Page 70 - UKRRptNov21

9.2 Major corporate news 9.2.1 Oil & gas corporate news
Ukraine’s leading crude oil producer Ukrnafta (UNAF UK) has scheduled a shareholder meeting for November 30 aiming at split of the company’s assets between Naftogaz (which controls a 50%+1 share in the company) and other shareholders (the biggest of which is Igor Kolomoisky, about 40.1%).
Namely, the EGM is offered to approve: 1) transfer of some of Ukrnafta assets (which market value may exceed 50% of Ukrnafta's book value of assets) to its fully-owned subsidiary Ukrgazaktyv; 2) Ukrnafta’s sale of 100% rights in Ukrgazaktyv to Naftogaz; 3) Purchase by Ukrnafta 50%+1 of its shares from Naftogaz and cancellation of these treasury shares. If the deal is approved and realized, Naftogaz (NAFTO) will become a sole owner of some of Ukrnafta assets and won’t own Ukrnafta shares, whereas Kolomoisky will own over 80% of Ukrnafta.
Besides the split of Ukrnafta assets, the EGM will consider granting a right to Ukrnafta to conclude a settlement agreement with Naftogaz regarding a dispute over natural gas produced by the company in 2007-2013, or conclude an amicable agreement regarding lawsuit #910/3660/18. These disputes refer to a claim of Ukrnafta and its minority shareholders demanding that Naftogaz returns to the company natural gas “expropriated” in 2007-2013. The total claim of Ukrnafta to Naftogaz, according to the mentioned lawsuit, amounts to 9.07 bcm of gas.
The EGM documents provide no information about assets of Ukrnafta that will be effectively exchanged into Naftogaz’ 50% stake, nor other details of possible deals, except for the timing of Ukrnafta’s purchase of its shares from Naftogaz (one year).
The split of Ukrnafta assets between Naftogaz and Kolomoisky is a long-awaited event that should eliminate mid-term risks of state holding Naftogaz from being a “partner” of the unreliable and toxic tycoon. However, a big question is - how much Naftogaz will pay for this “divorce” – the EGM documents provide no answer. A lot will depend on Naftogaz’ and Kolomoisky’s ability to defend the valuation of their portions of Ukrnafta assets.
Also, in this split, the size of Ukrnafta claim to Naftogaz for “expropriated gas”, as well as the way this claim is resolved in the amicable agreement, will be very important. Taking into account the unusually high market price for natural gas now (implying the current value of the disputed gas is more than $9bn), the timing of the “divorce” does not look optimal for Naftogaz.
EBITDA at Ukraine’s state national gas company Naftogaz climbed 31% year on year in the first half of the year, arriving at UAH33.1bn ($1.2bn), on the back of higher gas prices.
Revenues were up 46% y/y at UAH106.2bn, primarily due to a 105% increase in earnings from trading and supply, thanks to higher gas prices. Upstream gas EBITDA was up 145% at UAH26.64bn while trading EBITDA came to UAH4.55bn, versus a loss of UAH1.98bn a year earlier. Naftogaz’s oil arm
70 UKRAINE Country Report November 2021 www.intellinews.com