Table of Contents
See previous part: How Russia prepared to seize Ukraine’s nuclear energy. Part 4: Billion-Dollar Repository Fraud
Ukraine’s Energy Export Opportunity
You probably thought that the topics have been exhausted and the story is coming to an end, didn’t you? You’re mistaken; there is still a lot to tell… Because the “untiring villains” continue to steal and destroy Ukraine’s energy sector.
As you know, on March 16, 2022, Ukraine’s energy system was prematurely synchronized with the European energy system, creating a technical opportunity for exporting Ukrainian electricity to European Union countries and opening new possibilities and markets for Ukrainian businesses.
The fish was practically swimming into their hands, so the criminal group of Derkach/Galushchenko/Kotin/Boyaryntsev couldn’t ignore this fact, considering the circumstances in the European energy markets. The export of electricity presented limitless opportunities!
Back in the summer, in the Alpha and Omega program Bloody Electricity, the author warned about a possible scheme to create an artificial monopoly on the export of Ukrainian electricity:
Was there a plan regarding this matter by Derkach’s group? Actually, there were two.
Firstly, they decided to monopolize the export de jure and followed the usual path by attempting to push through a law on electricity export without auctions. However, they immediately received a wet slap in the face because the proposed concept of the law does not comply with the Law of Ukraine On the Electricity Market, the requirements of regulations and directives of the European Union. In short, it doesn’t align with anything and cannot become a law based solely on the energy minister’s desire.
Monopoly Plan B: Resurrecting the Energy Company of Ukraine
Then they took a different path and decided to monopolize the export de facto, but in a way that wouldn’t raise any suspicions. To do this, the allies of Derkach brought out of the shadows State Enterprise Energetychna Kompaniya Ukrainy (Energy Company of Ukraine), which was established in 2004 and managed the state’s corporate rights in the electricity sector until 2014. It was later sent for liquidation as its energy assets diminished due to privatization.
The main focus of these virtuoso adventurers was to save time by creating the illusion of a supposedly “historic” company that had no connection to them whatsoever. They simply underwent a minor rebranding by appointing the infamous Vitaliy Butenko as its director. He was known in the recent past as the head of the company LLC TET Group, which was involved in the “schemed” import of electricity from Belarus to Ukraine, and before that, he served as the commercial director of DTEK.
Indeed, from the very beginning, Butenko’s State Enterprise Energy Company of Ukraine attempted to secure working capital through banking institutions because funds were needed for the purchase of electricity and access to the grid crossing.
The payment for grid crossing was high, reaching 15-20 cents per kWh during peak hours. However, such “trivialities” never stopped Derkach’s team, as it could always extract the necessary sum from the government under any circumstances. Furthermore, the project was profitable since the team bought electricity at 7 cents per kWh and sold it for 35-40 cents per kWh. But something went wrong in the initial stage — despite all the profitability indicators, banks refused to provide revolving credit funds to the State Enterprise Energy Company of Ukraine deeming the company high-risk.
However, thanks to the administrative resources of the State Enterprise Energy Company of Ukraine, it obtained exclusive conditions. The final defibrillator came in the form of Energoatom, which itself requires resuscitation.
Interest-Free Money with No Repayment
Such an order (attached) is a direct initiative of Minister Galushchenko and is based on the First Vice Prime Minister — Minister of Economy of Ukraine, Yulia Svyrydenko (since the amount of the revolving interest-free financial aid of 500 million UAH (13,6 million USD) exceeded 25% of the company’s asset value).
And so, a contract (attached) is signed between the State Enterprise Energy Company of Ukraine and Energoatom for the transfer of 500 million UAH to the former on a non-repayable basis for the formation of working capital.
The most interesting thing about this is not even thatEnergoatom lacks the legal authority and necessary permits for this transaction, but rather that it cannot meet its own needs by securing credit funds for this purpose. It turns out that the loan provided to Energoatom in May by UkrGasBank in the amount of 1.5 billion UAH (40,8 million USD) for the purchase of fresh nuclear fuel from Westinghouse is being funneled through intermediary companies under a different guise.
However, at the end of the signed contract, in a microscopic subsection, it is indicated that this loan does not fall under the definition of financial services, and therefore, it is not subject to the Law of Ukraine No. 2664-III dated 12.07.2001 On Financial Services and State Regulation of Financial Services Markets. The appropriate permits are required for such services, which nobody possesses. The participants in the regatta are well aware of the responsibility for exceeding their official powers, yet they still do so, attempting to cover up their dubious activities with a flimsy fig leaf.
You may think that this is the climax of absurdity, but no… it’s only the beginning.
