Yuriy Vitrenko, executive director of NJSC Naftogaz, wrote an internal memo to the Supervisory Board, proving that the company is losing money in favor of private enterprise ERU Trading, which was previously owned by Andriy Favorov. From November 2018, Favorov holds the position of the Head of the gas business in NJSC Naftogaz.
Yuriy Vitrenko believes that the marketing policy of ERU Trading for selling gas to industrial consumers was ineffective. He wrote about this in an internal memo to the Head of the Compliance Service (internal audit) of the NJSC, Maria Kucherova, on January 31, 2019.
According to the document, gas sales in the fourth quarter of 2018 led to financial losses for Naftogaz and unjustified profits of ERU Trading Llc. as an intermediary between Naftogaz of Ukraine and its subsidiary PJSC Ukrtransgaz.
“As far as I know, the same situation remains relevant for gas supplies in January and February 2019”, the document says.
Based on the analysis of Vitrenko, a copy of which is provided by the Ukrainian News Agency, it follows that in the 4th quarter, ERU Trading received gas at a price that was underestimated in some cases by almost 1 thousand UAH per 1000 cubic meters. It follows from the document that “at the end of November and in December 2018, ERU Trading purchased gas from gas storages at a low price (weighted average 8,457 UAH/thousand cubic meters) with a total volume of 101 million cubic meters”.
“If we assume that this resource was used by ERU Trading for production and technological needs and balancing services, then, when compared to the estimated purchase prices of gas by Ukrtransgaz on contractual terms, ERU Trading could earn $2.2 million on these operations”, says the analysis.
Andriy Favorov was the director and one of the founders of ERU Trading. From November 2018, he was appointed as the Head of the gas business of the NJSC Naftogaz of Ukraine and was partially got the authority of Yuriy Vitrenko.
Yuriy Vitrenko suggests that Favorov had an influence on the formation of the company's marketing policy, this contradicts his official duties to act in the interests of NJSC Naftogaz of Ukraine.
“Accordingly, there may be enough stichtings to believe that this is a consequence of a conflict of interests, if A. Favorov remains the real beneficiary of ERU Trading. On the other hand, based on such circumstances, a reasonable suspicion that A. Favorov could have remained a real beneficiary of ERU Trading may arise, notes Vitrenko.
Maria Kucherova replied that the conflict of Favorov’s interests was settled on February 11, 2019. Vitrenko did not accept such an answer. In turn, he addressed Claire Spottiswoode, the Head of the Supervisory Board of the NJSC, with a proposal to decide as soon as possible which control authorities should be addressed in order to understand the situation and prevent such conflicts of interests.
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