Ukraine's Naftogaz Goes from Loss to $1bn Profit
Ukraine’s state gas company Naftogaz said in annual results April 12 that, starting from 2016, it has been transformed from relying on state support to paying substantial amounts into the state budget. Also earlier this week it entered into talks with Italy's Snam on the possible future of its gas transit grid.
But Naftogaz cautioned that a slowdown in a corporate governance reform program may undermine relations with international creditors and lead to a liquidity crisis. In the past week, both G7 energy ministers in Rome and the EU-led Energy Community have urged Kiev to implement energy reforms fully including on Naftogaz’s unbundling and independent regulation.
Naftogaz made a net profit of hryvnia 26.5bn ($1bn) last year, its first profit in the last five years, compared with a net 2015 loss of UAH 27.7bn ($1.3bn).
Gas transit activities contributed $1.1bn (up 22.5% on 2015) towards profits. It's believed a significant increase in Russian gas exports helped, but in the longer term Gazprom plans to switch ever more of its transit flows away from Ukraine and into the Nord Stream and its planned Nord Stream 2 pipes.
Photo credit: Naftogaz
In contrast, gas trading made a loss of $113.5mn, of which 40% was due to public service obligations imposed on Naftogaz, but even that was an improvement on the $1.9bn loss made on trading in 2015, it said.
Naftogaz intends to pay roughly half ($492.1mn) in dividends to the government, with a further $88.8mn planned to be paid as advance profit tax. The Ukrainian government, as owner, will decide on the final amount of dividend to be paid by April 30 2017. In addition, Naftogaz said it paid UAH 16.3bn (over $638mn) in taxes and other duties to Ukraine, becoming the second largest tax payer after Ukrgazvydobuvannya, also part of Naftogaz group. Last week Naftogaz said it was seeking an investment adviser for the planned divestment of its modest upstream interests in Egypt.
MoU with Snam, Eustream
On April 10, Naftogaz and its gas transit subsidiary Ukrtransgaz, Italian gas grid operator Snam and Slovakia’s Eustream signed a memo of understanding to evaluate jointly possible collaboration in enhancing Ukraine’s gas transmission system on April 10. Ukraine is implementing the unbundling of its gas grid from incumbent Naftogaz and has expressed its interest in cooperating with an experienced western gas grid operator.
Ukrtransgaz’s entry capacity is above 302bn m3/yr and its exit capacity towards western and southern Europe is 151bn m3/yr; it has storage capacity of 31bn m3. Eustream, part owned by Czech EPH, runs the gas transit system in Slovakia, which transits most Russian gas from Ukraine to the EU.
Mark Smedley