Mind nominations 2022: Companies and people who impressed during the year. Fuel and Energy Complex
Who proved themselves the best in this breakneck war year or vice versa
Mind is taking stock of the year, marking out persons and structures in each sector of the national economy that have distinguished themselves especially strikingly after 24.02 – even if not always successfully – or encountered unprecedented challenges, even general crisis adjusted. The list is not any rating, though it reflects the opinion of the industry specific part of our team about what were the most important things that occurred in the operation of this or that industry.
"Victim of the Year" is a company/brand that suffered irreparable damage due to the war.
"Unbreakable of the Year" is a company/brand significant for the industry and suffered huge losses due to the war, but managed to resume and continue its work.
"Deal of the Year" is the most meaningful deal for the country/industry, the largest in size and/or impact, becoming even more important given the war and future reconstruction of the country.
"Positive Surprise of the Year" is a company/brand/person who, against the backdrop of armed aggression, managed to become a leader/increase profits/take a proactive position, becoming a surprise for the industry/professional community/markets and contributing to additional stability of the industry/country.
"Disappointment of the Year" is a company/brand/person who, against the backdrop of armed aggression, having huge resources, failed to properly dispose of them or took a destructive position.
"Unlucky of the Year" is a company/brand/person who had invested heavily in a project/asset/niche on the eve of the war, but the war destroyed it radically or the initiative lost its relevance for many years.
"Failure of the Year" are structures, individuals, and institutions that made the most unsuccessful/controversial/inappropriate decisions in wartime.
War's beneficiary" is a company/brand/person who gained more profit than losses in the face of armed aggression.
Since the operations format and the intensity of events differ considerably in various fields, there can be from four to seven nominees in each industry.
The next section of Mind Nominations 2022 project is the Fuel and Energy Complex.
The situation in the fuel and energy sector and the level of energy security that the government is able to provide is a touchstone of the maturity of public policy and the quality of public administration. The events that have been unfolding in Ukraine after February 24 underline its systematic importance.
The interests of the state, business and every citizen overlap within the energy economy sectors. Its highly sensitive social component makes it the focus of not only government officials managing the economy, but also the President of Ukraine, who pledged to "take care of the good of the Motherland and the welfare of the Ukrainian people" in his oath.
And in the annual address to the Verkhovna Rada, delivered yesterday, December 28, by Volodymyr Zelensky, the power industry was given a special role.
"Now that the enemy has set out to destroy our energy sector, we aim to lead its transformation in order to counter any threats – military, political, economic or even climate. We must – and will – become a leader in building modern green energy. This will allow creating a decentralised energy system that cannot be disrupted by missile strikes," the President said. He also said that the promotion of renewable energy sources, nuclear generation and hydrogen energy would enhance Ukraine's role in Europe.
All these are strategic guidelines. And now our energy economy is undergoing the sustainability test. According to First Deputy Minister of Internal Affairs Yevgen Yenin, the enemy destroyed 702 critical infrastructure facilities: gas pipelines, power substations, bridges, etc.
Zaporizhzhia Nuclear Power Plant has been occupied by russian troops since the spring, being used by them as a military base. In the conditions of war, the authorities have not only to respond to foreign aggression, but also to make difficult decisions to eliminate the consequences of domestic contradictions, the underpinnings for which were laid several years ago by poor public administration policy.
But despite the mass terror at the hands of the enemy, the heating season has successfully started and continues in Ukraine, and the extremely tough conditions are not a hindrance to this. The fuel and energy sector's distinctive role in the security of the state makes it very hard to assess its current state during the war. Yet, we can draw some interim conclusions, with which Ukraine is moving closer to the Victory and to the reconstruction of its energy.
Here are Mind nominations as for year-end 2022 in the energy sector
"Victim of the Year"
DTEK – as a result of russian aggression, 10% of Ukraine's energy infrastructure was destroyed and at least 40–50% damaged. Most of these assets belong to Rinat Akhmetov's holding
In 2010–2012, through special privatisation, Rinat Akhmetov's company gained control over 70% of thermal generation and 80% of coal production. These are manoeuvring capacities, which are essential for the functioning of the system. They enable reducing the output of electricity supplied to the grid when demand falls, or adding it when it grows. Therefore, when DTEK needed to "to pull strings" of the state to get more income, the company's power units went out of operation suddenly, and there was a lack of coal in the warehouses.
DTEK's dominant position in the energy system provided it with an exclusive market and political power capable of replacing the state authorities. Since the beginning of the full-scale invasion, this power has kept the Ukrainian energy system operating reliably in the face of massive enemy missile attacks.
As of early December, according to preliminary estimates by DTEK, russian strikes destroyed about a tenth of Ukraine's energy infrastructure and damaged at least 40–50%.
Read also: Oligarchs of the new time: How the war will change the energy sector of Ukraine
"Unbreakable of the Year"
Ukrenergo National Power Company, which restores and provides energy supply to consumers throughout the country in extremely arduous conditions despite regular shellings
On February 24, when russia started an unprovoked full-scale war against Ukraine, our power system was completely disconnected from power systems of russia and belarus. For three days it worked in an isolated mode. During this period, more than 6,000 policemen ensured enhanced protection of critical energy infrastructure facilities.
Having successfully passed the energy independence exam, Ukraine joined the energy system of continental Europe.
Since March 16, 2022, the Ukrainian grid has been operating in synchrony with the continental ENTSO-E and has become part of the European energy space.
In early June, Ukraine received the right to export its energy to Europe. Professionals of the state transmission system operator Ukrenergo NPC managed this difficult process of European integration. Now they handle the Ukrainian energy system in the face of massive attacks on the infrastructure, which have been ongoing regularly since October.
