ENSURING EFFICIENT AND EFFECTIVE CORPORATE GOVERNANCE
First Vice President - Technical Director SE NNEGC Energoatom
Nuclear power has a number of economic features that distinguish it from other industries. Among many others, these are high scientific capacity and constant need for R&D and design engineering works to ensure a high level of nuclear and radiation safety.
In the long run, due to its economic efficiency, nuclear power will still remain competitive compared to other types of power generation. There is one more important feature: managing a company in this strategically important, complex and capitalintensive industry, which is constantly focused on safety and efficiency improvement, requires the best global management expertise.
One of the strategic tasks for SE NNEGC Energoatom is to maintain a share of at least 50% in the national energy balance and increase it by building new capacities. This underlies the management strategy of the Company, which pursues to enhance the role of strategic planning while creating new and upgrading the available capacities and maintaining the high level of operational safety at the same time. SE NNEGC Energoatom corporate governance system is being constantly improved.
All the main processes of the Company’s activity are reflected in standards, which makes it possible to specify the scope of staff actions in the implementation of technological procedures. We have ensured the consistency, transparency and reproducibility of production management at all its stages and levels. The management system of SE NNEGC Energoatom has been brought in line with the international standards and certified.
Still, we do not want to stay complacent and have ambitious plans to improve the Company’s governance system in the future.
THE FUTURE OF NUCLEAR ENERGY
Energoatom is a key electric energy producer for decades ahead. "Ukraine considers nuclear power as one of the most cost effective low carbon energy sources. Further development of the nuclear energy sector for the period up to 2035 is based on the projection that the share of nuclear generation in the total volume of electricity production will be on the rise", states the Energy Strategy of Ukraine to 20351.
ACCORDING TO THE ENERGY STRATEGY OF UKRAINE, THE NUCLEAR POWER INDUSTRY WILL DEVELOP IN THREE KEY STAGES:
KEY ACTIONS OF THE UKRAINIAN ENERGY STRATEGY TO 2035 IN THE IMPLEMENTATION OF STRATEGIC GOALS IN THE AREA OF NUCLEAR POWER GENERATION:
- Introducing a new model of the electricity market and making all the market segments operational: market of bilateral contracts and day-ahead market; intraday market; balancing market, market of ancillary services;
- Liquidation of cross-subsidizing between consumers, bringing the prices for households to the market level;
- Introducing legislative regulation of repayment of debts of electricity and adjacent markets operators;
- Development of efficient mechanism for accumulation of resources to fund the works related to taking nuclear power blocks out of operation by nuclear facility operators;
- Considering introduction of incentive-based tariff setting and market pricing mechanisms, creating investment incentives, increasing production and operational efficiency;
- Completing the construction of spent fuel and radioactive waste storage facilities;
- Minimising/removing external technical and administrative limitations;
- Implementing programs for improvement of efficiency of the use of capacities of state owned companies, in particular increasing the installed capacity use factor of NPPs;
- Creating possibilities for export and import of electricity to/from EU countries on the market basis;
- Releasing closed capacities through electricity grid development program and implementation of projects aimed at removal of external restrictions;
- Extending the period of NPPs operation;
- Approving decisions on construction of new generating capacities to replace those to be taken out of operation after 2025 and 2030;
- Selecting reactor technologies for construction of new nuclear energy blocks to replace NPPs capacities to be taken out of operation after 2030;
- Developing and approving the long-term Ukrainian Nuclear Power Development Program;
- Designing and constructing nuclear power units according to Ukrainian Nuclear Power Development Program.
STRATEGIC GOALS AND PRIORITIES
The vision of the SE NNEGC Energoatom future is reflected in the Company’s Strategic Plan enacted by Order No. 424 "On Giving Effect to the Strategic Development Plan of SE NNEGC Energoatom 2017-2021" dd. 19 May 2017.
The plan has been designed to deliver key performance indicators and ensure strategic directions of the Company’s operation. In the tense political and economic situation in Ukraine, the Strategic Plan will help solve the most important operational problems and ensure sustainable development of nuclear energy subject to the availability of financing for the programs specified by the Strategic Plan.
