The two-way scheme for heating using alternative energy sources (AES) have been annoying Nashi Groshi journalists for a long time. It looks like this: the first step - an “investor” without any competitions gets a boiler-house near a budgetary institution and switches it from gas to firewood; the second step - using its monopoly position, he raises the price as much as he likes.

From time to time, we disputed with various regional officials who stated that “it won’t be possible to raise the price as much as they like”. We may come back to the discussion right now. With the facts we found out on the example of Slovyansk, the Donetsk region.

The fact is that the network of interconnected private companies has been heating educational institutions of Slovyansk for more than five years. Moreover, over the past two years, UAH 4.63 million was overpaid, and now there is a tariff, at which an illegal overpayment will amount to another UAH 3.3 million.

Let’s tell the story in detail to compare it with other regions of Ukraine.

Nelia Shtepa and Energy Independence

 

It is believed that the main advantages of an alternative boiler-house are cheapness and independence from the Russian gas. In Slovyansk, the fight for the energy independence of Ukraine began at the time when the well-known Nelia Shtepa was the mayor.

At the end of 2012, the local department of education and Promyshlennoye Oborudovaniye LLC agreed to install biofuel boilers at two schools in the town. The tariff for heat was 10% lower than from Donetskteplokomunenergo Regional Public Utility Company (its branch in Slovyansk is called Slovyanskteplomerezha).

In order to consolidate the victory, they decided to build another boiler-house for state money. Though where public finances appear, it cannot go without nuances. That’s what happened this time.

UAH 1.5 million, of which 218 thousand were from the local budget, the rest – the state and regional budget, were budgeted for the construction. The boiler-house on the Konieva street was built for almost a year, the construction was completed at the end of 2013.

Slovyansk Department of Capital Construction Public Utility Company, which at that time was headed by Ihor Shapovalov, was the customer. In 2015, he will become deputy mayor, a year later, he will be arrested for bribery.

Vioks LLC was chosen as a contractor without a tender, SMU-4 LLC was subcontracted. Both companies are connected with state authorities of Slovyansk. The founder of Vioks LLC is Volodymyr Bilyk, who was the director of the Komservis Public Utility Company. The founder of SMU-4 LLC is Andrii Filchak, who from February 2012 became the director of PNTK Elektrotekhmash PE. Earlier, this post was held by Ihor Shapovalov, but it was from 2012 that he started working in the communal structures of the Slovyansk Town Council.

The educators leased the house-boiler built for budget funds to the same Promyshlennoye Oborudovaniye LLC. In addition, in accordance with the certificate of acceptance and transfer, the value of the property amounted to UAH 997 thousand. But owners of the private business decided that paying a month rent for just over UAH 4 thousand was too much for them and hired their appraiser.

At the end of 2014, an independent appraiser Individual Entrepreneur Nataliya Lukyanchuk estimated the cost of the boiler-house at UAH 94.2 thousand, that is, 10 times less. Accordingly, the price of the lease decreased to a more comfortable one for the investor – UAH 403 per month.

 

Flourishing of the Alternative and Strange Scheme

After the “test layer”, alternative boiler-houses started appearing as mushrooms. However, unlike the rest of Ukraine, a somewhat strange method was introduced in Slovyansk. A private investor built a boiler-house, then transferred it to the ownership of the town, and subsequently rented it. This issue will still require a more detailed study, while one can confidently say only one thing: the lease payment did not cause any significant damage to owners of private business. Investors declared that the price of the boiler-house during the transfer varied from UAH 1,640 to 4,955. As a result, the rent was from UAH 8 to 24 per month.

In each case, during the next few years, about 20 boiler-houses appeared in the town. And in the beginning, it was really profitable for the budget.

Season 2012-2013

Negotiation Procedure. The price is UAH 1,000 inc VAT per 1 Gcal from the manufacturer Promyshlennoye Oborudovaniye LLC. The tariff of Donetskteplomerezha Regional Public Utility Company is UAH 1,086 inc VAT.

