03.06.2026
Energy Club continues its special project “Corporate Governance in the Energy Sector: New Rules of Responsibility, Trust, and Control,” which discusses practical aspects of transforming the management system of state-owned energy companies.
The project focuses on how the state exercises its ownership rights without interfering in operational activities, the role of supervisory boards, how to measure their effectiveness, where the line between control and political influence lies, and what builds the trust of international partners and investors in the Ukrainian energy sector.
Oleksiy Movchan, a Member of Parliament of the IX convocation and Deputy Chairman of the Committee on Economic Development of the Verkhovna Rada of Ukraine, outlined the logic behind the current corporate governance reform in the energy sector in an interview with Energy Club journalist Olena Karpachova. He explained that independent supervisory boards serve as a key safeguard against manual political management of state-owned enterprises and act as a tool to balance the state’s interests as an owner with the demands of business efficiency.
The MP paid special attention to the boundary between political decisions and operational activities, the role of the state as a market regulator, challenges in applying Public Service Obligations (PSOs), and wartime difficulties where management decisions are often made under crisis conditions. He emphasized the gradual nature of the reform, the necessity of developing corporate governance practices, and building trust with international financial institutions.
– Mr. Movchan, corporate governance is often perceived as a technical or “donor-driven” reform. However, in the energy sector, this issue is now directly linked to security, investor confidence, and the resilience of state-owned companies. Why, in your opinion, has corporate governance become critically important for the energy sector right now?
– If there are no independent supervisory boards, then there is a procedure for direct appointment of management and direct influence of political bodies—ministries, agencies, etc.—on the operation of state-owned companies. And this never ends well.
In fact, an independent supervisory board is a safeguard that prevents any interference or direct influence on the company’s operations.
Therefore, the more professional and properly structured corporate governance is, the better the protection of the company and its interests. A supervisory board is obliged to act primarily in the interests of the company and all its shareholders, seeking a balanced approach.
Unfortunately, interference in the activities of state companies is often corrupt, which is the worst part. For donors, transparency is essential; they say: “We lend to state-owned companies, and we want to see openness and clarity.” This, by the way, aligns with international standards.
– One of the main challenges for state-owned enterprises is the blurring of responsibility between the state as the owner, the ministry, the supervisory board, and the management. Where, in your view, should the line be drawn between the owner’s policy and the operational management of the company?
– This line is drawn precisely within the supervisory board. We sometimes experience imbalances when a supervisory board acts more in the interest of the owner (the state), and occasionally more in the interest of the company. Its role should be to balance the owner’s requests with the company’s capabilities, making decisions that do not harm the enterprise itself. The owner always has political goals, while the company is always interested in profits and its financial health. This is exactly where the balancing must happen. The effective functioning of supervisory boards prevents state companies from being managed in a manual, ad-hoc mode.
– In the energy sector, the state simultaneously acts as an asset owner, regulator, policymaker, and often a participant in crisis management. How can manual management of companies be avoided in such a system, especially during a war?
– First of all, the state must not forget that it is primarily a market regulator, and a competitive market is fundamental to the functioning of the economy. Therefore, significant responsibility in this matter can and should be placed on the integrity and conscientiousness of the state in managing companies and, consequently, influencing the market. It must, at the very least, do no harm and look not just at the activities of a single company, but at the economy as a whole and competition within each specific sector.
– You have repeatedly emphasized that ministries should not interfere in the operational activities of enterprises. How should this work in the energy sector, where the ministry often justifies interference by citing security concerns, tariffs, navigating the autumn-winter heating season, or protecting critical infrastructure?
– In reality, the tools for this exist. Perhaps they are not all effectively developed yet, but this is also a question for the government: how ready is it to use these tools? To put it simply: when making decisions, the company should be treated as if it were private. The government should not divide the sector and create one set of conditions for state energy companies and another for private ones, leaving them to survive as best they can. There must be equal treatment for all market players. Accordingly, state regulation should stem exactly from these principles to avoid such imbalances.
Speaking of specific tools, there is, for example, a solid mechanism called Public Service Obligation (PSO), where the state compels a state-owned company to deviate from market rules to achieve specific state objectives. This is not just a Ukrainian practice; it exists abroad too. However, in Ukraine, the attitude toward PSO resembles a command-and-control planning approach. For instance, Ukrzaliznyця is ordered to sell cheap tickets, and Energoatom is told to sell cheap electricity. What happens next to Ukrzaliznytsia or Energoatom seems to concern no one.