When designing the Strategic Plan the general approach was to ensure that the Company’s strategy be consistent with the country’s national energy strategy and the methodological requirements of the Ministry of Energy and Coal Industry of Ukraine. The key strategic goals and priorities being integrated by the Company in its activities are based on domestic legislation and regulations.
Energoatom carries out its activities in accordance with the following strategic objectives: safe operation and increase of NPPs efficiency, meeting the needs of the country in electric and thermal energy, investment development and social development. Based on Energoatom’s strategic areas of focus, the following strategic goals of the Company have been set:
STRATEGIC GOALS OF ENERGOATOM
SAFE GENERATION OF ELETRICITY AND THERMAL POWER
PROVIDING FRESH NUCLEAR FUEL AND SPENT FUEL DISPOSAL SERVICES TO UKRAINIAN NPPS
INCREASING SAFETY OF THE OPERATING NPPS AND EXTENDING THEIR LIFE CYCLE
ENSURING PROPER QUALITY AND VOLUME OF REPAIR WORKS AT NPPS WITHIN THE PROJECTED TIMEFRAME
PHYSCIAL PROTECTION OF NPPS
ENSURING PROPER LEVEL OF EMERGENCY READINESS
ENSURING SAFE WORKING CONDITIONS
IMPROVING PERFORMANCE EFFICIENCY
OTHER AREAS OF CAPITAL INVESTMENT
IMPROVING LABOUR EFFICIENCY AND RETAINING JOBS
ENSURING COORDINATION BETWEEN SOCIAL DEVELOPMENT ACTIONS OF THE COMPANY AND STATE SOCIAL POLICY
Key strategic objectives and performance indicators (KPIs) of the Company also take into account the necessity to ensure sustainable development of Energoatom and contribute to the sustainable development of the entire Ukrainian society. In 2017, the Company made significant steps on the way to safe production of electric and thermal energy, in particular, it continued implementing the Complex (Consolidated) Safety Upgrade Programme of Power Units of Ukrainian NPPs, launched the project "Ukraine-EU Energy Bridge", and successfully completed the autumn-winter period 2016 / 2017.
The Company continues contributing to Ukraine’s energy independence. In 2017, Energoatom produced 85.6 billion kW/h of electricity, which accounted for 55.2 % of the total electricity production in Ukraine.
As to safety improvement at the existing NPPs and the extension of their life cycle, a 10-year life cycle extension of power unit No. 3 at Zaporizhzhya NPP became an event of the year. As you know, nuclear power plants, as well as any facilities that are exposed to natural aging processes, require special attention in terms of ensuring their safety, as well as moderate approaches to managing their service life and longer operation. In a move to extend the life cycle, the Company conducts overhauls, maintenance and repair, as well as engineering works.
Management of a storage facility for spent nuclear fuel and radioactive waste: The Company has launched the construction of the Central Spent Fuel Storage Facility (CSFSF) for Rivne, South-Ukraine and Khmelnytska NPPs, as well as started pilot operation of facilities for processing radioactive waste at Zaporizhzhya and Rivne NPPs.
Investment development: The Company has launched pilot operation of "Building G Training Centre", which will be used for repair and management staff training.
In addition, Energoatom has taken efforts to diversify the sources of nuclear fuel supply for power units of Ukrainian NPPs, completed the construction of gas facilities (in particular, nitrogen-oxygen station No. 2 and electrolysis station No. 2), implemented the project for a reconstruction of a 750 kV outdoor switchgear for connection of a 750 kV overhead line Zaporizhzhya-Kakhovka and performed a great deal of work within the project “Reconstructing a service water supply system at South-Ukraine NPP”.
In addition, 2017 was a successful year for the Company in the area of new facilities construction.
On 6 July 2017, Energoatom was granted a license by the State Nuclear Regulatory Inspectorate of Ukraine to carry out activities at the stage of the life cycle "construction and commissioning of a nuclear facility" of the Central Spent Fuel Storage Facility for spent fuel from VVER-1000 type reactors operated by domestic NPPs. The Chernobyl Exclusion Zone has been designated as the construction site. On 9 November 2017, a construction opening ceremony took place in Buriakivka village (Kyiv Oblast, Chernobyl Exclusion Zone). On 21 December 2017, the Ministry of Finance of Ukraine, Energoatom, the Overseas Private Investment Corporation (OPIC) and Central Storage Safety Project Trust signed an agreement to raise $250 million for the construction of the Central Spent Fuel Storage Facility.
