On December 30, 2014, one of the most high-profile scandals of the era of the victorious Euromaidan broke out, reports realist.
An unknown figure, Dmitry Vovk, became head of the National Commission for Regulation of Electricity and Public Utilities (NKREKU), in defiance of all laws and civil service competitions.
He had neither a relevant education nor minimal experience in the energy sector. He was 24 years old at the time of his appointment. Prior to this, he had worked in Moscow as a national manager at the Roshen confectionery corporation. This company, owned by current Ukrainian President Petro Poroshenko, successfully conducts business, including in Russia.
Shortly before joining Roshen, Vovk served as assistant to the vice president for corporate finance at Investment Capital Ukraine (ICU). The company was founded by current NBU Governor Valeria Gontareva. While she has formally withdrawn from the co-founders, ICU continues to enjoy preferential treatment from the National Bank.
The former Minister of Energy and former head of the National Commission for State Regulation of Energy and Public Utilities (NERC), Vladimir Demchyshyn, also worked for this company.
Currently, the company's co-owner, Makar Pasenyuk, is involved in numerous matters on behalf of Poroshenko, including those related to the botched purchase of the 112 TV channel. Incidentally, it was Pasenyuk who officially commented on the "offshore scandal" on Poroshenko's behalf. In other words, the company's close ties to the government are self-evident.
In 2014, by appointing Vovk, the government cast doubt on one of its promises to create an independent tariff regulator. Batkivshchyna leader Yulia Tymoshenko took advantage of this. The "Tariff Opposition" has been her platform for campaigning for many months now.
On September 22, 2016, the current government managed to retain Vovk as head of the National Commission for State Regulation of Energy and Public Utilities. The commission gained unprecedented weight as a regulator in the energy market, including in matters of tariffs and natural monopolies.
Tymoshenko can thank the president for this wonderful gift. She won't have to prove that Poroshenko is to blame for the fact that millions of Ukrainian citizens are forced to pay exorbitant utility bills. After all, it is the National Commission for State Regulation of Energy and Public Utilities that sets the very tariffs, the increase of which could cause social unrest in the near future.
What has Vovk accomplished during this time? Realist decided to explore the biography and path to the top position of one of the state's youngest managers.
No experience or recommendations
Vovk's appointment seemed highly controversial from the very beginning. Even from a distance, he didn't look like a wunderkind capable of overseeing perhaps the most complex sector—energy.
Vovk graduated from the Kyiv National University of Trade and Economics. On his LinkedIn profile (now deleted – R°), he lists his professional skills as corporate finance, business strategy, financial modeling, financial analysis, agribusiness, and retail.
At Roshen in Moscow, Vovk oversaw relationships with leading retail chains, marketing, and product pricing. Essentially, he was a marketing manager.
The offer came from the Presidential Administration. It was spontaneous. They said we needed to meet and talk. One of the interviews was with Lozhkin (Boris, then head of the Presidential Administration. — R°). Neither Gontareva nor Demchishin were the initiators of my arrival.
— Vovk said in an interview with Ukrainian media.
He called the choice of a person who had never worked in the industry for the position of head of the National Commission for State Regulation of Energy and Public Utilities (NKREKU) “a decision by the president.”
The fact that Vovk worked for four years at Gontareva's ICU, in his opinion, suggests that Poroshenko "had every reason to believe" that such a successful young and ambitious man could handle the energy sector.
It's worth recalling that immediately after his appointment to the National Commission for State Regulation of Energy and Public Utilities (NKREKP), the press service of Roshen's Russian branch made an interesting statement. Apparently, Vovk was dismissed due to "unsatisfactory performance."
Incidentally, the newly appointed official himself called this statement by the press service “revenge of the former leader.”
Besides the obvious riskiness, Dmitry Vovk's appointment violated the law, which stipulated that only a current member (elected through a public competition—R°) could become acting chairman of the commission. Which, of course, he was not.
The newly appointed official began with entirely predictable actions—personnel purges. There's nothing surprising about this—every leader does this when trying to build their team.