Additionally, Ukrenergo also holds auctions for access to interstate power grids for exporting and importing electricity. For instance, the state-run energy trader Energy Company of Ukraine has already made the first test deliveries of electricity from Romania and Slovakia. The need for such operations arose due to the missile attacks on the energy infrastructure, which caused an increase in the electricity shortage in the system. And thus, it greatly increases the risks for the progress of the heating season.
Read also: Kyiv is experiencing its first absolute blackout: Water and electricity supply is restored faster than expected, mobile connection is more challenging
"Deal of the Year"
Nationalisation of energy assets owned by Ukrainian and russian financial-industrial groups
Supplying energy carriers in the context of russian aggression and economic turmoil provoked by the war became a crucial issue of national security. An additional risk factor were oligarchs and foreigners with a certain reputation who had control in this area. Therefore, the authorities intervened to protect the interests of the government and consumers.
The National Security and Defense Council imposed sanctions against Dmytro Firtash and russian citizens who control VS Energy group. Igor Kolomoisky was stripped of Ukrainian citizenship by President Volodymyr Zelensky's decree as he also holds passports of Israel and Cyprus.
These moves were a precursor to depriving them of their influence in particularly vulnerable assets of the Ukrainian energy sector. Gas distribution companies (oblgazes), which were under the influence of Dmytro Firtash (making approximately 70% of gas networks delivering gas to end consumers), were nationalised. The government also confiscated VS Energy's stakes in five distribution system operators (oblenergos), and at the end of the year the state took full control of the Ukrnafta oil company and the Kremenchuk refinery, where it had already had a stake, from Igor Kolomoisky.
Gas Distribution Networks of Ukraine Company was established to integrate the nationalised stakes of oblgazes within the structure of Naftogaz of Ukraine NJSC. The company was headed by Denys Myrgorodsky, the founder of the law firm Dynasty Law & Investment.
Former russian shares in oblenergos passed to a new dedicated state company, Ukrainian Distribution Networks, headed by Mykhailo Ilnytsky, Chernigivoblenergo's former director. And Sergiy Koretsky, former CEO of the WOG fuel station chain, led two enterprises at once: Ukrnafta and the Kremenchuk Oil Refinery of Ukrtatnafta.
All these government’s decisions during the war made it possible for market experts to hope that the settlement of the crisis issues in managing these assets will reach a civilised Western level, when problems are solved in the meeting rooms of law firms, and not at the mafia sit-downs. So far, the new top management carries out an audit of the economic activities of nationalised enterprises to evaluate the future prospects of their business.
Read also: Shares of five strategic enterprises were passed to the state. Who will the plants of Kolomoisky, Boguslayev, Zhevago and Grygoryshyn work for now?
"Surprise of the year"
Ukrgasvydobuvannya State Joint Stock Company – in spite of the war, the company continues to expand drilling and production of domestic gas
This state-owned gas producing enterprise is a true star in the structure of Naftogaz of Ukraine, not just because it is the largest gas production company in Central and Eastern Europe. Regardless of the martial law and shelling of the infrastructure, the company continues producing gas at all its facilities, except for those located in close proximity to the frontline.
The progress is quite optimistic. Particularly, because of the Armed Forces of Ukraine that liberated the territories in the east, Ukrgasvydobuvannya regained control over the drilling rigs that had been in the occupied lands in the combat zone for about seven months. Most of them have already resumed drilling after repair.
In October 2022, the company’s drilling division, Ukrburgas, set a record for monthly drilling penetration – more than 30.5 metres.
In total, Ukrgasvydobuvannya has drilled 47 new wells this year. This figure is almost the same as before the war.
Ukraine expects to produce 18.5 billion cubic metres of natural gas in 2022. Last year's figure was 19.8 billion cubic metres, of which private companies accounted for 5 billion cubic metres.
"War's beneficiary"
Fuel traders who managed to gain a unique experience of market restructuring amid the destruction of 100% of pre-war fuel supply sources
With the beginning of the war, fuel supplies from belarus and russia, as well as by sea, ceased by default. Up to 20% of total consumption was provided by domestic producers: Kremenchuk and Shebelynka refineries. But the latter, owned by Naftogaz of Ukraine, was shut down on February 26 due to war hazards. In early April, after a massive missile attack, the Kremenchuk refinery also stopped functioning. Moreover, the enemy destroyed about 30 largest petroleum depots.
Ukrainian petrol stations had to completely restructure their logistics, which was confined to imports through the western border. On this way, traders faced speculative price tags from foreign suppliers and sky-high logistics costs. In particular, due to the need to supply 40% of fuel by tank trucks.
Until May, the Cabinet of Ministers had regulated prices at petrol stations, preventing most of the free batches in Europe from entering the market. Due to the aggravation of the deficit and in order to quickly fill the market, the government abandoned state regulation in mid-May, which resulted in the market overcoming the crisis within a month.
Thanks to the construction of a new supply system, the situation with fuel in Ukraine is stable. Still, there are risks connected with the changes in the EU markets due to the embargo on russian petroleum (effective since December 5). Some European refineries need more time to fully replace raw materials from russia.
Read also: Mind nominations 2022: Companies and persons, who impressed during the year.
If you have read this article to the end, we hope that means it was useful for you.
We work to ensure that our journalistic and analytical work is of high quality, and we strive to perform it as competently as possible. This also requires financial independence. Support us for only UAH 196 per month.
Become a Mind subscriber for just USD 5 per month and support the development of independent business journalism!
You can unsubscribe at any time in your LIQPAY account or by sending us an email: [email protected]
