The Kudrytskyi Case: Why Presidential Office Persecutes Former Head of Ukrenergo

Volodymyr Kudrytskyi, the former CEO of the Ukrenergo National Energy Company, who was accused of misappropriating state company funds, was released from pre-trial detention on 30 October after posting bail of 13.7 million hryvnias. Tough times lie ahead for Mr Kudrytskyi—and, unfortunately, not only for him.

In this story, the Presidential Office is not merely settling personal scores with one man; it is also marking its territory across Ukraine to ensure that no one dares to come in with their “best practices,” Western investment or all those troublesome innovations.

The version of the State Bureau of Investigation (SBI) runs as follows: in 2018, while serving as investment director at Ukrenergo, Kudrytskyi conspired with a representative of a private company during tenders for the reconstruction of external fences at substations of the Southern and Western power systems. He signed two contracts with that company worth over 68 million UAH, paid it 13.7 million in advances, the contractor pocketed the money, and the work was never done. The result: losses to the state and 12 years in prison with confiscation for Kudrytskyi as the signatory.

The SBI coyly omits everyone except Kudrytskyi, but the contracts were with Vizyn Rich LLC, belonging to notorious Lviv entrepreneur Ihor Hrynkevych, which won the ProZorro tenders to build those fences.

The registry of forgotten court decisions

Much time has passed since 2018, and it is naïve to think the SBI is the only source on this episode. The Unified Register of Court Decisions can tell an even fuller story.

Take the “larger” project with an 8.8-million UAH advance, also known as case No. 906/283/21. From the materials we learn that after the first contract came an addendum setting new deadlines: project design and approval by 30 April 2019, work completion by 20 December 2019. The contractor failed; on 13 January 2020, Ukrenergo terminated the contract. From that date the company gained the right to demand repayment of the advance plus 14 percent annual interest for each day of its use. The contractor repaid nothing; Ukrenergo sued it and won.

Indeed, because of the supplementary agreement, the court recalculated penalties and fines, reducing them by almost a million hryvnias. Yet since it ordered Vizyn Rich LLC to pay Ukrenergo 17.9 million for an 8.8-million advance, that’s not the worst result.

But why did Ukrenergo only go to court in March 2021?

It’s simple: the company spent a year recovering the bank guarantees for the advances paid to Vizyn Rich.

Here too, the court registry has much to say. In case No. 904/1579/20, Ukrenergo sued to recover the 8.8-million-hryvnia advance from the guarantor, Concord Bank, by no means one of Ukraine’s better banks.

Under the terms, the guarantor had to pay the money in place of Vizyn Rich upon the first written claim of non-repayment. Ukrenergo sent such a demand on 22 January 2020, one day after the repayment deadline had passed. So if you read that Ukrenergo applied for the guarantee too late, rest assured—you’re being misled.

The bank refused not because of timing but because, in its view, Ukrenergo had “not done enough to make the contractor pay.” The court was unconvinced and ordered the bank to pay Ukrenergo the 8.8-million guarantee plus 19,000 hryvnias in interest for delay. The second, “smaller” contract followed roughly the same script. Court orders exist for compulsory recovery of both the larger and smaller advances in Ukrenergo’s favour.

All 13.7 million hryvnias returned to the state company.

The only unsettling question in this part of the story is why the guarantees came from Concord Bank, which had never been a strong institution and was eventually liquidated by the National Bank.

Be that as it may, the decision to use that bank as guarantor was certainly not made personally by Kudrytskyi.

If Ukrenergo confidently won every court case related to this story and recovered for the state even more than it had advanced to the Lviv scammers, then what exactly are the SBI’s claims about?

Prosecutors allege that after receiving the bank guarantees, Kudrytskyi and Ihor Hrynkevych—a businessman already implicated in another case over supplying low-quality uniforms to Ukraine’s Armed Forces worth more than one billion hryvnias—misappropriated and split the money. Yet no one has seen proof of this, and no one is in a hurry to show it.

First, the cited cases clearly show that the funds were to be returned to Ukrenergo’s accounts—from which it would be very difficult for two private individuals to “extract and share” them. The fact that Ukrenergo continued litigating against Vizyn Rich after receiving the guarantee does not mean the money disappeared; the company simply wanted penalties, interest and justice.

Second, the supposed “proof” of collusion is that Vizyn Rich won even though its bid wasn’t the lowest. Procurement records reveal that the two lower bids were disqualified: one due to insufficient staffing, the other due to lack of relevant experience. The decisions were well-reasoned and, incidentally, not signed by Kudrytskyi.

Still, none of these arguments is likely to affect how things develop. A seven-year-old case with no victims and no losses looks, walks and quacks like a pretext for strong-arming.

Megawatts of envy

Don’t think the twisted logic here is the fault of the executors.

Don’t imagine the Presidential Office is truly worried about potential losses to the state.

