Anti-corruption court refuses to reinstate Rotterdam Plus investigation

The High Anti-Corruption Court of Ukraine ruled on
Sept. 24 to uphold the decision of an anti-corruption prosecutor to close an
investigation of the so-called Rotterdam Plus case, local media reported the
same day. The complaint against the decision was initiated by former MP Viktor
Chumak, an active participant of Ukraine’s NGO community. The court upheld a
prosecutor’s conclusion that not enough evidence has been collected to claim
there was a crime in adopting in March 2016 the Rotterdam Plus methodology for
setting the forecasted electricity price. The National Anti-Corruption Bureau
(NABU) commented that the ruling can be appealed in the Appellate Chamber of
the High Anti-Corruption Court. The decision can also be overturned by the head
of the Specialized Anti-Corruption Prosecutor’s Office or by the Prosecutor
General, NABU said.

Recall, the Rotterdam Plus case was closed by an
anti-corruption prosecutor on Aug. 28. Rotterdam Plus refers to an approach of
calculating the forecasted price of electricity produced by coal-fired thermal
power plants. Introduced in March 2016 by the state power sector regulator,
this approach determined coal prices based on the import parity principle. That
is, as if all the coal for power plants is imported from the hub of
Amsterdam-Rotterdam-Antwerp (including delivery costs), even though coal was
never delivered from there. In August 2019, NABU alleged that the Rotterdam
Plus approach (namely, the coal delivery costs included in the formula) had inflicted UAH 18.9 bln in losses
to Ukrainian electricity consumers in 2016-2017, of which UAH 14.3 bln
benefitted private holding DTEK Energy (DTEKUA). NABU named as suspects eight
individuals (including power sector regulator officials and DTEK employees) in
a conspiracy that led to the introduction of this approach. DTEK has
consistently denied any wrongdoing and has actively defended the Rotterdam Plus
pricing approach.

Alexander Paraschiy: Although we
are sure Rotterdam Plus was introduced based on misleading assumptions about
Ukraine’s coal balance, we also remain sure that it will be extremely hard for
the anti-corruption bodies to prove any (1) wrongdoing or (2) conspiracy in
this case. So far, we see that NABU has failed to prove the former. To prove
the latter, investigators have yet to find some benefits to the regulator’s
officials provided by DTEK managers. This will be even harder to prove, as any
conspiracy is very likely to have been made not at the level of DTEK and the
regulator’s officials, but at the highest level (between the direct
representatives of DTEK’s owner Akhmetov and then-president Poroshenko).

All in all, we do not believe these investigations
of the Rotterdam Plus case will bring any tangible result. That said, this case
won’t have any consequences for DTEK Energy fundamentals or its reputation.