But, according to NKREKU employees, previous employees were simply replaced by friends and acquaintances of Dmitry Vovk.
For example, Irina Rozhanskaya, the head of the National Commission's staff, said that the previous head of the National Commission for State Regulation of Energy and Public Utilities offered her the position of department director. However, while the transfer process was ongoing, an acting director was appointed.
I filed a lawsuit against Mr. Vovk because he violated my rights. I decided to speak out, even though many current employees whose rights were also violated are unable to speak out due to certain circumstances. But this isn't just about my personal interests. A person who has no legal right to do so makes and signs not only unprofessional personnel decisions but also strategically important decisions for the country as a whole.
— Rozhanskaya explained.
According to her, while acting as director, Vovk was not actually a civil servant—he was not officially employed, did not receive a salary, and did not take the civil servant oath. However, he had access to all government documents, including those classified as "secret."
One of the new head of the National Commission for State Regulation of Energy and Public Utilities (NKREKU)'s first signatures was on an agreement to import electricity from Russia to Ukraine for onward transmission to occupied Crimea.
Negotiations with the Russian side regarding imports were unofficially led by Russian-Ukrainian businessman Konstantin Grigorishin. Grigorishin, incidentally, was also said to be the overseer of Vovk's predecessor in this position, Volodymyr Demchyshyn, the former Minister of Energy.
Trace of Konstantin Grigorishin
Vovk was appointed while Kyiv was negotiating the next tranche with the IMF. One of the main conditions for receiving the new loans was raising tariffs for electricity, heating, and utilities.
As one official in the Presidential Administration told Realist, Vovk's appointment had several objectives, including "finding someone responsible for raising tariffs—a move always unpopular among the population, and even more so during an economic crisis."
The fact is that the state regulator is influenced not only by the president but also by business. Therefore, Vovk is a pliant lever in Poroshenko's hands. He can be removed at any moment, accused of incompetence, while all the high tariffs are hung on him. He is essentially a continuation of Demchyshyn. But unlike him, he is more manageable. And finally, and most importantly, with Vovk's help, the problems of the eternal struggle between financial-industrial groups can be resolved.
– said the source in the AP.
With the new leader, as already noted, came new members of the team. This, according to Realist's source, strengthened the influence of the Poroshenko-Grigorishin group and weakened Rinat Akhmetov's position. However, the former "King of Donbas" was not offended by the NEURC either. This multi-vector approach is very typical of Poroshenko, who strives to find balance with as many influential people as possible.
Two days before Vovk's appointment, Poroshenko signed decrees dismissing commission members Yulia Kovaliv and Andriy Gerus, who worked for the department. Tellingly, Kovaliv soon resurfaced in a new, even more influential position at the Ministry of Economy and the Naftogaz Supervisory Board.
The following day, Victoria Morozova, who previously headed the regulator's legal department, and Yuriy Golyak, a new member of the commission's structure, were appointed to the positions of Kovaliv and Gerus.
Although Kovaliv and Gerus stated that they resigned of their own free will, the media repeatedly reported that the reasons for their dismissals were demands from above for unfair decisions, as well as pressure on the department.
Morozova is Grigorishin's man, and Yuriy Golyak is Dmitry Firtash's. To understand these processes, let me remind you that some regional power companies are owned by Russians, four are owned by Akhmetov, and Grigorishin controls a number of companies. We should also add Kolomoisky's regional power companies, as well as the shareholdings of the Surkis brothers, Boyko, Levochkin, and Firtash... In other words, through energy tariffs and prices, one can successfully control a portion of the country's business. That's why it's important for the president and his longtime friend Grigorishin to have as many of their own people as possible in the agency where these tariffs are set.
— the owner of one of Ukraine's gas companies said on condition of anonymity.
Yuriy Golyak did indeed serve on the audit commission of Zakarpatgaz OJSC in 2007 (15% of which is owned by Agropromkomplekt, a company associated with Dmitry Firtash. — R°). In 2008, he held the position of deputy director at Ukrtransgaz PJSC.