As the author mentioned earlier, the primary objective of the working capital is to purchase electricity for further resale. But why buy electricity when you can get it for free?
From the very beginning, Energoatom granted exclusive rights to the Energy Company of Ukraine, contracting a significant volume of electricity to it at a symbolic cost, with a payment deferral of 6 months. However, this turned out to be insufficient. Energy Company of Ukraine additionally purchased electricity from DTEK’s thermal power stations at various market segments but at indirect prices. You may wonder how DTEK fits into this scheme.
The Energy Company of Ukraine begins exporting electricity at a loss, manipulating the market by trying to obtain the entire transmission capacity at NPC’s auctions, effectively creating a monopoly. However, realizing the foolishness of its wastefulness, it simply divided the market with DTEK. And abroad, a “friendly” trader awaits, who has already acquired rights to various cross-border interconnections in multiple directions. By obtaining cheap Ukrainian electricity, they further sell it on more expensive European markets, consolidating all the profits for themselves. As a result, the entire margin of such trading settles in Europe and is distributed among all the beneficiaries of this process, while the losses remain with the Ukrainian state-owned companies.
For a better understanding, the costs incurred by the Energy Company of Ukraine for grid access were not offset by the price difference between the spot markets in Ukraine and the European countries where the electricity was sold. Therefore, the volumes of the public service obligations, paid by the exporting trader to the guaranteed buyer (80% of the price difference between the electricity markets in Europe and Ukraine, minus the costs of transmission and fees) were pre-optimized.
Overall, the economic performance indicators of the Energy Company of Ukraine during that period show a negative balance. Therefore, there is no mention of returning the funds raised or making deferred payments to Energoatom for electricity.
In essence, the state trader did not engage in export activities to maximize profit. It merely served as a “transshipment point” on the path of electricity to Europe. If the Energy Company of Ukraine as the monopolistic state trader, aimed to maximize revenue in European markets, it would directly sell electricity to countries with the highest prices per MWh.
Once again, the crooks are playing everyone for a fool, because real competition from private traders would bring more money to state-owned enterprises, saturate the industry with money, support the wartime economy, and Energoatom could spend 500 million UAH on the purchase of critical spare parts and nuclear fuel to ensure its own operation.
But it gets even worse. The Russian army is bombing infrastructure objects, and since October 11, there is no more export. The 500 million UAH have been successfully received, and there is no means to repay the debts, but that is unnecessary and is actually mentioned in the contract. Yes, of course, there is a standard provision stating that the funds should be returned by December 31, 2022, and failure to do so would result in penalties and the withdrawal of funds from all borrower’s bank accounts. However, there is an ironclad “Confidentiality” clause! And it precisely exempts the parties from any responsibility or obligation to repay the loan because it stipulates that for 10 years after the expiration of the contract, the parties undertake not to disclose any information about it to anyone, including government authorities! As all legal terms will have expired by then.
Therefore, the financial assistance was planned to be non-repayable from the very beginning.
And here, by the way, arises a logical question — why didn’t Energoatom independently export its own electricity? Within the structure of NNEGC, there is a division called Energoatom-Trading with over 100 employees who receive salaries. This division was created, among other things, to generate profit through efficient sale of electricity, including on international markets.
It would seem that Derkach’s team, as always, did a “great job” — no money, no electricity, no repayment of the loan.
Selling Air: The Final Scam During Wartime Blackouts
On November 23, 2022, during a rocket shelling that led to an emergency situation in the power system of Ukraine, the Derkach team managed to outsmart itself. Energoatom ceased electricity production but did not cancel the bilateral agreements for its sale. Thus, during the period from November 24 to 27, Energoatom carried out the sale of “air,” fully aware of the impossibility of generation after the disconnection. So, what’s wrong with that, you may ask?
The total value of the imbalances created by nuclear power plants amounts to over 870 million UAH (23,7 million USD) which need to be paid in the balancing market by the Energy Company of Ukraine, receiving these funds from NNEGC.
To prevent this “miracle ship” from sinking prematurely, the National Commission for State Regulation of Energy and Public Utilities was involved, which hastily made a decision not to include the created imbalances in the financial guarantees volumes and prevent the Energy Company of Ukraine from defaulting.
So, another crime of the Derkach team is evident: Energy Company of Ukraine is as a conduit for cynical money laundering, not only from state enterprises but from the country itself. And this is happening while the country is bleeding.
For some reason, it seems to the author of the article that the next audit of Ukraine’s energy market will have to be carried out by the armed forces, and it will happen much sooner than some expect.
Originally posted by Victor Kurtev on Hvylya. Translated and edited by UaPosition
