Board of Ukraine gas monopoly reportedly seeks extending of contract with incumbent CEO, halving salary

Board of Ukraine gas monopoly reportedly seeks extending of contract with incumbent CEO, halving salary
A fight has broken out between the Ukrainian government and Naftogaz CEO Andriy Kobolev.
By bne IntelliNews March 14, 2019

The supervisory board of Ukraine's state-owned natural gas monopoly Naftogaz proposed the Cabinet of Ministers to extend a contract with the company's CEO Andriy Kobolev for one year, until March 22, 2020, according to a letter signed by board's head Clare Spottiswoode.

At the same time, the board has proposed to halve the current level of the company head's salary to UAH520,500 ($19,461) without paying monthly and quarterly bonuses. However, Kobolev can claim for bonuses based on the results of work for 2019 if a the nation's gas pipeline operator operator ready for certification is created and gas production is increased by January 1, 2020, according to the letter published by the Ekonomichna Pravda online outlet on March 13.

On March 6, the Ukrainian government greenlighted a special resolution with the aim to appoint new head to Naftogaz. The contract with Kobolev will expire on March 22 under a decision of the government in Kyiv.

Over the past years, Kobolev has won reputations of a reform-minded manager among Western donors for his attempts to reform the monopoly. Under his leadership, Naftogaz has also secured its victory in the Arbitration Institute of the Stockholm Chamber of Commerce over Russia's Gazprom.

According to the Arbitration's ruling, Gazprom should pay $4.63bn to Naftogaz for the failure to meet gas transit obligations. However, since the court previously ordered Naftogaz to pay Gazprom for gas supply arrears in January, Gazprom's net payment after two arbitration decisions will be $2.56bn.

At the same time, Kobolev has been under fire for his multi-million bonuses. In 2018, Ukraine’s State Fiscal Service (SFS) has fined him by UAH8.3bn (around $20mn) for alleged violations of customs regulations during 2015 natural gas imports in 2015. Kobolev has denied any wrongdoing.

According to the Ukrainian government, applications from persons wishing to participate in the tender for the post of Naftogaz's head are accepted within 30 calendar days from the date of publication of the tender announcement.

Kobolev, in turn, believes that the cabinet's decision to terminate his contract and to announce a tender contradicts Ukrainian legislation. "This contradicts the spirit of reform, because the entire ideology consisted of the fact that the shareholder, that is, the government, its main tool of influence on the state-owned company is the appointment of a supervisory board, professional and non-corrupt," he said on March 6.

He added that he is not going to leave his post. "I need this post to achieve the goals I have talked about, and I hope that the rule of law, a civilized approach and corporate governance principles that were laid in the last five years, they will win in this situation," Kobolev said.