Prior to the appointments of Morozova and Golyak, Boris Tsyganenko also joined the commission. He replaced Andriy Tkachenko. Prior to his appointment to the NEURC, Tsyganenko was the director of Energy Consulting LLC. The company is controlled by Grigorishin's offshore companies.
What connects the president and Grigorishin?
helped Akhmetov
It has been reported and discussed numerous times that Petro Poroshenko and Konstantin Grigorishin are business partners and have known each other for over 10 years. Specifically, as reported by the publication Nashi Groshi, they are the ultimate owners of Kyiv Enterprise LLC.
Their connection is also evidenced by Ihor Kolomoisky's testimony in a London court after the Orange Revolution (the oligarchs were suing for control of several regional power companies – R°). At the time, Kolomoisky said that Poroshenko, then Secretary of the National Security and Defense Council, was Grigorishin's ally in their dispute.
Moreover, according to the oligarch in a London court, Grigorishin transferred an initial contribution of $12 million to Petro Poroshenko to support his party's election campaign.
Interestingly, even the Kyiv office of Energy Standard, a company owned by Konstantin Grigorishin, is located next to Poroshenko's International Investment Bank.
"In 2015, under Vovk, the commission approved Ukrenergo's well-known investment program, which included the purchase of UAH 2 billion worth of transformers at an inflated price. The equipment was to be supplied by the only Ukrainian manufacturer of such transformers—Zaporizhtransformator OJSC, owned by Grigorishin. There are numerous similar examples demonstrating that someone can be found to be interested in virtually any decision by the National Commission for State Regulation of Energy and Public Utilities," one of Realist's sources concluded.
However, it would not be entirely correct to consider Dmitry Vovk as a protégé of Konstantin Grigorishin exclusively.
How Vovk helped Akhmetov
Several months ago, the Presidential Administration began talking about the possible dismissal of Dmitry Vovk.
Thus, one of the employees at Bankova Street told Realist that as tariffs rise and public discontent grows, the authorities will need a "source of all ills" that can not only reduce the level of indignation but also suppress the plans of some politicians who are betting on the issue of utilities.
Most likely, Vovk will last until the summer of 2016, having completed all the assigned tasks and goals.
— the interlocutors assured.
Let us recall that in August, the tariff for thermal electricity increased by 18% compared to June.
Since the introduction of the so-called "Rotterdam" coal pricing formula for thermal power generation by the National Commission for State Regulation of Energy and Public Utilities (NKREKP) (calculated based on the price of coal at the port of Rotterdam, plus the cost of transporting it from the Netherlands to Ukraine – R°), electricity prices have been increasing monthly. Former NKREKP member Andriy Gerus estimates that this has resulted in energy companies overpaying UAH 707,8 million in just one month.
At the end of June, Dmitry Vovk also reported that the price of coal had been reduced from UAH 1490 to UAH 1393 thanks to the use of the "Rotterdam" formula.
However, in reality, the 6,5% reduction in coal prices not only did not lead to a reduction in the price of electricity produced from this coal, but, on the contrary, contributed to its increase in price.
It's also worth noting that Rinat Akhmetov's DTEK is the largest coal-fired power producer. The company's Eurobonds rose by 40% after the introduction of the Rotterdam formula. ICU, where Vovk previously worked, was the one buying these bonds at a low price.
If a similar process were taking place in the US, the all-powerful Securities and Exchange Commission (SEC) would already be investigating the Vovk-Akhmetov-ICU connection. In Ukraine, as we can see, nothing similar is happening.
Furthermore, on October 1, the commission again raised electricity tariffs for industrial consumers. On his Facebook page, Dmitry Vovk explained this move by citing an increase in the wholesale market price of electricity, which is due to the declining market share of low-cost energy generated by nuclear power plants.
