Cabinet dismisses Kobolev, appoints Vitrenko as Naftogaz CEO

Ukraine’s Cabinet of Ministers, which is the sole
shareholder of Naftogaz (NAFTO), fired Andriy Kobolev from the position of the
company’s CEO and appointed Yuriy Vitrenko to this position on April 28. The
replacement was criticized by Naftogaz and western partners of Ukraine.

At a Naftogaz AGM on April 28, the cabinet voted to
recognize as unsatisfactory the work of the company’s supervisory board and
management board, according to the cabinet’s press release of the same day. The
reason for this recognition was the UAH 19 bln net loss reported by Naftogaz
for 2020. This is short of the planned UAH 11.5 bln net profit, as has been
approved by the cabinet just in December 2020 based on the estimates of
Naftogaz’ top management, the cabinet’s press release stressed. “Consequently,
the powers have been terminated of the company’s independent supervisory board
members, of the board members representing the state and of the head of the
management board Andriy Kobolev,” the release stated. Next, the cabinet wrote
that the AGM decided to re-elect all the same Naftogaz supervisory board
members, who will serve at their position until new board members are elected
or appointed.

Notably, Naftogaz’ charter, updated on the demand of the IMF in October,
stipulates that the company’s CEO can be dismissed by the shareholder only
based on recommendation of the supervisory board. As firing of Kobolev has been
not recommended by the board, Naftogaz called the dismissal a legal
manipulation. “The way in which a range of decisions were made today regarding
the governing bodies of Naftogaz demonstrates a reversion to the practice of
manual control of state-owned enterprises,” Naftogaz press release on April 28
stated, adding “it is a clear signal to investors … [that] the working
conditions of state-owned enterprises in Ukraine are unpredictable and may
change depending on political expediency”.

Spokesman of U.S. Department of State Ned Price
tweeted on April 28, “Respect for corporate governance, transparency, and
integrity in energy sector personnel appointments – whether government or
state-owned enterprises – is key to maintaining confidence in Ukraine’s
commitment to reform.” The ambassadors of the G7 countries in Ukraine also
tweeted, “Effective management & governance of SOEs in Ukraine, free from
political interference, is crucial to Ukraine competitiveness, prosperity,
& fulfilling its international commitments.”

Kobolev was appointed to the position of Naftogaz CEO
in March 2014. Under his governance, Naftogaz underwent major reforms to turn
into a profit-generating company and reached a major court victory
against Russia’s Gazprom. Vitrenko also joined Naftogaz at top management
positions in 2014, and for a long time was a close ally of Kobolev. However, in
late 2019 his powers in Naftogaz were limited and he started to openly
criticize the policies of Naftogaz. The apparent conflict between Vitrenko and Kobolev
ended in the formers’ dismissal from Naftogaz in July 2020. In December, Vitrenko was appointed as acting energy minister
and in February he recommended that the cabinet replace
Naftogaz supervisory and management boards.

Alexander Paraschiy: Vitrenko
could be at least as efficient at the position of Naftogaz CEO as Kobolev was,
so there is no risk to Naftogaz operations with the top management replacement.
However, the way the replacement was made indeed raises questions regarding the
corporate governance reform in Ukraine’s state-owned enterprises and it clearly
indicates that the “reform” has not changed the interaction between government
and managers/boards of state-owned companies. This is not news, but just
another display of poor institution governance in Ukraine.