‘Independence and trust from Western partners’. Why Ukrenergo CEO Kudrytskyi was fired

At a late-night meeting of the supervisory board of the National Energy Company "Ukrenergo" on September 2, the majority of the board members—4 out of 6—voted to dismiss Volodymyr Kudrytskyi, the head of Ukrenergo.

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Oleksiy Brekh, a member of the board responsible for developing the electricity transmission network, was appointed as the acting head. According to the company's charter, the supervisory board must now conduct a competition to select a new leader.

Even if this competition takes place, the initiators of the dismissal will find it easy to bring in their own people. Several candidates for the position of head of Ukrenergo have already been interviewed at the Presidential Office, including Oleksandr Gava, the head of the state exchange Operator of the Market, Dmytro Olefir, the head of the supervisory board of this exchange, and Artem Nekrasov, the head of the state enterprise Guaranteed Buyer.

How the decision to dismiss Kudrytskyi was made

Only two independent members of the supervisory board, Daniil Dobbeni and Peder Andreasen, voted against the dismissal. Another independent member, Roman Pionkowski, supported the decision, as did the state representative Yuriy Tokarskyi. Both have long supported Energy Minister German Halushchenko in his conflict with Kudrytskyi.

Surprisingly, other independent members, Yuriy Boyko and Oleksandr Baraniuk, who had previously ignored instructions from the Ministry of Energy, also supported the dismissal.

An anonymous participant in the process told LIGA.net that Boyko and Baraniuk had offered Kudrytskyi to "fight back." Baraniuk, an experienced corporate lawyer, even proposed a strategy for doing so.

However, Kudrytskyi reportedly declined the help, urging the board members not to block the dismissal decision. On August 30, at a meeting of the Supreme Commander-in-Chief's Staff, Deputy Head of the Presidential Office Rostyslav Shurma and Energy Minister Halushchenko convinced President Volodymyr Zelenskyy that Ukrenergo had failed to build protective structures against Russian missile and drone attacks.

A massive attack on August 26 disabled equipment at several substations that supply nuclear power plants to the energy grid. The grid is still being restored.

Opponents of Kudrytskyi presented this situation as a failure in building protection, although it was initially declared that second-level protection—arcs and gabions—was being built, which can withstand strikes from drones but not missiles. On August 26, the aggressor launched nearly 130 missiles along with a hundred Shahed UAVs across Ukraine.

After this, Zelenskyy reportedly asked Kudrytskyi to resign voluntarily. Understanding that effective work would be impossible without the trust of the Supreme Commander-in-Chief, Kudrytskyi agreed to the dismissal but insisted that it be formalized by a decision of the supervisory board.

As of the publication of this material, there were no official comments from the press service of Ukrenergo or Kudrytskyi.

Kudrytskyi's achievements

Kudrytskyi took over Ukrenergo in February 2020, replacing his colleague Vsevolod Kovalchuk, who left the company due to a conflict with the then-Energy Minister Oleksiy Orzhel. Kudrytskyi had previously worked as a project manager at the state-owned Ukrtransnafta, MHP of Yuriy Kosyuk, EastOne of Viktor Pinchuk, and the international consulting company Grant Thornton.

Ukrenergo is the operator of the electricity transmission system (TSO). The company operates a network of main transmission lines and high-voltage substations. The TSO is responsible for dispatching the energy system of Ukraine, administering commercial settlements in the system, and the balancing market.

Ukrenergo's revenue consists of income from the transmission tariff (528.57 UAH or $12.82/MWh) and the dispatching tariff (104.57 UAH or $2.54/MWh), which are paid by every electricity consumer in the country. This year, the company's revenue will be around 100 billion hryvnias ($2.4 billion).

Under Kudrytskyi's leadership, Ukraine successfully integrated its energy system with the European Network of Transmission System Operators (ENTSO-E) in March 2022, a goal pursued since the early 2000s.

Ukrenergo was the only company among energy companies and other customers of construction of protective structures for energy facilities that published their cost estimates.

The Ukrainian TSO had the trust of Western partners, thanks to which it attracted about $1.5 billion in financing from international financial organizations.

The company had an efficient procurement system. Prices for typical equipment purchased by the company were two or more times lower than similar goods purchased by other state corporations—Energoatom and Ukrhydroenergo.

The Ukrainian economic community and international partners unanimously supported Kudrytskyi after attacks on him from the Presidential Office and the Ministry of Energy.

Before the supervisory board vote, a letter in support of Kudrytskyi was signed by the European Bank for Reconstruction and Development (EBRD), the International Finance Corporation (IFC), and the EU Representative Office. These actions indicate that obtaining financing from these donors will be much more difficult after the destruction of Ukrenergo's independence.

"Perhaps the main complaints of our government against the leadership of Ukrenergo are the lack of complaints against Ukrenergo from investigative journalists and too high trust in Ukrenergo from Western partners. This is not forgiven...", Oleksandr Parashchiy, head of the analytical department of Concorde Capital, summarized public opinion on his Facebook page.

Systemic conflict with the Ministry of Energy: Why it began

In July 2019, Ukraine launched a wholesale electricity market, implementing the so-called third energy package of European rules. These rules stipulate that one owner cannot simultaneously supply and transport energy resources.

The country's leadership decided that generation would be separated from the Ministry of Energy's ownership. Companies such as Energoatom and Ukrhydroenergo would be spun off, while the TSO would come under the Ministry's control.

However, when the TSO returned to the Ministry of Energy in 2021, the company had already been corporatized. An independent supervisory board had been formed, meaning that while the Ministry formally owned the company, it could not manage it. In the interpretation of officials, the Ministry was responsible for the company's activities without the authority to issue orders.

Instead, this reform helped Ukrenergo build a positive reputation among Western partners, such as the Energy Community—the governing energy body of the EU—and ENTSO-E. This reputation allowed the company to obtain financing from international organizations and advance towards joining ENTSO-E. Partners were confident that the funds provided would not be misappropriated or spent on populist government goals.

A previous attempt to take control of Ukrenergo occurred in December 2021. At that time, the term of the current supervisory board expired, and its functions were transferred to the shareholder—the Ministry of Energy. Using this opportunity, Energy Minister German Halushchenko attempted to change the company's management by appointing his own people.

At that time, the Energy Community and other Western partners "expressed concern." The ministry's attack was repelled, but the conflict between Halushchenko and Kudrytskyi became systemic.

In the fall of 2023, at another Staff meeting, Halushchenko and the energy overseer in the Presidential Office, Rostyslav Shurma, showed President Volodymyr Zelenskyy photographs of Ukrenergo substations that were supposed to prove the lack of protective construction work.

These photos were taken by Ministry of Energy employees while they were part of delegations at the substations. They photographed transformers damaged by missiles behind a fence or areas without protection.

At that time, Zelenskyy expressed dissatisfaction with Kudrytskyi. However, Kudrytskyi managed to explain why these accusations were manipulative. A year later, after another large-scale missile and drone strike, these accusations were revived. This time, Rostyslav Shurma and German Halushchenko achieved their goal.