Smart Holding, A Shareholder of Kharkivoblenergo and Kharkivenergozbut, Reports Disruption of Preparations for the Energy Companies’ Privatization and Corruption Schemes


Yesterday, online general shareholder meetings were held in two large companies having strategic importance for the economy and security of Ukraine – Kharkivoblenergo Joint-Stock Company and Kharkivenergozbut Private Joint-Stock Company.

The voting of the shareholders, including the State of Ukraine represented by the State Property Fund (SPF) with a 65% stake and Smart Holding (Cyprus) with a 29.79% stake, was administered by the National Depository of Ukraine.

Following the consideration of the general shareholder meetings’ agenda, a representative of Smart Holding (Cyprus) voted, in particular, against the approval of the companies' annual reports for 2019-2020, and also voted for the decision to recognize unsatisfactory the performance of both companies’ executive bodies in the same period.

However, the main negative point of the annual shareholder meetings was the fact that the Supervisory Boards in either of the two companies were not established.

This has led to the situation that starting from today the collegial body stipulated by the Charter and the laws of Ukraine, which protects the rights of shareholders, including the State, and also controls and regulates the activities of the companies' Directorates (management boards), in fact has ceased to function both in Kharkivoblenergo and Kharkivenergozbut.

This was the result of some intended and deliberate actions of the State Property Fund, which, as a subject of state property management, ignoring the requirements of the current legislation, simply failed to submit candidates to be elected to the Supervisory Boards of these joint-stock companies, which are of special importance for the Ukrainian economy.

Smart Holding has every reason to believe that this situation was the result of some close “collaboration” between SPF officials and the current management of the energy companies, whose representatives appear in a number of criminal proceedings into alleged misappropriation, embezzlement of property or its fraudulent conversion through abuse of office committed upon prior collusion by a group of individuals.

Following all the stipulated procedures and legal requirements and acting under its quota, Smart Holding submitted candidates to the Supervisory Boards of Kharkivoblenergo and Kharkivenergozbut to be approved by the general shareholder meetings.

Ivan Gerasimovich, Risk Management and Security Director of Smart Holding, a candidate to members of the Supervisory Boards of Kharkivoblenergo and Kharkivenergozbut, said:

‘The names of the companies recently appeared in a number of criminal proceedings related to corruption and large-scale embezzlement. We expected that the meetings of shareholders would form the Supervisory Boards, which would include independent members – specialists with the necessary competencies selected with the help of international partners. And this, surely, would make it possible to make the right decisions that would put an end to the practice of mass embezzlement, and would break the existing corruption schemes leading to actual plundering and bankruptcy of the companies that are pivotal for the economy of our State.

The irony of it also lies in the fact that the SPF, effectively, is playing to reduce the value of the companies' shares in the lead-up to their privatization, which is scheduled for the fourth quarter of this year. As a result, both the people of Ukraine, whose interests in this case are to be ensured by the State represented by the Fund, and our company are on the losing end, since in the light of unresolved existing problems and debt obligations created by the current management the value of the companies tends towards zero.'

Ivan Gerasimovich noted that according to financial analysts, misappropriation of assets, fraudulent actions of the current management and their operational inefficiency lead to at least three-fold undervaluation of the operating profit (EBITDA) of these state-owned companies compared to the private sector companies operating on the market.

One can talk about losses worth over USD 30 million a year, which then “materialize” as expensive cars and elite real estate assets of certain public officials and actors from the State.

‘Despite the 2020 net income of Kharkivoblenergo amounting to UAH 3.5 billion, its profit was only UAH 5 million, a negligible amount for such a company, which, moreover, looks doubtful since the company’s financial result before tax is a loss of UAH 2.2 million! Losses of Kharkivenergozbut run at over UAH 100 million.

One can endlessly talk about “operational inefficiency”, but there is a particular article in the Criminal Code of Ukraine for each action of the management that led to setbacks or losses for the company,’ summarized Risk Management and Security Director of Smart Holding.


SMART HOLDING is one of the largest industrial and investment groups in Ukraine. The interests of the Group focus on the industries that are the key ones for the economy of the country. The Group’s companies invest in metals and mining, oil and gas segment, banking sector, agriculture, energy sector, shipbuilding and real estate. SMART HOLDING’s strategy is aimed at efficient management of a diversified investment portfolio in order to increase its value in the long term.

SMART HOLDING (CYPRUS) LTD is the top holding company of the Group that was established and operates under the laws of the Republic of Cyprus. Its beneficiary is Vadym Novynskyi.