Global law firm Baker & McKenzie and global audit and consulting firm PricewaterhouseCoopers have presented a draft Corporate Governance Action Plan to Naftogaz and the European Bank for Reconstruction and Development (EBRD) in the framework of an EBRD-funded project, along with draft regulations and laws for the implementation of the corporate governance reform.
The key principles of the Plan include:
· bringing corporate governance in line with the Guidelines on Corporate Governance of State-owned Enterprises of the Organization for Economic Co-operation and Development (OECD);
· improving control over Naftogaz management in the best interest of the Ukrainian people;
· eliminating undue political intervention in the company’s business;
· setting up a Supervisory Board of Naftogaz and gradually increasing its independence;
· implementing best practices of information disclosure, risk management, audit and management remuneration;
· unbundling of the Transmission System Operator (TSO): establishing a company with an own corporate governance structure (independent of Naftogaz and its governance bodies), including an independent Supervisory Board;
· changing the role of Naftogaz’s corporate centre during the transition period: from opaque and inefficient "portfolio management" of its assets to "strategic control" over its subsidiaries (Ukrgazvydobuvannia, Ukrtransgaz, Ukrtransnafta, Ukrnafta, etc.).
Implementing the Plan will allow Naftogaz to meet the demand of Ukraine’s civil society for fundamental changes in transparency and operational efficiency of Naftogaz, which is also critical to a successful reform of the gas sector and improved investment attractiveness of state oil and gas assets.
In turn, this will create a real opportunity for further restructuring of Naftogaz for the benefit of the Ukrainian people.
Naftogaz has initiated a project on developing a Corporate Governance Action Plan in order to fundamentally improve the company’s efficiency and transparency for the benefit of Ukrainian people as the ultimate owner of Naftogaz.
The company defined corporate governance reform as a priority immediately after the change of management last spring. Given the complexity of this reform, including its political sensitivity, it proceeds in several stages.
The work on the reform concept was initiated by experts of the global audit and consulting firm Deloitte, engaged by the US Government, and Prof. A. Boytsun of the University of Antwerp. In particular, the decision was made to comply with the OECD Guidelines on Corporate Governance of State-owned Enterprises, and a concept note for implementing the Guidelines was developed.
At the suggestion of Naftogaz, the coalition factions of the Verkhovna Rada of Ukraine committed in their Coalition Agreement to implement the Guidelines in the public sector’s energy companies.
EBRD joined the project in October. The Bank financed the work of international consultants who developed the Action Plan, which includes drafting the necessary regulations and laws.