Social area development: In 2017, the payroll fund of Energoatom rose by UAH 894.9 million (compared with 2016). Total expenditures on H&S measures and equipment amounted to UAH 327.8 million during the reporting period.
CORPORATE GOVERNANCE SYSTEM
Energoatom is a legal entity established in accordance with the Resolution of the Cabinet of Ministers of Ukraine “On the Establishment of State Enterprise “National Nuclear Energy Generating Company “Energoatom” dated 17 October 1996 No. 1268 pursuant to the Law of Ukraine On the Use of Nuclear Energy and Radiation Safety. The Company is subordinate to the Ministry of Energy and Coal Industry of Ukraine, a governmental agency responsible for nuclear energy and radiation safety management.
Energoatom’s head is the president who forms the organisational structure and appoints the members of the Company’s management. The management of Energoatom consists of the President, the first Vice President-Technical Director, General Inspector-Safety Director, vice presidents, the Chief Accountant, as well as general directors of separate subdivisions (deputy heads of the operating organisation at NPP sites).
The Company adheres to an integrated management system and continuously improves its performance to achieve the goals, meet the requirements of stakeholders, legislative and regulatory requirements for nuclear and radiation safety, quality, environment, health, physical protection and occupational safety. Thus, ensuring sustainable development is one of the Company’s fundamental principles, as stated in the Energoatom Statement of Policy.
ENERGOATOM INTEGRATED MANAGEMENT SYSTEM IS BASED ON THE FOLLOWING PRINCIPLES:
ENSURE PRIORITY OF SAFETY REQUIREMENTS OVER ECONOMIC, TECHNICAL, SCIENTIFIC AND OTHER OBJECTIVES.
ENSURE PERMANENT AND SYSTEMATIC CONTROL OVER COMPLIANCE WITH SAFETY REQUIREMENTS.
PROVIDE PLANNING, MANAGEMENT AND SUPERVISION OF ACTIVITIES THAT AFFECT SAFETY IN ROUTINE, TRANSITIONAL AND EMERGENCY CONDITIONS.
CULTIVATE AND SUPPORT THE CULTURE OF SAFETY AND SECURITY.
ESTABLISH PERSONAL RESPONSIBILITY OF SENIOR MANAGEMENT FOR PRIORITIZING THE RESOURCES REQUIRED TO MEET SECURITY REQUIREMENTS
PREVENT VIOLATIONS OF SAFETY REQUIREMENTS THROUGH ONGOING ANALYSIS OF ACTIVITIES AND IMPLEMENTATION OF CORRECTIVE AND PREVENTIVE MEASURES.
- The key milestones achieved by Energoatom in 2017 on the way to improve the corporate governance system include the following:
- All the main processes of the Company’s activities are reflected in the standards, which helped clearly define the actions of all staff during the technological procedures. The consistency, transparency and reproducibility of production management at all stages and levels are ensured.
- Decision-making processes relating to managerial, financial and technological issues are in place. They are based on findings of internal inspections of production processes.
In 2017, Energoatom continued preparation for corporatisation specified by the terms of a loan agreement with the EBRD2. Corporatisation should facilitate the creation of favourable conditions for investment flows and financing of capital construction projects, completion of construction of nuclear power units, as well as improvement of the strategic governmental asset management.
In pursue of the Loan Agreement, EBRD selected Deloitte, Ukraine (Deloitte Touche LLC) as a corporatisation advisor for Energoatom. The advisor had to develop a Corporatization Road Map for Energoatom in accordance with the best international practice within 18 months (from the effective date of the Loan Agreement) and prepare the final report and a draft 10-year development plan of the Company.
In 2017, the advisor developed a Report on the First Stage of Corporatisation, which analysed and evaluated current legislation, provided information on corporatisation practices at state-owned companies that are not subject to privatisation, considered possible corporatisation schemes, etc. The results of the first phase of the project “Ukraine: Energoatom — Sustainable Corporate Development” were presented on 11 October 2017 in Kyiv. The main conclusion of the report was as follows: corporatisation requires a special law that would take into account all the peculiarities of the nuclear power company.
