Everyone Agrees But Naftogaz | DiXi Group
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22.02.2016

Everyone Agrees But Naftogaz

 

On Friday, February, 19,a round table, dedicated to unbundling gas transportation and supply of NJSC “Naftogaz”, was held on the initiative of Olga Bielkova, Deputy Head of the Verkhovna Rada Committee on Fuel and Energy Complex, Nuclear Policy and Nuclear Safety. It is important to note thatthe state monopoly unbundlingis a topical issuein the context of the Third Energy Package,that’s why it is frustrating that this issue has been stuckfor a year in expert discussionsand consideration of possible models. And here we go again.

 

The main dispute took place between VolodymyrDemchyshyn,Minister of Energy and Coal Industry,and AndriyKoboliev, CEO of NJSC “Naftogaz”. However,representativesof the IMF, the EBRD, JanezKopač, Director, Energy Community Secretariat,and civil society experts, including OlenaPavlenko, President,DiXiGroup, also had the opportunity to provide their comments. No wonder thatVolodymyrDemchyshyninsisted on the fullest possibleunbundling of NJSC’s businessunder the most drastic model —transfer of different businesses and companies under the management of other entities, including the Ministry of Economic Development and Trade,and partially under the management of his ministry (“ownership unbundling”), while AndriyKobolievsubstantiated the need to use a more careful approachto the unbundling and advocated a functional unbundling model (“ISO”,or “independent system operator”), under which Naftogaz will retain certain, though limited, control over the gas transportation systemand its operation. In such case, according to Mr. Koboliev, the corporate governance reformwill result in a substantial increase inthe value of fuel and energy assets;their further privatization by the European investorswill enhanceour European partners’ trustin Ukraine’s business and government.

 

More specifically, the model proposed by the Ministry of Energyprovides for the transfer of all tangible assetsat NJSC’s disposal to the newly-established state-owned holding companyunder the MEDT’s control.Mr. Demchyshyn’s ministrywill get a controlover the Gas Transportation System Operator (currently, Ukrtransgas, a subsidiary of Naftogaz).The monopoly’s activity will be limited to the role of trader. In contrast to this concept, NJSC’s version, characterized by Mr. Koboliev as “vertical unbundling”, provides for a clear separationof gas transportation from other company’s activities, but the current model of Ukratransgaz’s authorized capital ownership remains unchanged. In addition, it was proposed to separatethe underground gas storages (UGS)from the general gas transportation system, which, according to the Minister of Energy and Coal Industry,will reduce the value of both UGS and GTS. In general, as AndriyKobolievmentioned at the beginning of his report, when modelling the unbundling, which is viewed by all participants in the discussion as a necessary and a long overdue process, NJSC “Naftogaz of Ukraine”, as any other commercial company, was guided by the intent to increase the level of capitalization, which is a reasonable step for a state-owned companyas it will result in the increased budget revenues.

 

At the same time, it is hard to disagree with Ms. Bielkova, a discussion moderator, who noted that when it goes aboutUkraine’s implementation of its commitments under the Association Agreement and the Treaty establishing the Energy Community, first,it is necessary to pay attention that the unbundling model and resultscomply with the Third Energy Package requirements, including formationof the competitive gas marketand gas sector liberalization. Although, theoretically, relevant EU directivesprovide for some discretionary power of the governmentas regards the choice between the models —functional unbundling vs. ownership unbundling —both of which are equally acceptable, when making a final choice,one should be very careful with the monopoly’s opinion, even if it was made with the best of intentions. And the model had to be chosen long before.

DenysNazarenkoSpecialist for European Integration Programs

 

Denys Nazarenko
General Manager of Educational Programs

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Our platforms

https://ksep.energy/en/

Independent energy educational center

http://eiti.org.ua/

National website of Extractive Industries Transparensy Initiative in Ukraine 

http://ua-energy.org/

Information and analitical website “Ukrainian Energy UA-Energy.org” is unique   platform to inform