resources of these enterprises.
2. POSITION OF KHMELNYTSKOBLENERGO MANAGEMENT
The management of Khmelnytskoblenergo does not need to hold on to their positions and are ready for their own dismissal and the appointment of new management of the enterprise only when this is in compliance with transparent and legal procedures, transparent competition, publicly and legally.
Only in such conditions, the management believes, it is possible to hope that the incoming management of the Company will continue effective (and favorable for the State) management of the enterprise. At stake is decent work for 3,500 employees of Khmelnytskoblenergo as well as the guarantee of energy security of all residents of the Khmelnitsky region.
3. CURRENT SITUATION
On July 16 the Khmelnytsky City District Court decided to reinstate Mr. Kozachuk to the position of Acting General Director of Khmelnitskobolenergo.
Despite this at the end of July, with the help of a "black registrar" representatives of the SPF once again tried to change in the register the head of the enterprise and appoint Valery Gaponov. Again, this was done in an illegal way. First, the "black registrar" ignored the existence of the Khmelnytsky Court of Appeals' decision to cancel the measures as a result of Khmelnytskoblenergo's lawsuit. Second, the "black registrar" completely ignored the existing two warnings in the register prohibiting the replacement of the head in the register because Oleg Kozachuk had been reinstated by a court decision.
According to data published on August 11, 2020, in the first half of 2020 the net profit of Khmelnytskoblenergo was double that of the same period last year and amounted to 48.7 million UAH (compared to 24.6 million UAH for first 6 months of 2019.) At the same time, the Company's net income increased by 11.2% from 765.1 million UAH in the first half of 2019, to 851.4 million in the year-on-year terms.