- n December 2017, representatives of the Company and the leadership of the Ministry of Energy and Coal Industry held a meeting where they considered three major issues:
- formation of Energoatom Supervisory Board,
- necessary legislative changes for corporatisation,
- timelines of reform implementation.
The participants of the meeting discussed the formation of the Supervisory Board. Also, attention was drawn to the fact that legislation should be developed in parallel with the road map. However, as of the end of 2017 the Government of Ukraine failed to make a decision on Energoatom’s corporatisation.
The Company did not have any restructuring during 2017. No social infrastructure and housing facilities were alienated or transferred on a non-paid basis from the balance of Energoatom into the municipal ownership of the local communities in NPP satellite towns in 2017.
COMPLYING WITH INTERNATIONAL CORPORATE GOVERNANCE STANDARDS
Following the course towards the European integration, Energoatom has brought its own management system in line with international standards and certified it.
In 2017, the Company (as a single legal entity) successfully passed the supervisory audit regarding compliance of its integrated management system with the requirements of international standards ISO 9001:2015; ISO 14001:2015 and OHSAS 18001:20073.
THE COMPANY’S MANAGEMENT SYSTEM HAS BEEN HARMONISED WITH INTERNATIONAL STANDARDS AND CERTIFIED ACCORDING TO ISO 9001:2015, ISO 14001:2015 AND OHSAS 18001:2007.
ENERGOATOM’S ORGANISATIONAL STRUCTURE
The highest governing body of Energoatom is the Management Board. Energoatom’s President is responsible for operational management of the Company’s economic activities. The President, the First Vice President and vice presidents are appointed and dismissed by the Cabinet of Ministers of Ukraine.
The current organisational structure of the Company is characterised by vertical administration, distribution of functions, mandates and roles for managing basic production, finance, human resources, procurements, departmental supervision and providing physical protection of nuclear materials.
ENERGOATOM GENERAL ORGANISATIONAL CHART
In 2017, the Company’s management system did not experience any changes as a result of corporatisation as the Government had not yet made the respective decision. The senior managers remained the same as in 2016.
YURIY O. NEDASHKOVSKY
PRESIDENT OF ENERGOATOM
HE WAS BORN ON 14 APRIL 1961 IN KYIV. IN 1983, MR NEDASHKOVSKY GRADUATED FROM ODESSA POLYTECHNIC INSTITUTE, MAJORING IN NUCLEAR POWER PLANTS AND FACILITIES.
The Cabinet of Ministers of Ukraine issued Order No. 124-r on 5 March 2014 to appoint Yuriy Nedashkovsky the President of Energoatom.
OLEXANDR V. SHAVLAKOV
FIRST VICE PRESIDENT –
TECHNICAL DIRECTOR OF ENERGOATOM
HE WAS BORN ON 30 JULY 1959 IN HORLIVKA, DONETSK OBLAST. IN 1982, MR SHAVLAKOV GRADUATED FROM MOSCOW ENGINEERING PHYSICS INSTITUTE, MAJORING IN NUCLEAR POWER PLANTS AND FACILITIES.
On 2 March 2011, the Cabinet of Ministers of Ukraine appointed Olexandr Shavlakov the First Vice President – Technical Director of Energoatom.
VOLODYMYR M. PYSHNYI
VICE PRESIDENT OF ENERGOATOM
HE WAS BORN ON 15 JANUARY 1955 IN SENCHA VILLAGE, LOKHVYTSIA DISTRICT, POLTAVA OBLAST. MR PYSHNYI STARTED HIS CAREER IN 1972 IN SENCHA CONSTRUCTION OFFICE AND THEN ENTERED ODESSA POLYTECHNIC INSTITUTE IN 1973. HE GAINED THE QUALIFICATION OF A THERMAL ENGINEER. AFTER GRADUATION IN 1978, HE WORKED AS A REACTOR ENGINEER AT NOVOVORONEZH NPP (RUSSIA) AND AS A SENIOR REPAIRMAN IN A CENTRALISED REPAIR SHOP AT ZAPORIZHZHYA NPP.
