26 Aug 2022 16:07

World Bank calls on Ukraine to abide by OECD corporate governance procedure in appointing GTSOU head

MOSCOW. Aug 26 (Interfax) - The World Bank has called on the Ukrainian authorities to adhere to the Organization for Economic Co-operation and Development (OECD) corporate governance procedure when appointing the general director of the Gas Transmission System Operator of Ukraine (GTSOU).

The World Bank said in a letter to the Ukrainian energy minister the OECD principles of good corporate governance suggest that the appointment and selection of a general director is the sole responsibility of the GTSOU supervisory board after its establishment, according to Ukrainian media.

A copy of the World Bank letter has also been forwarded to the Finance Ministry of Ukraine.

Therefore, the World Bank strongly recommends all of the aforementioned measures be carried out by the operator's independent supervisory board after it is elected through a transparent and merit-based nomination of candidates and their appointment.

In this regard, the World Bank proposed arranging a meeting between a group of its specialists and representatives of the Ukrainian Energy Ministry, which is now drafting an alternative new GTSOU charter in order not to lose the due independence of the company's supervisory board.

It will ensure that the World Bank, as well as other development partners, can provide optimal support to Ukraine in its energy strategy and investment in coming years, it said.

The World Bank also proposed sending a week-long mission to Ukraine, where it could start working from September 4 to further discuss these issues and outline support on a broad scale.

According to the World Bank, its group has been working with the Ukrainian government for several years to enhance corporate governance of state-owned enterprises in line with OECD principles. In particular, the models developed for GTSOU have been approved by the Secretariat of the Energy Community and the European Union.

This approval and efficient corporate governance of state-owned enterprises in the energy sector is, on the whole, critical to their successful integration with European energy markets and to Ukraine's future energy security, the World Bank said.

As reported, when JSC Mahistralni Gazoprovody Ukrainy (MGU, Trunk Gas Pipelines of Ukraine) was established, the idea was that this company would become the operator of Ukraine's gas transmission system. However, GTSOU, which was set up as a result of Naftogaz of Ukraine's unbundling, was given Ukrtransgaz's functions as the Ukrainian gas transmission system's operator.

GTSOU was subsequently transferred to MGU. Simultaneously, the Ukrainian government appointed GTSOU the operator of the country's gas transmission system for 15 years. The company became a licensed operator on January 1, 2020.

Director of the Energy Community Secretariat Janez Kopac suggested in October 2021 that MGU had accomplished its mission and could be disbanded.

In June 2022, the MGU supervisory board approved the company's merger with GTSOU, which is currently wholly owned by MGU. MGU on August 11, 2022 made its decision on a candidate for the post of GTSOU acting general director, but declined to disclose the candidate's name.

The supervisory board also said that it had not made decisions on any other candidates for GTSOU general director. Several media outlets said earlier that the Energy Ministry in its August 12 letter asked MGU to consider Deputy Energy Minister Mykola Kolisnyk's candidacy at a special meeting.

The Ukrainian government on August 9 refused to approve MGU's choice of a candidate for the post of GTSOU acting general director without debate, citing the absence of suggestions on such a candidate.

Serhiy Makohon has been heading GTSOU since May 2019.