Institutional support to the national nuclear utility Energoatom

In the context of restructuring the electricity sector by the Ukrainian government, this project was set up to support the re-orientation of the management of Energoatom towards a competitive market-driven environment.
This project, financed under Tacis 1998 Programme, was in line with the institutional reforms in the Ukrainian energy sector and aimed to enable the national nuclear utility Energoatom (further referred to as EA) to efficiently operate in the competitive electricity market. The project design complied with the Tacis priorities and the needs of EA, and therefore supported EA’s vision: “to become an independent, profitable growing commercial company, socially responsible to the community, the environment and employees, providing safe and reliable energy services”.

The overall objective of the project was to improve the commercial performance and to optimise the management structure of Energoatom.
The specific project objectives were the following:

To develop the normative and organisational basis of the company enabling it to efficiently operate in the competitive electricity market
To establish a corporate model of self sustaining company development with financial transparency and commercial focus
To achieve high business and commercial performance, in compliance with the highest safety standards.

The project activities were performed through interactive cooperation between EA and the Contractor’s consortium. The project established openness of communications, a strong involvement of stakeholders and a collaborative team, which worked efficiently and sometimes across the levels of hierarchy.

The main outputs of the project were: drawing a corporate strategy development plan, transforming Energoatom into a joint stock company without change of ownership, introducing an efficient computer-aided management system, and training of staff.

The project produced valuable reports with practical recommendations for measures as follow-up to the plan for restructuring. Development of the institutional and business competencies of EA was a lengthy process.
The achieved results were highly appreciated by EA management. The documents produced provided an extensive compendium of implementation measures for the short and long terms that needed to be further detailed in the course of implementation.

The TOR was published on 2001, with the result-oriented activities related to the following six tasks: Inception Phase; Corporatisation; Corporate Strategic and Development Plan (CSDP); Restructuring Plan; Action Plan; Corporate Governance.

The contract was signed with British Energy on 24/03/02, and the kick-off meeting was held in Kiev, on 24/04/02.
After the kick-off meeting, a delay in the project administrative arrangements required at the level of EA and the Ministry of Fuel and Energy (MFE) including the confidentiality agreement between the project parties had caused a 2-month delay in the effective start of project work. Due to this, the Inception Report (IR) phase was extended until 09.08.2002.
EA assigned the newly established Corporate Development Department to manage the project activities at the Ukrainian side, though initially the Department on Quality was responsible for that. The Contractor concluded subcontracts with local companies Energy Consulting Group, JurEnergo Consulting and NPP Operation Support Institute.

The IR approved by EA on 16/09/02 confirmed that the TOR essentially remained relevant. The changed work schedule accommodated for a delayed start and changes of the EA’s President and senior officers. Moreover, all parties involved recognised: i) as impracticable the arrangements to be in place within five months for corporatisation of EA; ii) that obtaining support by EA staff for corporatisation is essential, which however does not assume privatisation as a consequence. The IR highlights also the separation between short-term and long-term organisational change issues.

The Contractor and EA recognised at the Round-table seminar on 22/10/02, that the decision to proceed to joint stock company status was outside the scope of EA and the Contractor’s consortium.
Attention was shifted from assistance for implementation to assistance for the preparation to corporatisation, and as the threat of privatisation no longer existed, the initial opposition to ful co-operation disappeared.

The presentation of the Corporate Strategic Development Plan CSDP (on 06/11/03) was attended by representatives of the Cabinet of Ministers, Ministries and Departments, the EU Ambassador, EA experts, as well as mass media. The response was positive and constructive. Concerns were expressed on the townships and the social impact of staff reduction to European standards, and also on tariffs and now-insufficient Decommissioning Fund. The President of EA appreciated the CSDP and stated that social protection of the staff was a high priority.

The Restructuring Plan (12/2003) was based on the CSDP and identified a prioritised set of business objectives. EA stressed that the change process required ‘internalisation’ before being adopted, to carefully prevent destabilisation of the workforce critical to the safety and engineering departments of the NPP.
The Action Plan covered a period of up to 5 years, until 2009. The Plan identified responsible parties and schedule, and recommended to EA to establish a core team for managing programme implementation.

The CSDP, the restructuring and the action plan were approved by EA and properly reflected Ukrainian conditions. The plans were timely completed within budget and of high quality.
Compliance with Ukrainian legis�lative and regulatory environment was essential in developing the Corporate Governance procedures. For adequate protection of potential investors, a further developed financial legislative framework was considered necessary. The Corporate Governance Manual was prepared based on discussions with EA management and issued in January 2004, focusing on accountability and responsibilities.
Near the project end (as reported in 08/2003), the PM agreed to reallocate additional workdays from local experts to Contractor’s experts.

The project was extended until 22/01/04.

The project adequately adapted to the changing needs and circumstances. The involvement of different Ukrainian Authorities and their commitments to review the project documents demonstrated that the project was fully supported at all national levels.