AIDYN A. AISIN
VICE PRESIDENT OF ENERGOATOM
HE WAS BORN ON 21 OCTOBER 1958 IN BAKU (AZERBAIJAN). MR. AISIN GRADUATED FROM KYIV INSTITUTE OF CIVIL AVIATION ENGINEERS IN 1982 AND FROM THE NATIONAL ACADEMY OF MANAGEMENT IN 1995, MAJORING IN FINANCE AND CREDIT. HE HELD SENIOR POSITIONS IN COMMERCIAL AND GOVERNMENT-OWNED ENTERPRISES.
The Cabinet of Ministers appointed Aidyn Aisin Vice President of Energoatom (Resolution No. 1239-r dd. 16 June 2010). On 18 June 2012, he was transferred to the post of Vice President for Economic and Corporate Development
DANKO V. BILEY
GENERAL INSPECTOR – SAFETY DIRECTOR OF ENERGOATOM
HE WAS BORN ON 27 FEBRUARY 1954 IN PLOSKE VILLAGE, SVALIAVA DISTRICT, ZAKARPATTIA OBLAST.
NATALIYA V. VASHETINA
CHIEF ACCOUNTANT OF ENERGOATOM
SHE WAS BORN ON 11 DECEMBER 1956 IN PETRUSHI VILLAGE, RIPKY DISTRICT, CHERNIHIV OBLAST. IN 1981, MRS VASHETINA GRADUATED FROM UKRAINIAN AGRICULTURAL ACADEMY, MAJORING IN ACCOUNTING IN AGRICULTURE. SHE HELD SENIOR POSITIONS IN GOVERNMENT-OWNED AND COMMERCIAL ENTERPRISES
In 2017, Vice President Aidyn Aisin was responsible for economic issues, Natalia Shumkova, Executive Director for Nuclear and Radiation Safety and R&D, dealt with environmental challenges and Hryhory Muliar, Director for Human Resources and Social Affairs, addressed social issues. In accordance with the Law of Ukraine On the Electricity Market, starting from 1 July 2019 Ukraine will introduce a new model of the electricity market. Under this model, electric energy will not be sold to the sole buyer (as opposed to the wholesale market model), but it will be traded in different segments of the electricity market, namely: the day-ahead and intraday market, the market of bilateral contracts, retail and balancing markets. In 2017, Energoatom started active preparations to ensure operation under the new market model. In late 2017, the Company launched the process to set up a new standalone subdivision, Energoatom Trading, which will be responsible for the electricity sales to maximise profits.
ENERGOATOM’S SUPPLY CHAIN MANAGEMENT
The development of the international supply chain and the participation of foreign companies in Energoatom’s projects are priorities of the Company’s global strategy. Energoatom partners can participate not only in the NPPs joint maintenance and modernisation, but also in the management of spent nuclear fuel. As for the procurement of fresh nuclear fuel, it is the main procurement of the Company in terms of both costs and importance for the production process.
Thanks to the successful implementation of the programme for diversifying sources of nuclear fuel supply to Ukrainian NPPs, Energoatom has two fresh nuclear fuel suppliers. With a wider cooperation with US-based Westinghouse, Russian TVEL has lost its monopolistic position. This helped implement the recommendation of IAEA to have at least two sources of fuel supply. At the same time, the Company diversifies sources of procurement of nuclear materials and other components, which reduces the final cost of fuel.
The fuel used in VVER-1000 type reactors (operated by the national NPPs) is fuel assemblies containing fuel elements made of zirconium. In turn, the fuel elements contain enriched uranium in the form of tablets. Nuclear fuel fabrication involves the production of fuel assemblies from components. Ukraine buys ready-made fuel assemblies, although it participates in certain stages of production.
FRESH NUCLEAR FUEL SUPPLY TO UKRAINIAN NPPS
NUCLEAR FUEL CYCLE INCLUDES THE FOLLOWING STAGES:
MINING AND PROCESSING URANIUM ORE, PRODUCING URANIUM CONCENTRATE;
CONVERTING URANIUM CONCENTRATE INTO URANIUM HEXAFLUORIDE AND ENRICHING URANIUM HEXAFLUORIDE;
MANUFACTURING FUEL ASSEMBLIES;
STORING OR PROCESSING SPENT FUEL;
STORING RADIOACTIVE WASTE.