Season 2013-2014

October-December. Negotiation Procedure. The price is UAH 1,000 inc VAT per 1 Gcal. Contractors - Promyshlennoye Oborudovaniye LLC and Ukrekoteplo LLC. Tariff of Donetskteplocomunenergo – UAH 1,086 inc VAT.

January-April. Negotiation Procedure. The price of Promyshlennoye Oborudovaniye LLC is UAH 787 inc VAT, the price of Ukrekoteplo LLC is UAH 787 ex VAT (since LLC was on a single tax). The tariff from public utility companies for the heat generated from gas is UAH 1,086 inc VAT.

Season 2014-2015

After the liberation of Slovyansk, in September 2014, the public bidding procedure is being held for the first time. An important moment that influenced the situation is the fluctuation of prices for central heating throughout Ukraine. From January 2014 to January 2017, the tariff of Donetskteplokomunenergo Regional Public Utility Company for budgetary institutions changed 12 times:

October - December. The winner is Promyshlennoye Oborudovaniye. The price is UAH 1,198 inc VAT. The cost of 1 Gcal in the contract with Donetskteplokomunenergo Regional Public Utility Company was UAH 1,302.55.

January - April. The winner is Ukrekoteplo. The price is UAH 1,390/Gcal ex VAT. The cost of gas heating is on the average UAH 1,709/Gcal inc VAT.

Season 2015-2016. First Overpayment

In September 2015, the E-Data portal was launched. This made it possible to see how much was actually paid under the contract.

October - December. In October 2015, the contract with Ukrteplo LLC is concluded for UAH 4.44 million. Then supplementary agreements were concluded, and as a result the Department of Education paid UAH 5.52 million. The price of UAH 1,691 per 1 Gcal was lower than the price in UAH 1,716 from public utility companies only due to the fact that Ukrekoteplo does not pay VAT. It was the first warning light that owners of private business could heat with pellets at a higher price than the centralized gas heating.

In January 2016, a heating contract, according to which the cost from Ukrekoteplo in UAH 1,885/Gcal ex VAT is higher than from RME Donetskteplokomunenergo Regional Public Utility Company, which is UAH 1,672/Gcal inc VAT, was concluded.

In general, in comparison with the price of public utility companies, UAH 898.7 thousand was overpaid.
A piquant detail. This expensive tariff was approved by the Executive Committee of the Slovyansk Town Council. However, it happened on April 6, 2016. That is, two and a half months after the signing of the contract. Moreover, according to the Law on Heat Supply in force at that time, the tariffs for heating using renewable energy sources by the summer of 2017 should have been established exclusively by the NEPURC.

 

But we will not take into account such “trifles”. Since all of them was overlapped by the heating season 2016-2017.

2016-2017. Getting to the Shore

Strangely enough, but the holiday of overpayment in Slovyansk came along with the Prozorro era. As a result of “transparent and open” tenders, the cost of heating from alternative energy companies began to rapidly outrun the traditional one.

In the fall of 2016, the authorities put up 18 lots: for the supply of thermal energy to 18 educational institutions.

Six victories were taken by Ukrslavterm LLC (UAH 2.12 million) and 12 lots – Slovyanski Teplovi Merezhi (STM) LLC (UAH 4.95 million). Promyshlennoye Oborudovaniyt was the third participant to play.

The prices impressed this time. The cost of 1 Gcal from Ukrslavterm is UAH 1,895 ex VAT, STM – UAH 1,904 ex VAT. At the same time, Teplomerezha heated with gas at an average for UAH 1,419 inc VAT. In comparison with the prices from public utility companies, UAH 2.18 million was overpaid to private suppliers.

The next tender procedure for heating in January-April 2017 was held under almost the same scenario. This time, the Department of Education of Slovyansk made three lots. 3 participants took part in the tender, each of which won one lot and lost in others.