Yet, when such orders are issued, there should be state compensation for the tariff gap, as companies incur losses, and the country’s economy suffers as a result. If there is compensation from the State Budget, everyone begins to count the money and determine whether such a decision is effective. But when it is not compensated from the budget, or is casually shifted onto dividends, it represents a completely different approach from the perspective of company planning.
– Supervisory boards should serve as a safeguard against political interference, but in Ukraine, another issue often arises: the public does not always understand what exactly they are responsible for and how to evaluate their effectiveness. What criteria should be applied to the supervisory boards of state-owned energy companies?
– Ineffectiveness of supervisory boards is only possible when these supervisory boards actually exist. So, we need to start by lowering expectations and saying: “It is good that we have supervisory boards. Now let’s look at where they are effective and where they are not.”
Sometimes, a supervisory board fails to realize its potential due to various circumstances. For example, as a result of a highly over-regulated market, which frequently happens with energy companies. If the government has too many powers to restrict a company’s profitability or its financial results—or to influence these results not through guidance to supervisory board members, but through Cabinet of Ministers resolutions and NEURC (National Energy and Utilities Regulatory Commission) decisions—then no matter how excellent the supervisory board is, market conditions dictate the outcome. This factor is crucial to consider.
How can we make supervisory boards effective? I believe we will reach that stage. Corporate governance legislation is currently actively developing. While in 2015 supervisory boards in state companies operated with limited powers, in 2024 we passed a law that granted them the authority to appoint the CEO, to be independent, and so on. Following that, it took the government a long time to develop bylaws. This is similar to driving a car: first, you get your license and pass the test (the basic minimum), and only then do you learn how to drive. The same is happening now with the government and supervisory boards. The government is still “learning to drive” with supervisory boards, managing them effectively rather than directively, as it was used to doing.
– In Ukraine, conflicts often arise around the appointment or dismissal of supervisory board members. How can these processes be made less politicized and more predictable? Is the current legislation sufficient, or are additional safeguards needed?
– I don’t see any particular need for additional safeguards. In fact, all the safeguards that exist globally are already provided for here. Moreover, I would say that Ukraine has even stricter regulation regarding the independence of supervisory boards than many countries. Why? Because we have had many political scandals involving the dismissal of supervisory board members and government interference in enterprise operations.
Therefore, we need to look at the bigger picture and build upon one crucial legal provision concerning the classification of strategically important companies for the state. It is precisely these companies that must be governed in the best possible way that exists within the context of corporate governance.
Once the government achieves a “confident driving mode” and masterfully manages supervisory boards, then it will be possible to loosen the screws and grant more authority to the owner, knowing that they will not abuse it. This is only possible through attracting more private ownership into the capital of state companies or through control. You cannot always allow outside parties into state capital, but there are tools of accountability to partners. You are not an isolated director; you must align your actions with strategic partners. And strategic partners include the EBRD, the World Bank, and other major investors in strategic assets.
In many countries, companies like ours are even traded on the stock exchange and are effectively accountable to exchange compliance rules. For example, in France, this applies to the state-owned nuclear energy enterprise. The government held a controlling stake, a certain portion was traded on the stock exchange, and another was distributed among influential strategic investors. Later, the government bought back the shares and took full ownership of the assets through the stock exchange mechanism. At a certain point, the enterprise can return to the stock exchange without needing complex reforms. They did this because everything they do already complies with market standards anyway.
– In the public sector, the argument is often heard: “during war, speed is needed, not complex corporate procedures.” How do you find a balance between the speed of decisions and proper control, especially in energy companies operating under constant attacks?
– This is an excellent question, but probably the most difficult one. Even if someone criticizes the government’s actions today regarding the appointment or dismissal of supervisory board members or the evaluation of their performance, we must consider the global lack of experience in crisis management of the state sector of the economy—especially when we are at war with such a large country with a powerful economy like the Russian Federation. We cannot blame our government for mistaken decisions, as it has to operate under extreme conditions under exceptional circumstances.