The state-owned enterprise "Eastern Mining and Processing Plant" (SkhidGZK) produces uranium ore and natural uranium concentrate (uranium concentrate). Each year Ukrainian nuclear power plants consume about 2,200-2,400 tonnes of uranium, while SkhidGZK produces only about 1,000 tonnes of uranium. The whole volume of uranium concentrate produced by SkidGZK is transferred to Russia-based TVEL for further enrichment and production of nuclear fuel. Depending on circumstances, the remaining raw materials are received by Energoatom as a part of the reactor fuel assemblies under a contract with TVEL or purchased in the international market, in particular in the form of enriched uranium hexafluoride, in order to ensure production and supply of fuel assemblies under a contract with Westinghouse.
Raw materials for the production of nuclear fuel are purchased under transparent and rigid conditions for potential tender bidders, which encourages intense competition. Thus, Energoatom signed a contract for the supply of enriched uranium with AREVA (now Orano, France) in April 2015 and British-German-Dutch URENCO in 2016. The next stage of the fuel cycle is production of fuel assemblies (fabrication). Specialised industrial complexes process uranium dioxide powder to fabricate uranium tablets, which are then configured in special zirconium rods, and the rods are grouped into fuel assemblies. To reduce the final price of one fuel assembly, Energoatom’s separate subdivision, Atomenergomash, produces separate elements of fuel assemblies (so-called "shanks" and "heads" of fuel assemblies).
The final stage of the nuclear fuel cycle is the processing of spent fuel (SF). Ukraine does not have its own spent fuel processing facilities, and the only Ukrainian nuclear power plant with a dry storage facility for spent nuclear fuel is Zaporizhzhya NPP (the storage facility was put into operation in 2001). Spent fuel from three Ukrainian nuclear power plants — Rivne, South-Ukraine and Khmelnytska NPPs — is sent to radiochemical plants in the Russian Federation. Under the contracts, the processed products, including radioactive waste, are to be returned to Ukraine. This form of cooperation is costly for the domestic energy sector, and there is always a risk of termination of services by the Russian Federation.
The most cost-effective and safest solution for Ukraine is the socalled deferred decision for SF management envisaging interim (for 100 years and more) storage of SF in a separate central storage facility which is remote from NPPs. The Central Spent Fuel Storage Facility, which is being built in the Chernobyl Exclusion Zone and shares the infrastructure with Vector Facility, fully complies with these requirements. The facility is built using Holtec International technologies. The storage facility is expected to be launched in 2020. With the Central Spent Fuel Storage Facility, the country will be able to save up to $200 million annually.
In addition to nuclear fuel, Energoatom buys various industrial, electrical and other equipment for modernisation and safety enhancement of NPPs in the framework of current production and investment programmes.
Among the Company’s suppliers are flagships of the world’s heavy and instrument engineering: Westinghouse, Holtec International, Electricite de France, Skoda JS, Orano, General Electric, Toshiba, Siemens, ABB, NUKEM, Iberdrola, Tractebel, ÚJV Řež and others. There are also leading Ukrainian companies recognised globally: Turboatom, Impulse Research and Production Association, Radiy R&D company, Vestron, Sumy NPO, Pivdenteploenergomontazh, Khartron-Energo Ltd., Energoproekt Kyiv-based R&D Institute, Energoproekt Kharkiv-based R&D Institute and others.
UKRAINIAN NPPS’ NEEDS INNUCLEAR FUEL
PLANS FOR 2018 AND A MEDIUM TERM
The key objectives for Energoatom in 2018 include actions to enhance safety, extend the life cycle of power units, implement the investment programme, ensure electricity exports to the EU and reform the corporate governance system.
The Company’s management also plans to continue the implementation of programmes to increase the efficiency of Energoatom operations, draft a long-term program for the development of nuclear energy and make mid-term projections for demand in specialists and blue-collar workers.
Among other important objectives is the creation of a unified system of Energoatom production indicators (with account of the recommendations of the World Association of Nuclear Power Plant Operators). Presently, Energoatom uses several groups of production indicators, but the new system will help both streamline the indicators and improve their use.