Winners’ prices: Prombioservis LLC – UAH 2,055 ex VAT; Urkslavterm LLC – UAH 1,450 ex VAT; Slovyanski Teplovi Merezhi LLC – UAH 1,450 ex VAT.

During this period, Donetskteplokomunenergo Regional Public Utility Company heated educational institutions of Slovyansk at a price of UAH 1,338 inc VAT. Thus, the overpayment from private heat suppliers amounted to UAH 1.55 million.

2017. The Law of Ukraine that Was not Read in Slovyansk

 

In March 2017, an important event took place. The Verkhovna Rada has adopted amendments to the Law On Heat Supply, which regulates the prices for alternative heating. It indicated that the tariff for it should be 90% of the gas heat tariff average in the region.

At that time, some experts said that even 90% were too much, and it was this figure that alternative energy companies lobbied to explain their financial appetites. Experts simply did not know how they can “eat” in Slovyansk. The point is that here this Law passed by without any notice.
On September 25, 2017, the State Agency on Energy Efficiency and Energy Saving of Ukraine established that the average weighted tariff for heat energy for budget organizations in the Donetsk region is UAH 1,201.71 per Gcal. Therefore, the tariff for heating with the use of alternative energy sources should be UAH 1,081.54.

Almost immediately after that, in October 2017, another tender takes place in Slovyansk. The Department of Education again divides the order into three lots. Participation was taken by four suppliers, one of which – Promyshlennoye Oborudovaniye - worked as a statist at all three lots. There was no decrease in price, and each winner took part in just one lot.

Results: Kramatorsk Energy Company (KEC) – UAH 2,050, Slovyanski Teplovi Merezhi – UAH 1,850, Ukrslavterm – UAH 1,940.

The prosecutor’s office came into to play here. True, it turned out to be quite funny. On the same day, when contracts were concluded with KEC, STM and Ukrslavterm, supplementary agreements on the agreed decrease in prices were published. The local public prosecutor’s office informed that it managed to reduce the cost of the purchase of heat energy by UAH 350 thousand by its efforts.

As a result of efforts of the prosecutor’s office, prices fell to UAH 1,990, UAH 1,800 and UAH 1,820, respectively. That is, overpayment for heating with the use of AES from 90% of the average weighted tariff on heat energy in the Donetsk region has decreased from 3.61 million to 3.3 million. Such an achievement.

According to the results of the over five-year epopee with heating of educational institutions, private structures overpaid over UAH 4.63 million compared to tariffs of public utility companies. After concluding the contract with KEC, STM and Ukrslavterm in the fall of 2017, heating tariffs in violation of the Law on Heat Supply are already in excess of UAH 3.3 million. It sums up to UAH 7.93 million, which could be saved.

Here is the diagram comparing the value of 1 Gcal from Donetskteplokomunenergo Regional Public Utility Company and private heaters for each heating period:

Chairman of the Board of Civic Union “Bioenergy Association of Ukraine” Heorhii Heletukha commented on the state of affairs with the heating of educational institutions of Slovyansk by private structures:

“In this situation, there are several issues at once. The first one is who approved the heating tariff? According to the amendments to the Law On Heat Supply, from June 2017, tariffs for heating with the use of alternative energy sources (such as firewood or pellets) should be established by local self-government authorities (LSGA). Prior to that, only the NEPURC set the tariffs for heating with alternative or renewable sources. I doubt very much that the tariff for these private heaters was approved by the National Commission. The tariffs at the level of UAH 1,800-2,000 simply could not be established for them, provided that they heated with pellets.

The second one is why the local authorities are silent and pay such an expensive tariff? The law says that the revision of tariffs shall take place once a quarter. Let’s assume that they have an objective tariff of 2 thousand. According to the law, the department of education had the right to file an application with LSGA to revise the tariff. Educators should refer to the law, which clearly specifies the tariff for the use of ASE at the level of 90% of the average weighted in the region and ask to recalculate it. 0.9 of the tariff for gas in the region should have been established for these owners of private business - this would be UAH 1,081 per Gcal. And not UAH 1,800-2,000 at all.

