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September 8, 2017 www.intellinews.com I Page 5
forthcoming, despite repeated commitments from government officials", according to the statement.
He noted that in addition to threatening the overall corporate reform effort, this had resulted in a substantial increase in the time commitment required from the supervisory board members compared to that envisaged at the time of his appointment. "Taken together, these factors
made it impossible for him to continue to fulfil his role effectively and therefore with regret, he had decided to resign," Naftogaz underlined.
Meanwhile, the remaining members of Naftogaz supervisory board share Proctor’s disappointment with the present situation and his concerns about the future of corporate governance reform, the statement reads.
"Citing, amongst other areas of concern, the lack of an agreed strategy for the company, which creates a potential regulatory void enabling politi- cal meddling in the company’s operation, and the continued lack of approval of agreed financial plans for Naftogaz group companies for 2017 with a consequent impact on the company’s ongoing busi- ness, and specifically investment in critical pro- jects to maintain transmission infrastructure and grow domestic gas production," Naftogaz under- lined. "These are material issues that have a direct impact on the success of the supervisory board.”
Although they currently remain committed to the success of Naftogaz they say that without significant progress their situation is not sustainable, according to the statement.
Further reforms
In July, the Ukrainian government approved a
2017 financial plan for Naftogaz with expected Ebitda at UAH14.211bn (€472.25mn), making an expected 60% drop year-on-year, and net profit of UAH21.781bn (€723.8mn), down 17.9% y/y.
The approval of the 2017 Naftogaz financial plan and performance indicators for the company's supervisory board by the end of July were among the EBRD demands that need to be met if it is to allocate a further multi-million package to Kyiv for natural gas purchases.
At the same time, the government has refused to increase the price of gas for the country's house- holds from October 2017 by 18.84% or UAH931 per 1,000 cubic metres (cm) to UAH 5,873 without VAT. The hike was in line with demands of the Inter- national Monetary Fund (IMF), and was necessary for the improvement of Naftogaz's financial results.
In July 2016, Kyiv adopted full cost recovery levels for gas and heating tariffs, while Naftogaz's deficit has almost been eliminated after it reached 5.6% of GDP in 2014.
"The large tariff increases to full cost recovery have provided incentives to conserve energy and supported an improvement in energy efficiency and a dramatic decline in household gas con- sumption and corresponding reduction in macro imbalances," the IMF wrote in comments pub- lished in April.
According to the Fund, low tariffs for residential gas and district heating have encouraged excessive energy consumption and led to large quasi-fiscal losses, pushed up gas imports, and discouraged investment in domestic production in Ukraine until recently.