Naftogaz suffers from bad debts, impairments in 2020

Ukrainian state gas company Naftogaz booked a 19bn hryvnias ($680mn) loss in 2020, compared with a profit of 2.6bn hryvnias the year before, excluding discontinued operations. Its April 27 statement attributed this to lower demand and gas prices, and a bad debt provision of 23.2bn hryvnias. Operating cash flow however was almost three times the 2019 total at 19.5bn hryvnias, up from 6.9bn hryvnias. Excluding exceptional items and bad debts, it reported a full-year profit of 3.2bn hryvnias. 

Its loss for Q4 2020 was just 2.0bn hryvnias, compared with 10.3bn hryvnias in Q4 2019 and it is expecting to turn a profit in the first quarter of this year as it has "entered into a period of improved profitability." Impairment of assets was 8.0bn hryvnias, down from 9.4bn in 2019, reflecting revised price assumptions.

The government compensated it for deliveries made under the public service obligation (PSO) between 2015 and 2019 with a 26.4bn payment in December. The PSO was abandoned in the summer, under pressure from the Energy Community, which works with non-EU member states on corporate governance and transparency matters.

Natural gas production in 2020 was 14.9bn m³ and it sold 18.2bn m³ of gas, using Soviet-era measurements. Its exploration and production profit was down a third, from 42.3bn hryvnias in 2019 to 28bn hryvnias, reflecting lower gas prices that were partly offset by lower subsoil royalties.

Gas storage profits though were more than double at 3.3bn hryvnias, from 1.5bn hryvnias in 2019. The company has been marketing capacity internationally.

Capital expenditure was 15bn hryvnias, below the target of 20bn hryvnias and 46% lower than 2019. Net debt fell from 42.6bn hryvnias at the end of 2019 to 29.2bn hryvnias at the end of 2020.

Naftogaz CFO Peter van Driel said: “Despite a challenging environment with low prices and demand, we are showing a robust underlying performance after our swift and decisive action to reduce operating costs and capital expenditure. Gas customers not paying for deliveries negatively impacts our bottom line. Our operating cash flow is strong and we remain focused on capital discipline. We continue to strengthen the efficiency of our operations.”