Page 13 - FSUOGM Week 45 2021

FSUOGM NEWS IN BRIEF FSUOGM

Ukraine to change gas the delisting “is in the best interest of the shareholders demanding that Naftogaz returns
to the company natural gas “expropriated”
company and its shareholders.” Namely,
measurements the company has not been able “to utilise in 2007-2013. The total claim of Ukrnafta to
Naftogaz, according to the mentioned lawsuit,
its listing to raise finance” for several years,
Ukraine’s parliament has backed a revised while it is carrying costs related to the amounts to 9.07 bcm of gas.
bill that would require gas supply to be listing of about $0.6mn annually. Also, the The EGM documents provide no
measured in energy units rather than company’s size of free float is below the information about assets of Ukrnafta that
volumetric space, with effect from May threshold required by listing rules (25%). will be effectively exchanged into Naftogaz’
2022. The company is planning no alternative 50% stake, nor other details of possible
If ratified by the government, the listing, but “will seek to arrange a matched deals, except for the timing of Ukrnafta’s
legislation would require energy regulator bargain trading facility” to provide purchase of its shares from Naftogaz (one
NERC to recalculate tariffs for gas shareholders with a platform for shares year).
transportation and distribution based on a trading after the delisting from the LSE. The split of Ukrnafta assets between
gross calorific value (GCV) of 10.64 kWh JKX shares were traded between Naftogaz and Kolomoisky is a long-awaited
per cubic metres. The GCV used to measure GBP0.185 and GBP0.545 in 2021, and event that should eliminate mid-term risks
gas held in underground storage would traded at about GBP0.42 over the last three of state holding Naftogaz from being a
be slightly lower at 10.596 KWh per cubic sessions before the announcement. “partner” of the unreliable and toxic tycoon.
metre. JKX has divested all its assets beyond However, a big question is how much
The transition to gas measurement in Ukraine and seems to have no ambitious Naftogaz will pay for this “divorce” – the
energy units would bring Ukraine closer in expansion plans. From this standpoint, its EGM documents provide no answer. A lot
line with European norms, while marking decision to exit the public market might will depend on Naftogaz’ and Kolomoisky’s
a departure from Soviet-era reporting look logical. Perhaps the next step after the ability to defend the valuation of their
standards. It was meant to happen in May delisting would be the liquidation of its UK portions of Ukrnafta assets.
this year, but was delayed after market office, which generated $19mn aggregate Also in this split, the size of Ukrnafta
participants disagreed on how to implement operating losses for the company in 2018- claim to Naftogaz for “expropriated gas”, as
the law. 1H21 (6% of the company’s revenue for well as the way this claim is resolved in the
Ukraine has won international praise the period). We see no reason for minority amicable agreement, will be very important.
in recent years for energy sector reforms, shareholders to keep their positions in JKX. Taking into account the unusually high
including the liberalisation of gas prices. Meanwhile, the price decline following the market price for natural gas now (implying
But recent policy decisions by the Zelenskiy de-listing announcement creates a potential the current value of the disputed gas is more
government have prompted concerns of arbitrage opportunity. than $9bn), the timing of the “divorce” does
backtracking. Ukraine is a member of the not look optimal for Naftogaz.
EU-led Energy Community, and has been
seeking to align its energy legislation with Naftogaz, Kolomoisky
EU standards as part of efforts to join the
bloc one day. initiate Ukrnafta split CENTRAL ASIA & SOUTH
Ukraine had 17.9bn cubic metres
of gas in storage as of November 4. Of Ukraine’s leading crude oil producer CAUCASUS
this amount, 2.7 bcm was held under a Ukrnafta (UNAF UK) has scheduled a
customs-free warehouse regime, with 2.2 shareholder meeting for November 30 Azerbaijan to cut propylene
bcm available for re-export under the aiming at a split of the company’s assets
short-haul mechanism. Gas held under between Naftogaz (which controls a production
the customs-free regime is not subject to 50%+1 share in the company) and other
taxes or customers' duties, as long as it is shareholders (the biggest of which is Igor Azerbaijan plans to produce 116.400 tonnes
subsequently re-exported back to the EU Kolomoisky, about 40.1%). Namely, the of propylene in 2022 according to the new
restore normal pressure in its pipelines. EGM is being given the opportunity to draft law "On the state budget for 2022".
approve: 1) transfer of some of Ukrnafta Under the document, it is forecasted to
assets (which market value may exceed manufacture 104,700 tonnes of propylene in
JKX announces delisting, 50% of Ukrnafta's book value of assets) to 2023. This is 11,700 tonnes or 10.05% less
its fully-owned subsidiary Ukrgazaktyv;
than in 2022. In 2024, production of 91,800
share buyback at GBP0.42 2) Ukrnafta’s sale of 100% rights in tonnes of polypropylene is projected, which
is 12,900 tonnes or 12.3% less than the
Ukrgazaktyv to Naftogaz; 3) purchase by
JKX Oil & Gas (JKX LN) announced on Ukrnafta 50%+1 of its shares from Naftogaz forecast for 2023. In 2025, the production
November 3 that its directors have initiated and cancellation of these treasury shares. If figure will amount to 92,000 tonnes, which
the cancellation of the admission of its the deal is approved and realised, Naftogaz is 200 tonnes or 0.22% more than in 2024.
shares to the listing on the London Stock (NAFTO) will become a sole owner of some
Exchange's main market and the buyback of Ukrnafta assets and won’t own Ukrnafta
of free-floated shares at GBP0.42 ($0.57). shares, whereas Kolomoisky will own over Oil below $55 proves
The EGM to decide on this is scheduled for 80% of Ukrnafta.
November 23. If the decision is approved, Besides the split of Ukrnafta assets, difficult for Azerbaijan
JKX will announce a tender offer to the EGM will consider granting a right to
purchase up to 40mn of its ordinary shares Ukrnafta to conclude a settlement agreement According to the new draft law "On the
(23.3% of the total) on December 15. The with Naftogaz regarding a dispute over natural state budget envelope for 2022", a fall
tender offer will be closed on January 6 and gas produced by the company in 2007-2013, of the oil price to below $55 would lead
the de-listing will occur on or about the or conclude an amicable agreement regarding to difficulties in Azerbaijan. A fall in oil
same day. lawsuit #910/3660/18. These disputes refer prices by $5 would lead to a decrease in
The company’s directors believe that to a claim of Ukrnafta and its minority consolidated budget revenues by about

Week 45 10•November•2021 www. NEWSBASE .com P13