If such a scenario did not happen in Slovyansk, then all this has signs of corruption. Why does the Department of Education pay almost UAH 2,000 per Gcal, when they can pay UAH 1,081? Why don’t they submit documents to reduce the tariff? I do not understand it, the law does not understand it, in general, the common sense does not understand it”.

                                                                                                                    
A Few Words About Lucky Businessmen

 

In the text, we did not mention who owns all these companies and who became an active investor in the alternative in Slovyansk. The fact is that they all come down to one person. We don’t know whose interests, apart from his own, are represented by this person. Maybe, his own. Although, there are doubts about this.

A number of criminal proceedings against private investors and their work methods can be found in the court register.

For example, the decision, in which it is put down in black and white that Promyshlennoye Oborudovaniye LLC and Ukrekoteplo LLC filed identical lists of employees for the tender. Or an eloquent verdict to the Director of Ukrekoteplo LLC that he did not refuse to falsify the documents for participation in the tender.

Only a few strokes and one name plate.                              

Promyshlennoye Oborudovaniye LLC. Vyacheslav Rohoza was one of the founders in 2012.

Ukrekoteplo LLC. The founders are Konstiantyn Bantush, Kiril Horlov and Vyacheslav Rohoza. From the beginning, Rohoza was the manager.

In 2014, when Promyshlennoye Oborudovaniye and Ukrekoteplo participated in one tender, Rohoza was a representative of PO. He was the director of Ukrekoteplo. In the minutes of the disclosure of proposals, V.O. Rohoza – a member of Promyshlennoye Oborudovaniye LLC – is indicated as present. PO indicated the contact telephone number, which coincides with the telephone number of Ukrekoteplo LLC. The same number is indicated as the contact telephone number of Individual Enterpreneur Vyacheslav Oleksiyovych Rohoza in the USR.

Ukrslavterm LLC. Diana Romanenko is the founder and manager. Ukrslavterm is registered in the building, where Ukrekoteplo was registered by mid-2016.

Equipment for Ukrslavterm LLC is supplied by Individual Entrepreneur Vyacheslav Oleksiyovych Rohoza. According to the data in Clarity Project analytical system, the phone number of Ukrslavterm LLC in tender procedures was indicated as the contact phone number of Ukrekoteplo LLC and Eco Module-Ukraine LLC, where Vyacheslav Rohoza is the founder.

Slovyanski Teplovi Merezhi LLC. The company was founded in Kramatorsk in April 2016. Its founder was Oleksii Raspopov, whose signature was in the reports of the services rendered between the Department of Education of Slovyansk and Promyshlennoye Oborudovaniye LLC from November 2012 to April 2013.

The supplier of equipment for STM is Individual Enterpreneur Platon Oleksandrovych Reznichenko, whose contact number coincides with the telephone of Ukrslavterm LLC and, according to the list, Ukrekoteplo LLC, Eco Module-Ukraine LLC.

Prombioservis LLC. The company was founded in September 2016 in Kramatorsk. From the beginning, Oleksandr Zenko, who until then was the director of Ukrekoteplo LLC, was the manager and founder. Now Dmytro Pustovit, who was named an employee of Ukrekoteplo LLC in accordance with their documentation to the tender, is the director of Prombioservis.

The equipment for Prombioservis LLC is supplied by Individual Entrepreneur Maryna Oleksandrivna Pysarenko from Druzhkivka. This is the wife of a businessman from Druzhkivka Dmytro Pysarenko, who is a business partner of Vyacheslav Rohoza and is co-founder of Slavekoteplo LLC.

