Ukraine Approves Naftogaz Governance Reform Plan Facilitated by ERBD
The Cabinet of Ministers of Ukraine approved Naftogaz' governance reform plan facilitated by the European Bank for Reconstruction and Development (EBRD), which will introduce an independent supervisory board with ‘wide authority and responsibility.’
“Under the present system the supervisory board is appointed by the ministry of energy (currently the board is not formed and not functioning). The CEO and other top-managers are appointed by the government. The company’s financial plan is approved by various ministries. The existing structure makes Naftogaz extremely dependent on political decisions and changes” Naftogaz told Natural Gas Europe.
After “a transition period”, Naftogaz is expected to turn into a commercial-like company, with a more finance-based rationale.
“It means the company may have longer-term strategy focused on standard business targets like asset value growth and maximizing returns for its shareholders (ultimately – the citizens of Ukraine). This is a huge change.”
EBRD LAUDS NAFTOGAZ
At the end of September, the EBRD’s board of directors approved a $300m loan to help Ukraine fill its gas storage facilities before winter. Those funds can be used only after "crucial steps" towards transparency. For example, the loan forces Naftogaz to comply with European practice when using the funds to tender and contract the gas (around 1bcm).
‘We welcome today's news from Ukraine’s Naftogaz. An important development’ EBRD wrote on its Twitter page.
CONTEXT
On Thursday, Ukrainian Prime Minister Arseny Yatseniuk said that the country has enough funds to buy gas for the coming winter, adding that Kiev would start legal proceedings if Russia does not accept the cancellation of Ukraine's US$ 3 billion debt. Earlier this month, Naftogaz and Gazprom signed a winter package for Russian gas to Ukraine, paving the way for gas supplies over the next months. It remains unclear whether an eventual arm-wrestling over the renegotiation of Ukraine's debt could endanger the gas deal.
Sergio Matalucci is an Associate Partner at Natural Gas Europe. He holds a BSc and MSc in Economics and Econometrics from Bocconi University, and a MA in Journalism from Aarhus University and City University London. He worked as a journalist in Italy, Denmark, the United Kingdom, and Belgium. Follow him on Twitter: @SergioMatalucci