28 Nov 2022 11:57

Former head of Ukraine's Gas Transmission System Operator not competing for CEO position

MOSCOW. Nov 28 (Interfax) - The former head of the Gas Transmission System Operator of Ukraine (GTSOU), Sergei Makogon said he will not participate in the competitive process announced by GTSOU owner JSC MGU to select candidates for the position of the company's new CEO, calling it a "circus" and recalling that MGU previously wanted to set up a management board at the company to replace the CEO.

"Before my dismissal they called for introducing a management board at the company instead of the position of general director. Supposedly it's too much power in the hands of one person and the best European practices require the existence of a collegial management board, so a management board needs to be introduced. I see that now MGU is no longer demanding a management board and just wants to appoint its own sole executive," Ukrainian media reported Makogon as saying on social media.

He said MGU is ignoring the position of the Energy Community, the organization responsible for certifying the operator. In addition, the announced competition contradicts the position of the World Bank regarding the target model for corporate governance at GTSOU, which calls for first creating a new supervisory board at the operator, holding a competition to select supervisory board members and then a competition to select members of a management board.

Under this model, there were plans to liquidate MGU altogether as an unneeded layer, Makogon said, adding that he has "no plans to participate in this circus."

However, an open selection process is "always good," he said. "MGU could not push its own candidate, selected without any competition, through [Ukraine's Cabinet] twice. I hope that this competition is not just a screen [...]," Makogon said.

MGU, the sole owner of GTSOU, decided on September 16 to dismiss Makogon from the position of GTSOU CEO. Makogon said earlier that he planned to dispute his dismissal.

When MGU was created, it was expected to become the operator of Ukraine's gas transmission system. However, in the process of the division of state oil and gas company Naftogaz Ukraine by type of business, GTSOU was created and it was given responsibility for managing the transmission system.

GTSOU was handed over to MGU and at the same time the government put the gas transmission system under the management of the new operator for 15 years. The company became the licensed operator on January 1, 2020.

In October 2021, the director of the Energy Community Secretariat, Janez Kopac said that MGU had served its purpose and could be liquidated.

In June 2022, MGU's supervisory board approved a merger with GTSOU. In August, the MGU board decided on a candidate for acting CEO of GTSOU, but did not name him publicly. Meanwhile, also in August, Ukraine's Cabinet refused to approve the candidate for acting CEO.

After this, the World Bank called on the Ukrainian authorities to adhere to the corporate governance procedures of the Organization for Economic Cooperation and Development when appointing the CEO of GTSOU.

The company's deputy CEO for development and transformation, Pavel Stanchak was named acting CEO of GTSOU.

The Energy Community Secretariat, in a letter to Ukraine's prime minister and energy minister in late September, called for the country to accelerate the reform of GTSOU's corporate governance system and simplify the existing two-tier management structure by adopting a new charter and creating a new supervisory board at the operator.

At the end of September, MGU announced a tender to provide services to select candidates for CEO of GTSOU and declared Talent Advisors, a representative of British executive search firm Odgers Berndtson, the winner. On November 25, MGU announced an open selection of candidates for GTSOU CEO. Applications will be accepted until the end of day on December 12, 2022.