Kramatorsk Energy Company LLC. The company appeared in April 2016 in Kramatorsk and is registered at the same address as Slovyanski Teplovi Merezhi LLC, has the same phone number with Prombioservis LLC. Not only the phone number but also the founder - Oleksandr Zenko binds Kramatorsk Energy Company with Prombioservis.

Already known to us Individual Entrepreneur Maryna Oleksandrivna Pysarenko is indicated as the supplier of equipment for Kramatorsk Energy Company LLC.

In the picture, everything looks something like this:

To keep the balance, we tried to get a comment from the main figures of the article. Calls were made to the contact numbers of Kramatorsk Energy Company LLC, Slovyanski Teplovi Merezhi LLC and Ukrslavterm LLC, which won tenders in October 2017, and now they are heating schools, kindergartens and an orphanage. The objective was to find out what enterprises are heated with, the justification of the tariff, the reasons for exceeding the cost of heating in violation of the law and the relationship between firms. It is quite predictable that the conversation with company’s managers did not go beyond the second question.

We didn’t manage to contact KEC, as simply nobody picked up the phone.

The director and founder of Ukrslavterm Diana Romanenko said that her company heat educational institutions by biofuel. After questions about the justification of the tariff, the connection was lost and nobody picked up the phone in Ukrslavterm.

The conversation with the founder of STM Oleksii Raspopov was more productive. He pointed out that they had pellet boiler-houses. Raspopov did not give an answer to the question about calculation of the tariff in UAH 1,800 per Gkal Raspopov and recommended to address the director of the company and the accounting department:

“You ask me too much questions, it seems to me. You need to call my director or accountant, send a letter - you will be given a tariff calculation. Let’s get in touch over the phone later and I’ll give you the contacts”, he said.

Oleksii Raspopov promised to provide the e-mail of the company’s accounting department to obtain a tariff calculation, but he did not send contact details.

 

Favourites of Local Authorities

 

In fact, we are not very interested in “all these people”. The search for an explanation of the unusual “love” of the town authorities for these companies is more important.

A request to the Slavyansk Town Council was sent to provide documents, according to which the tariffs for private heaters were approved from 2013 and till now. In response, we received a letter signed by the Mayor Vadym Liakh that the town council had the right to set a tariff for heat energy from private enterprises. The Executive Committee of the Slovyansk Town Council in April 2016 approved the tariff of UAH 1,885 per Gkal for Ukrekoteplo LLC, but this resulted in initiating criminal proceedings by the police under the article “Service Negligence”.

The decision to approve tariffs until April 2016 was lost in the Slovyansk Town Council:

“When working with archival documents for the period of 2013-2015, the necessary documents are not available for the reasons unknown to us”, - it was stated in the letter.

Stay tuned for that. We have already figured out that the tariff for heating of educational institutions in Slovyansk with the use of pellets was to be established by the NEPURC. In response to a request from the National Commission, it was clearly stated that they did not set a tariff for any of the group of related companies that had been heating educational institutions of Slovyansk for more than five years.

When the legislation of Ukraine in 2016 reduced the maximum income for companies on a single tax (and all private companies that heat educational institutions of Slovyansk, except for Promyshlennoye Oborudovaniya LLC, use the simplified tax system) from UAH 20 to 5 million, local authorities made advances to investors. And it began to split lots so that one could fit into 5 million and not “flew down” from a single tax, as it happened with Ukrekoteplo LLC in 2016, when owners of private business received a contract for 7.95 million. Then it led to the appearance of new firms from under a common roof to “eat” the whole budget cake without leaving crumbs.

We will probably not be able to find explanations for such strong feelings of state authorities for small and medium businesses. When any money can be spent for favorite companies, especially if they are not yours.

Bohdan Krasovskyi for Nashi Hroshi, Slovyansk. The investigation was conducted within the framework of the USAID Transparent Energy Project. The author’s position may not coincide with the position of the United States Agency for International Development and DiXi Group Think Tank.