Don’t fall for conspiracy theories about the desire to pin all the burdens of the coming, certainly difficult, heating season on the former CEO of Ukrenergo.

All those versions fly too high; reality is so down-to-earth it’s almost nauseating.

The Office disliked Kudrytskyi from the start. Armed with corporate governance principles, he ignored the Ministry of Energy and the so-called “Halushchenko group,” a network of officials and businessmen linked to former energy minister Herman Halushchenko and known for its influence over the state energy sector. He ruined Energoatom’s gravy train with transmission prices roughly a quarter of what Energoatom charged, He wrecked Energoatom’s sandbag racket—the inflated procurement scheme that had brought it tens of millions—by purchasing at roughly a quarter of their prices. He built anti-drone protection at nearly every substation by using partner funds, which unpleasantly highlighted the “achievements” of the rest of the energy sector. Most of all, under his leadership Ukrenergo secured around three times as much international financing as the ministry itself and firmly kept the “Halushchenko group” away from its trough. So he was dismissed scandalously, to the relief of many, with hopes never to be seen again.

No wonder the Office was so tense when Kudrytskyi re-emerged—this time teamed up with someone equally irritating to them: Tomáš Fiala.

Fiala himself is a serious irritant for the president’s team. For Zelenskyy and Yermak, who still cannot tolerate even minimal criticism, Fiala’s media—above all Ukrainska Pravda—are like a thorn in the side. So much so that the idea of sanctioning Fiala has crossed their minds more than once. Recall how actively—from Telegram channels to the United News telethon—information spread that developer Arricano Real Estate, in which Fiala once held 12.5 percent, had kept its business in Crimea. In summer this year, Arricano was indeed added to Ukraine’s sanctions list, though by then Fiala’s Dragon Capital had already withdrawn. Too late. And while they were busy with that trifle, they missed something far more significant.

The Power One project, launched by Fiala’s Dragon Capital and Kudrytskyi’s Negen, aims to develop distributed generation—something Ukraine’s power system has badly needed in recent years. Fiala has already invested $30 million; Dragon Capital owns 100 percent of Power One. Kudrytskyi, through Negen, provides organization, management and, let’s say, market know-how. To be fair, the former Ukrenergo CEO is no stranger to the sector, nor is his Negen co-owner Andrii Nemirovskyi, a former board member of Ukrenergo. Hence the inevitable “sensational” headlines like Company of Former Ukrenergo Head Wins Ukrenergo Tender. But the energy sector is so specialized that everyone here is an “ex-someone.” We’d rather be surprised if Kudrytskyi, after dismissal, had taken up pedigree cattle breeding. Ukraine’s energy market is also tightly regulated—with a host of rules, standards and qualification requirements that petty shell companies can hardly circumvent, even if you’re the ex-God Almighty himself.

Power One, for that matter, is no shell company. By the end of this year, the project planned to build about 20 MW of gas-engine generation and 40 MW of energy-storage systems. The announced expected return—30 percent; payback period—three years. The first station was to go live this autumn, after spending about half of that 30 million on land and equipment.

In early April, the company passed Ukrenergo’s qualification for construction of two new generating sites of 9.2 MW each in Zakarpattia. By late April it had already secured consent from the Mukachevo city territorial community (document)—whose head, by the way, is Andrii, the son of Viktor Baloha, a long-time Zakarpattia political heavyweight and former head of Ukraine’s Presidential Secretariat. In June, it obtained a trader’s licence from the National Energy and Utilities Regulatory Commission (NEURC). In July, a Czech company—but of course—RSE supplied gas-engine units based on MWM engines ranging from 1 to 4.5 MW, totalling 20 MW for the first phase.

Meanwhile, work was under way to launch an investment fund for energy and infrastructure together with international investor Amber Infrastructure Group and with financing from the European Investment Bank and the European Bank for Reconstruction and Development, which agreed to contribute up to 110 million euros.

Quite the momentum—almost enough to make us believe the government really intended to expand distributed generation and attract investors into energy. The country truly needs them, but the authorities care far more about making life unpleasant for the Office’s foes. That matters more than any megawatts or hundreds of millions.

People who failed to “find common ground” with the Office—and who openly disapprove of its modi operandi—cannot be allowed to work freely, develop, negotiate with partners, bring in money or expect any earnings. Not without the Office, not outside it, and, worst of all, not in defiance of it.

Let them now explain to the EBRD why one of them faces twelve years in prison with confiscation of property.

Of course, Kudrytskyi and Fiala will explain—the crooked practices of the president’s team surprise no one anymore.

But the message has been delivered loud and clear: since the first searches of Kudrytskyi’s home, the media outlets not on the “white list” have been regularly fed with “new hot details” of what else he is allegedly guilty of—always without citations or proof.

Someone is eager for everyone to understand that in this “Texas,” you don’t mess with “Texans”—and you certainly can’t help rebuild it too.

The powerful “statemen” are getting ready for reconstruction. Terrifying.