Anti-monopoly investment-nanny allows Akhmetov to have another increase of monopoly

by Yuriy Nikolov, originally published by Nashi Groshi

The Antimonopoly Committee has decided to allow Rinat Akhmetov’s group DTEK to acquire another energy asset and increase in this way the oligarch’s market share once again. The permit concerns Kirovogradoblenergo, which previously belonged to Russian Luzhniki group (and this is another element of “betrayal” in this story). The Antitrust League does not agree with this scenario and has sent explanation to the Committee and other public authorities why this permission cannot be granted and what can be done in this situation. We explain big antitrust statement in simple words.

The Antimonopoly Committee has published the draft of obligations under which DTEK will be allowed to purchase shares of Kirovogradoblenergo. Obligations are simple. Namely, oblenergo should buy electricity on competitive basis to compensate technological losses, should report to the Antimonopoly Committee on these purchases, and should write on its website about cases when oblenergo refuses to enter into agreement with the supplier of electricity regarding transit of this energy through wires of oblenergos. These “obligations” will last for five years and then disappear.

In fact, these commitments are insignificant in comparison with negative impact on competition and further consolidation of monopoly-oligarchic system in Ukraine. Commitment concern small share of energy that will pass through oblenergo. Therefore, according to experts of the Antitrust League, this concentration should be either banned, or DTEK Merezhi LLC should take on much larger structural commitments on itself. Namely, if they want to buy new oblenergo, they shall sell some old one in order not to worsen market structure (see full text of comments and suggestions of the Antitrust League at the end of this article).

Akhmetov’s monstrous possessions

Today, vertically integrated group DTEK owns the largest assets in Ukraine. Namely:

  • 70% in thermal generation of electricity (DTEK Skhidenergo, DTEK Dniproenergo and DTEK Zahidenergo)
  • 80% of thermal coal production in Ukraine, which is burned to generate electricity;
  • 41% of the total electricity distribution in Ukraine through distribution companies (oblenergos) in Kyiv, Kyiv region, Donetsk region, Dnipropetrovsk region.

With the acquisition of Kirovogradoblenergo (the annual volume of distributed electricity is 2.92 billion kWh), DTEK’s share in the total volume in Ukraine will be 44%, which exceeds 35% threshold set by the law, according to which the position of entity in particular market is recognized as monopoly. That means that the Antimonopoly Committee allows to make the big monopolist even bigger. Here is the scheme how Akhmetov has acquired oblenergos with permission of the Antimonopoly Committee during last 15 years:

This scheme reflects the growing share of DTEK in distribution of electricity. Interests were calculated according to data of Business.Censor regarding the distribution in 2018, when Ukraine no longer included ORDLO and Crimea. In 2006, Akhmetov acquired PEM-Energovugillya and Service-Invest (later renamed as DTEK Vysokovoltni Merezhi). In 2007, he acquired Donetskoblenergo. In 2011, he acquired Kyivenerho. In 2012, he acquired Dniprooblenergo. In 2019, he acquired Kyivoblenerho and Odesaoblenergo. In 2021, he asked for permission to purchase Kirovogradoblenergo.

Why such concentration of oblenergos in one hand is bad

Akhmetov’s speakers and their supporters in the Antimonopoly Committee spread opinion that oblenergos are natural monopolists themselves in every region. And so it does not matter who owns them. Even if all oblenergos belong to one oligarch, they still do not compete with each other. And conditional resident of Sumy region will not be able to use services of Poltavaoblenergo for the distribution of electricity (this is delivery of energy by wires). And so there is nothing to worry about.

In fact, it is a very deceptive myth to calm tired minds and make profitable decisions for the oligarch.

If to speak quite simply, completely similar indulgence in the concentration of oblenergos in one hand allowed Dmytro Firtash to control 70% of gas supplies to consumers after market liberalization. And because of this to have such significant market power in very important sector that will be able to blackmail the political power of Ukraine with problems of supply of natural gas to the electorate in order to obtain favorable solutions. In 2021, the Verkhovna Rada allowed Firtash’s oblenergos to write off debts in the amount of 50 billion UAH. And Naftogaz has signed very profitable agreement with Firtash’s members regarding supply of gas allegedly for the population at cheap prices, but with the right to resell it to industry many times more expensive. And the government is not very concerned about abuse of monopoly position by Firtash’s members in the provision of services to household consumers (additional charges with the use of temperature coefficients, refusal to change supplier, abuse when connecting to networks).

And none of the Members of Parliament or residents from Bankova can think of stopping these decisions and brawls. Because who wants to go to war with the oligarch who supplies gas to 70% of Ukrainians and owns one of four largest media groups in the country.

