Ukraine dismisses head of Energoatom reflecting political tensions

2 December 2019

Ukrainian Prime Minister Alexei Goncharuk on 27 November announced the dismissal of Yuri Nedashkovsky, head of nuclear utility Energoatom.

“It was the initiative of the Minister of Energy and the Environment Alexei Orzhel,” Goncharuk said. He added, “We are now dismissing dozens of people who worked in previous years. In most cases, the reason for dismissal is incompetence and human corruption. He said, “This was long overdue. And there are three reasons for this: the deterioration of Energoatom’s performance, the increase in the number of negative incidents and a procurement investigation with which the deputy of the previous convocation is associated” [he was referring to businessman Nikolai Martynenko, one of the closest associates of Nedashkovsky and of former Prime Minister Arseniy Yatsenyuk.

A statement on the energy ministry’s website the following day said Nedashkovsky, who took office in 2014, had been sacked for reasons including inefficient management, suspicion of embezzlement of state funds and mismanagement of procurement. The statement said procurement problems had led to defective products being used at nuclear plants. It said a fire at an unnamed nuclear plant was due to the supply of substandard transformers.

The ministry noted that schedules had not been met for major repairs at nuclear plants, which led to underproduction of electricity and an increase in expenditure. Energoatom “constantly did not fulfil” financial plans set by the ministry, the statement said. The Ministry of Energy and Energy added that Nedashkovsky’s dismissal would not affect the operation of Ukraine’s nuclear plants and that a competition for his replacement would be announced in the near future.

More details were given by the Ministry’s press service, which identified the unnamed NPP as Khmelnitsky. It said examples of ineffective management include examples of fire of a transformer and generator at unit 1 of the Khmelnitsky nuclear plant during startup after repair. The increase in the number of violations in nuclear power plant operation since 2014 had increased from 10 to 22 in 2018.  

In addition, Energoatom's financial indicators are deteriorating, including EBITDA and return on assets. Other reasons for the dismissal were identified as non-compliance with the schedules for major and ongoing repairs at NPPs, a significant increase in loan servicing costs (33% more than planned), failure to fulfill loan agreements with the European Bank for Reconstruction and Development and Euratom (70% of all long-term obligations), an increase in currency risks, mismanagement in procurement. The ministry also noted that the dismissal is connected with a case in which the former people's deputy and former head of the Verkhovna Rada committee on fuel and energy complex, Nikolai Martynenko, was implicated. The special anti-corruption prosecutor’s office had charged him and several other persons with embezzlement of €6.4 million from Energoatom relating to contracts with the Czech company Skoda JS and Bradcrest Investments.

Also on 28 November, addressing an Investment Forum on Renewable Energy, the co-founder of the Ukrainian Association of Renewable Energy, a member of the Innovation Council under the Prime Minister, Igor Tynny, also criticised Nedashkovsky. He asked why three nuclear waste storage facilities have been built at the same time in the Chernobyl zone – one for used fuel from Chernobyl NPP, one for other used fuel and one for liquid radwaste – all surface facilities. “If they were concentrated in one place, it would be more efficient, it seems to me. The number of staff could be optimised."

An investigation into Martynenko by Ukrainska Pravda in November 2015 revealed that Swiss law enforcement officials had been investigating the case against him for almost two years on suspicion of bribery and money laundering. The paper said he had been siphoning money from nuclear fuel contracts using intermediary companies in Kazakhstan and Austria. Ukrainska Pravda cited an investigation by the Ukraine Security Service (SBU), which found evidence of corruption in the supply of uranium from Ukrainian uranium company VostGok to Energoatom involving these intermediary companies resulting in a loss of $34 million to the State.

The paper traced the relationship between Martynenko and Nedashkovsky back to 2000, the first time that Nedashkovsky headed Energoatom. Nedashkovsky had previously been director of the Khmelnitsky NPP. He headed Energoatom from July 2000 to June 2002, from February 2005 to October 2006 and from June 2008 to 2012. His appointments coincided with pro-Western governments coming to power in Ukraine. He managed to retain his post for some time under Viktor Yanukovych, generally seen as pro-Russian, but was finally dismissed in 2012 after initial attempts to introduce Westinghouse fuel into South Ukraine NPP caused damage when the fuel assemblies became distorted. He was reappointed in 2014 after Yanukovych was replaced. Ukrainska Pravda said market participants and energy experts polled by the paper “unanimously argue that it was precisely thanks to the political influence of Martynenko that Nedashkovsky had been in office for so many years”.

In the wake of Nedashkovsky’s dismissal, Energoatom’s press service issued a statement saying the accusations were untrue and that energy minister Oleksiy Orzhel was “pro-Russian” and had shown “disdain” for the nuclear industry. It said the accusations were  “manipulative and false”.  The press service said workers from Energoatom had taken part in a protest rally.

Energoatom press office said the company paid UAH11.5 billion ($477m) in taxes, implemented investment projects worth UAH 12.8 billion, and generated nearly 55% of Ukraine’s electricity. It added that Energoatom had successfully passed all investigations by the World Association of Nuclear Operators and the International Atomic Energy Agency. It said the Energy Ministry had been blocking the company’s financial to strategic plans for two months.

Earlier the same day, the Ukrainian Nuclear Society called on Ukrainian President Volodymyr Zelensky to prevent Nedashkovsky’s dismissal, noting the participation of Nedashkovsky, a number of joint projects with Europe and the USA aimed at reducing the dependence of the Ukrainian nuclear industry on Russia.

In a detailed report on the dismissal, Elena Golubeva in 112.ua said: “Nedashkovsky’s tense relations with the Minister of Energy and the Environment, Alexei Orzhel, were known.” Earlier in November, the Energy Ministry had taken a decision not to join VostGOK to Energoatom, but to seek a private partner for the only uranium miner in Ukraine saying there would be no joining of one inefficient enterprise to another inefficient enterprise. Another contentious issue was some amendments in parliament in September which had allowed the import of electricity from Belarus and Russia. Energoatom had taken the matter to the Antimonopoly Committee of Ukraine.    

Energoatom operates Ukraine’s four operating NPPs (Zaporizhzhya, Rivne, South-Ukraine and Khmelnitsky) comprising 15 nuclear power units, of which 13 are VVER-1000 and two are VVER-440, with a total installed capacity of 13.8MWe.



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