Igor Kolomoisky versus Ukrenergo: how Bank “Alliance” became a tool for writing off billion-scale obligations

A small Ukrainian bank, Alliance, which refuses to fulfill its obligations under a guarantee issued to a company linked to Igor Kolomoisky for electricity payments received from Ukrenergo, may be removed from the market by the National Bank. This is stated in an article by the European publication EU Reporter.

Journalists drew attention to a scheme involving the bank, the company United Energy, associated with Igor Kolomoisky, and the state-owned company Ukrenergo.

At the beginning of Russia’s full-scale invasion of Ukraine, United Energy received funds from the resale of electricity without paying the state. The company’s debt is supposed to be covered by its guarantor — Alliance Bank. However, the bank also refused to fulfill its obligations. Journalists note that the debt amount is equivalent to the cost of 14,000 Mavic drones, 57,000 FPV drones, or 7,000 rounds of 155 mm artillery ammunition for the Armed Forces of Ukraine.

The National Anti-Corruption Bureau of Ukraine (NABU) investigated the case, according to which the bank had no right to issue a guarantee of more than 1.8 billion UAH to the energy trader. Therefore, when Kolomoisky’s company failed to pay for the electricity supplied and the bank refused to cover its obligations, this became a direct loss for the state enterprise. Moreover, the bank is now challenging the validity of the guarantee in court.

“Failure by a financial institution to fulfill its guarantee obligations may raise the question of its removal from the market. The bank’s own capital is less than 1 billion hryvnias, so a guarantee payment of 1.13 billion hryvnias may affect its financial stability. […] Journalists have already noted that it is highly unusual for a third-tier bank to assume obligations worth billions of hryvnias that exceed its financial capacity. Moreover, even a superficial look at the balance sheet shows that Alliance Bank had no right to issue guarantees of such magnitude,” the article states.

As of September 1, 2021, the institution’s regulatory capital amounted to 610 million hryvnias. This means that under the agreement with United Energy, the guarantee could not exceed 152 million hryvnias (25% of regulatory capital). “However, under the agreements between the company and the bank, the guarantee amount reached almost 1.9 billion hryvnias. This is 12.5 times higher than the regulatory limit,” the report says.

According to the author, this should primarily attract the attention of the regulator (the NBU). “Following an inspection of Alliance Bank in January 2023, it became known that the bank deliberately submitted inaccurate financial reports to the NBU. Once again, the question arises: where is the NBU’s position?” the journalist writes.

He adds that Alliance Bank has issued other guarantees (as of September 2023 they exceeded 7 billion hryvnias) and is involved in a number of court cases related to the refusal to satisfy creditor claims, including the Ministry of Defense, the National Health Service of Ukraine, the Gas Transmission System Operator of Ukraine, Naftogaz Trading, and the Ukrainian Sea Ports Authority. In addition, the bank is mentioned in criminal proceedings No. 4201700000000445 dated February 17, 2017, indicating that in 2017–2018, through the bank, executives of regional gas companies linked to Dmitry Firtash may have illegally withdrawn funds, leading to a significant increase in debt to Naftogaz.

“Therefore, it is clear that canceling guarantees in all cases is not the best way to position a financial institution on the market—unless this is a business model. But then the National Bank, as well as NABU, should take a closer look at this in order to minimize risks for depositors and businesses still working with the institution,” the article says.

Meanwhile, alongside the proceedings involving the bank, Ukrenergo is attempting to recover funds not only from the financial institution but also directly from United Energy. However, the court hearing held on May 8 once again produced no result, and the court postponed the proceedings once more.