EBRD Extends Ukraine Loan for Gas

State-owned Naftogaz will be able to borrow up to $300mn from the European Bank for Reconstruction and Development when Ukraine's cabinet approves the 2017 [sic] financial plan and shows substantial progress in reforming corporate governance, the state transporter and gas supplier said July 10.

Last week, the EBRD Operations Committee approved a $66mn loan as part of that $300mn to cover Ukraine’s gas purchases from European suppliers but the bank will not release the money unless the cabinet fulfils the two conditions by the end of July.

“This funding is crucial to Ukraine’s preparation for the upcoming heating season and accumulating sufficient volumes of funds. Nevertheless, we understand the EBRD’s decision and hope that the Ukrainian side will quickly catch up on the approved corporate governance action plan,” said Naftogaz CEO Andriy Kobolev.

Naftogaz' financial plan was prepared according to international standards and agreed by the company’s supervisory board and submitted to the cabinet for approval in April.

Last September, ownership of Naftogaz' transport subsidiary Ukrtransgaz was transferred to the economy ministry, an action reversed the following week but not after alarming the EBRD, among others, as news of the amendment of Naftogaz' charter leaked into the press. Ukraine has been buying gas from central European suppliers, generally priced off the NetConnect Germany hub, and it repaid the previous EBRD loan of $300mn "in full and on time," it said May 16.

It has not bought any Russian gas contractually from export monopoly Gazprom since November 2015, although most of the gas it buys has come from Russia, flowing through Ukraine into Slovakia down one pipeline; and back in again through another.

William Powell