Page 64 - UKRRptMay19

9.2 Major corporate news 9.2.1 Oil & gas corporate news
Ukrainian Prime Minister Volodymyr Groysman is going to fire the CEO of the nation's natural gas monopoly Naftogaz Andriy Kobolev if the company refuses to cut the price of gas sold for households before April 24. "Either Naftogaz [cuts] the price below UAH8.55 per cubic meter from May 1 and informs all Ukrainians about this before April 24, or I will initiate the dismissal of the head of Naftogaz and I will ask the government to support my position," local media quoted Groysman as saying on April 17. The statement followed March's extension of Kobolev's contract for one year. Earlier, the company's board offered to extend a contract with Kobolev for one year, until March 22, 2020, according to a letter signed by the board's head Clare Spottiswoode. At the same time, the board has proposed to halve the current level of the company head's salary to UAH520,500 ($19,461) without paying monthly and quarterly bonuses. However, Kobolev can claim for bonuses based on the results of work for 2019 if the nation's gas pipeline operator is created ready for certification, and gas production is increased by January 1, 2020.
Ukraine’s leading oil producer Ukrnafta increased net revenue by 34% year-on-year to UAH36.1bn in 2018, according to the company's annual report published on April 25. Ukrnafta's Ebitda advanced 5.4-fold y/y to UAH9.5bn and net profit skyrocketed 63-fold y/y to UAH6.4bn. Despite improved P&L, the company did not make any progress in resolving its debt issue to the state, as payables to the budget increased 7% y/y to UAH12.7bn as of end-2018. At the company’s April 25 AGM, shareholders failed to approve the company’s 2018 results and dividend distribution. Commenting on that, Yuriy Vitrenko, the top manager of Naftogaz (which holds a 50%+1 stake in Ukrnafta) and head of Ukrnafta’s supervisory board, said that the company’s 2018 financials were provided to shareholders too late to become familiar with them. Vitrenko also listed the conditions for Ukrnafta shareholders to approve dividend distribution. First, the Cabinet must publish its resolution on dividend distribution for state-owned companies. Earlier, Ukrainian media reported that the cabinet decided to order a 50% distribution of 2018 profit. The Ukrainian government also must approve the decision of Ukrnafta’s EGM that allows Naftogaz to purchase natural gas from Ukrnafta. On March 28, Ukrnafta shareholders decided that Naftogaz will buy 4.06 bcm of natural gas from the company, and Ukrnafta will use the proceeds from the deal to repay its tax debt. Alexander Paraschiy Kyiv-based brokerage Concorde Capital believes that by postponing dividend distribution from Ukrnafta, Naftogaz is trying to force the government to allow it to buy the natural gas from Ukrnafta in order for its subsidiary to resolve its tax debt issue. "Such tactics are risky for Naftogaz’s top management, given that the Ukrainian government does not support Naftogaz’s initiative for Ukrnafta debt resolution. So, Vitrenko’s position may escalate a smouldering conflict between Naftogaz and the cabinet. At the same time, this attempt looks encouraging for Ukrnafta’s prospects to resolve its key risk," he added in a research note.
Naftogaz drafts 2019 financial plan with $2.5bn financing gap. State natural gas giant Naftogaz of Ukraine (NAFTO) has filed an updated draft of its 2019 financial plan to the government, the company’s CEO Andriy Kobolyev reported on April 11. The draft has been prepared in full accordance with Ukraine’s 2019 state budget, as had been demanded by the Cabinet and
64 UKRAINE Country Report May 2019 www.intellinews.com