This can be compared to the work of doctors in an intensive care unit: if the patient is doing well, there is no need to use a ventilator or other resuscitation equipment. But if something suddenly happens, no one asks you: “Do you want us to hook you up to a ventilator or not?” Because you might not even be able to answer. It is simply used to save your life and health, because the doctor knows best. This is basically the case with the government when it performs resuscitation actions regarding state companies, sometimes breaking competitive rules—allocating funds to ensure a certain level of protection. Sometimes it carries out nationalization or the forced seizure of assets from one legal entity to another. Let’s take Ukrnafta as an example. If it weren’t for martial law, of course, no one would do such a thing. But in the conditions of war, when extraction, refining, and transportation are being destroyed, the government said: “We need our own energy, our own gas, our own oil, our own gasoline.” And it did what it did.
– Do you see a risk that, under the banner of wartime necessity, a rollback of corporate reform could occur—a return to manual management, opaque appointments, and political influence on companies?
– I doubt there will be a rollback. I think that under current conditions, it is harder for the government to balance the independence of supervisory boards with the resuscitation management of the economy.
– Today, Ukraine is actively attracting international financing to restore its energy sector. Is the corporate governance system in state-owned energy companies strong enough for international financial institutions to trust them directly?
– The corporate governance system still needs to develop and prove that it can be trusted. This is a question not so much for the government, but for the companies themselves, the supervisory boards, and the members with their experience.
Now, with the adoption of the 2024 corporate governance law, many different courses, schools, and programs have emerged that explain what corporate governance is, why it matters, and so on. This is a virus that needs to infect more and more people so that when they take office, they can manage companies appropriately and foster healthy competition. I consider this an evolutionary process.
– A separate area is procurement transparency. In the energy sector, procurement during the war is often accompanied by arguments about urgency, security, and classified information. How can a balance be struck between protecting sensitive information and controlling the use of funds?
– The Verkhovna Rada adopted a new version of the public procurement law, which aligns with European integration. We have adapted 80% of the European directive into national legislation.
European experience allows for deviations from the directive in emergency cases if there is a threat to national security. Now, in the fifth year of the war, determining exactly where a threat exists and where it does not in each specific case is quite difficult because there are tens of thousands of procurements. Sometimes abuses can genuinely happen, and there are threats to energy facilities. Therefore, it is vital for state companies to fully comprehend these challenges related to transparency and national security interests and implement appropriate mechanisms.
Mechanisms exist. Imagine we are building a protective structure. This requires appropriate qualification of suppliers with whom the state company works and trusts. This could be several companies that have been given the “green light,” but the auction is conducted in a closed mode. This is not a cartel agreement, but a procedure to verify the supplier’s compliance with security issues. And only then do they begin to conclude contracts, trade, etc.
Everything can be done normally, without criminal cases. And the new law provides a great many tools for this.
– The Ukrainian energy sector requires private investment in generation, energy storage systems, grid infrastructure, and the restoration of thermal power plants (TPPs) and combined heat and power plants (CHPs). To what extent does the corporate governance of state companies affect the willingness of private businesses to enter into partnerships with them?
– I think this is a foundational goal of corporate governance, alongside reducing corruption risks and political influence. When, for example, there is a private investor, they want guarantees and stability that the funds they invest together with a state company into facilities or projects will be spent efficiently, and that they will receive dividends. Therefore, the corporate governance of state-owned companies is key to partnering with private business.
– Looking at the next 2–3 years, which decisions in the field of corporate governance do you consider most important for the state energy sector?
– First, we need to remove deviations from the core legislation on corporate governance. For example, Energoatom has its own specifics that deviate from general rules, such as the appointment of the CEO. There is a consensus procedure—when the entire composition of the supervisory board makes this decision not by a simple majority, but only by the full composition. This is a problem from which a major, unpleasant story grew about how corporate governance in Energoatom was effectively dismantled precisely because of this deviation in the core law on corporate governance.
Second, there is an issue with the comprehensive regulation by the NEURC and the introduction of PSOs, and we are currently working on its resolution. Perhaps a law will be passed soon that eliminates PSO problems for all energy companies, and it will be more about honest accounting of losses and expenses on PSOs. This will partially help.
Thus, as Oleksiy Movchan noted, corporate governance reform in the energy sector is not a one-time decision but a gradual evolutionary process that requires time, practice, and a change in management culture. Despite all the challenges of wartime, the state is moving toward a more structured and transparent model of managing state-owned companies. The key task for the coming years is to increase the efficiency of supervisory boards, eliminate regulatory imbalances, and establish predictable rules of the game for the market. This should become the basis for trust on the part of investors and international financial institutions, as well as for the transition from crisis management to a stable, market-based model of energy sector development.
