Ukraine energy ministry under pressure to recall gas TSO board appointment amid procedure concerns

Author: Aura Sabadus

2021/11/25

LONDON (ICIS)--Pressure is mounting on the Ukrainian ministry of energy to cancel the appointment of a former politician to the supervisory board of a company overseeing the gas transmission operator, GTSOU, amid concerns over the appointment procedure.

Speaking to ICIS, Oleksandr Lysenko, a Kyiv-based independent corporate governance consultant said Pynzenyk’s appointment should be immediately reviewed following official confirmation that the legal procedure for the assignment had not been followed through.

Lysenko wrote to the ministry of economy, the cabinet of ministers as well as the ministry of energy following news that Pynzenyk had been appointed by the ministry of energy as government representative to the supervisory board of MGU, a shell company overseeing GTSOU.

He said that under existing legal arrangements, Pynzenyk’s candidacy should have been reviewed by the nomination committee overseen by the ministry of economy. This committee is made up of local and foreign stakeholders and is responsible for passing their independent opinion about potential candidates on to the cabinet of ministers (CMU).

CMU is then tasked to approve or reject the appointment.

APPOINTMENT PROCEDURE

However, Lysenko said that in Pynzenyk’s case, the ministry of energy, which is the sole shareholder of MGU, made a direct appointment, without referring his candidacy to the nomination committee.

“The ministry of economy have confirmed in a written letter that Pynzenyk was appointed to the board for a new term without the nomintation committee review and the approval of CMU,” Lysenko said.

Furthermore, several gas market sources in Ukraine and abroad, told ICIS that Pynzenyk had been appointed to the previous supervisory board of MGU in 2019 and that his term was expected to expire in 2022.

However, his mandate was terminated earlier this year and he was appointed for another three years during the transition period from the first to the second board.

ICIS invited Pynzenyk and the ministry of energy to explain why the correct procedure may not have not been followed and why Pynzenyk’s term was ended well ahead of its expiry in 2022. However, neither Pynzenyk, a former minister of finance in the cabinet of ex-prime minister Yuliya Timoshenko, nor the ministry of energy replied by publication time.

Lynsenko and several EU-based industry sources said the other four members of the current supervisory board were appointed in line with the legal procedure. These included a second government representative as well as an independent member, who like Pynzenyk, had served on the previous board.

Sources also mentioned that it was of utmost importance MGU followed correct corporate governance procedures, particularly at a time when the credibility of the transmission system operator is critical to retaining and extending the country’s historic transit role for Russian gas.

They explained that any decisions taken by MGU could be invalidated if Pynzenyk is not recalled and the appointment procedure followed through correctly.