It sounds in the following way in official discourse. The group DTEK, having significant share in various segments of the electricity market with the acquisition of new assets, may exert significant competitive pressure, dictate favorable conditions for electricity markets in general, and may increase pressure on regulators of this markets, namely the National Commission for State Regulation of Energy and Public Utilities, Ministry of Energy.

And this pressure is quite significant. The National Commission for State Regulation of Energy and Public Utilities has already increased the upper level of electricity prices in the wholesale market (so-called “price caps”), which allowed Akhmetov to raise prices for energy. But authorities also do not see Akhmetov’s personal guilt in disrupting supplies of Akhmetov’s coal to Akhmetov’s thermal power plants. This threatens Ukraine with outages in November, and therefore we will be forced to import electricity from Russia again, and then again become dependent on the aggressor even on the electricity grid. And this will be possible only if Russians give that energy.

And this is not the end of acquisitions. DTEK, which already owns 5 of 7 the largest electricity distribution system operators in Ukraine, previously announced its intention to acquire the last two market giants as soon as the state puts them for privatization. Namely, Kharkivoblenergo and Zaporizhzhyaoblenergo.

As a result, when we finally liberalize the market for electricity supply to the population, we will again happen to find that Akhmetov, like Firtash, is the monopolist in new market. And again, everyone will ask eternal questions. How did this happen? Who did this?

International experience

In developed countries, distribution networks are owned by private companies as well. And in some countries the concentration rates are even higher than in Ukraine.

For instance, 84% of distribution networks are owned by the company Energias de portugal in Portugal, 70% are owned by the company Enel in Italy, in total 78% are owned by the company Iberdrola and Endesa Energia in Spain, and the company E .ON SE owns 48% of networks in Germany.

But there are three giant buts. Namely:

  • All above-mentioned companies are public companies, and their shares are in free circulation and controlling stakes in these companies do not belong to one owner, and their shares are owned by state companies.
  • All the above-mentioned companies do not have dominance in cycling capacity (i.e., thermal power plants) among their assets, and do not have monopoly position in the coal mining and sales markets, as the group DTEK.
  • All above-mentioned companies are active in countries with powerful regulators and their owners do not have oligarchic power and can not “twist” these regulators as they want.

Moreover, the European Commission applied the voluntary division to the German company E.ON SE, which is very similar to DTEK. And when it planned to purchase certain assets on electricity distribution in Germany, it was forced to sell gas and energy retailers in the Czech Republic and Hungary.

Russian betrayal

Another very important nuance. It seems that the Antimonopoly Committee has again decided to believe that current owners of Kirovogradoblenergo from the group VS Energy have nothing to do with Russian politician Oleksandr Babakov and reputable businessman Yevgen Giner. Babakov is Member of Parliament of the Russian State Duma who collected oblenergos in Ukraine with one hand and voted for annexation of Crimea with the other hand. Today, last names Babakov and Giner do not appear in the list of shareholders of Ukrainian oblenergos. There are instead EU citizens of Latvia Arturs Altbergs, Walts Wigants and Willis Dambins, as well as Germans Maryna Yaroslavska and Oleg Sizerman. And this formal change of owners was enough for the Antimonopoly Committee to allow VS Energy to take control of Chernivtsioblenergo in 2017, to sell Kyivoblenerho and Odesaoblenergo to Akhmetov in 2019. And now it allows to give Kirovogradoblenerho to him. Together with the fact that the National Security and Defense Council also does not see these Russians in VS Energy, please at least google: “Marina Yaroslavskaya Yevgen Giner’s wife”. Well, maybe we will be able to show the SBU that it catches mice and for some reason allows representatives of the aggressor country to leave Ukraine very painlessly. Not only without fines, but also with money of grateful Akhmetov.

This is very contrary to the campaign that the Servant of the People has now launched against Poroshenko. Allegedly he’ll never get rid of Lypetsk factory in Russia, and therefore sanctions should be imposed on him for that. But Babakov is not seen in oblenergo ownership structure. And Akhmetov’s own coal mining business in Rostov region is also not seen.

The head of the parliamentary faction Servants of the People Davyd Arahamiya recently stated on the air of TRK Ukrayina to the request to name the largest investors in our country without any tricks:

“If we take investments in the real sector, Rinat Akhmetov is investing most of all now”.

Investor. Not an oligarch. And to ask in these circumstances why the Antimonopoly Committee of Ukraine, headed by the friend of Zelenskyi family, gives the monopolist even more market power is purely rhetorical question.

Share the news

Also read

All news
Draft Law No.9573: MP Motovylovets saves his friends from prosecution for corruption and violates the Constitution
Ukraine paid solar power plants of brother of Yermak’s deputy for electricity under occupation
First results of the law on transparent non-lethal procurements

subscription

Get the AntAC's news first
By filling in this form, I agree to the terms&conditions Privacy Policy