This decision by the National Commission for State Regulation of Energy and Public Utilities (NKREKU) is completely at odds with the regulator's stated policy, which established a two-year schedule for increasing electricity tariffs to align tariffs for households and industry, similar to gas tariffs.
Reappointment of the head of the National Commission for State Regulation of Energy and Public Utilities
It remains unknown whether Dmytro Vovk has completed all the tasks assigned to him. However, on September 21, the parliamentary committee on fuel and energy, nuclear policy, and nuclear safety decided to consider and vote on an amendment regarding the rotation of members of the National Commission for 1,5 years.
Samopomich MP and committee member Viktoria Voitsitskaya stated after the meeting that Vovk would retain every opportunity to remain in his position.
For me, the only thing is clear: today the fight is not for institutional reform of the regulator, but for a specific person who ensures the implementation of the program of certain people
She declared.
"Will Vovk hold out for his 1,5 years of immunity? It's unlikely, but one thing is certain: in order to fire Vovk, Poroshenko needs to find a new head of the NRCE. The same
— concluded the interlocutor from the president’s entourage.
Wealth without income
Coincidence or not, it was during the adoption of the "Rotterdam+" formula that Vovk registered a 2010 Mercedes GL 550 worth $40 in his name. The seller of the car was Liliya Silchenko, Vovk's common-law wife.
In February 2016, Silchenko also purchased a house in the village of Ivankovychi near Kyiv. The four-story building neighbors the homes of former Fuel and Energy Minister Yuriy Boyko and former Ecology Minister Mykola Zlochevsky.
This house previously belonged to Oleksandr Zinchenko, Deputy Chairman of the Verkhovna Rada and co-founder of the Inter TV channel. The house is almost 800 square meters in size and adjoins a 0,5-hectare plot of land.
In 2004, Zinchenko officially paid $250 for the estate. Realtors currently value the mansion at $1,5–2 million.
Lilia Silchenko does not own and has never owned any business. Her parents are not entrepreneurs either. Dmitry Vovk, whom journalists met late that evening outside Silchenko's home, refused to discuss the possible sources of income that allowed his friend to purchase such an expensive property.
Traditionally, it is extremely difficult to explain the source of the money used to buy the house.
Over the past three years, the head of the National Commission for State Regulation of Energy and Public Utilities (NKREKU) has seen his income decline significantly. In 2013, he declared an income of over 1 million hryvnias. In 2014, after working at the Moscow branch of Roshen, his income was nearly 640 hryvnias and 2 million rubles.
Interestingly, with the market price for Soviet-style apartments at $1200 per square meter, Vovk managed to buy an apartment for almost half that price.
Vovk also filled out an electronic declaration.
In 2015, the head of the National Commission declared $390,000 and €60,000 in cash. According to his declaration in the Unified State Register, Dmytro Vovk owns two land plots with a total area of 34,222 square meters.
Vovk also owns a 243,20 square meter house in the Kyiv region and two apartments in Kyiv (80,40 square meters and 41,30 square meters). Therefore, the official will only have to declare Zinchenko's former home next year. It will be interesting to see how this purchase will relate to his income.
In addition, for 2015, the head of the National Commission for State Regulation of Energy and Public Utilities listed watches from Swiss brands IWC and Ulysse Nardin, but without their price.
Dmitry Vovk drives a 2006 Infiniti M35. In his next tax return, he'll have to explain how he upgraded to a Mercedes GL.
Admittedly, this will be difficult. During his year at the National Commission, Vovk earned almost nothing. His total income in 2015 was only 68,997 hryvnias and 90 kopecks. The family saved just over 1 million hryvnias in bank accounts last year.
According to the declaration, the official has no funds in his accounts.
It seems the only way for Vovk to avoid declaring his assets is to file a voluntary declaration. Or, of course, to declare that he borrowed the money. Say, from Rinat Akhmetov.
In topic: Konstantin Grigorishin, Distinguished Oligarch of Ukraine and Russia
Subscribe to our channels in Telegram, Facebook, Twitter, VC — Only new faces from the section CRYPT!