Naftogaz warns slowdown in corporate governance reform program may undermine relations with international creditors and lead to a liquidity crisis
Starting from 2016, Naftogaz has been transformed from relying on state support to paying substantial contributions into the state budget
Naftogaz has released its stand-alone audited financial statements for 2016. The company has generated net profit – UAH 26.5 billion (US$ 1.0 billion) – for the first time in the last five years. In 2015, the company has posted a net loss of UAH 27.7 billion (US$ 1.3 billion).
The company intends to pay UAH 13.3 billion (US$ 492.1 million at the current exchange rate) in dividends (50% of 2016 profit) to the government. A further UAH 2.4 billion (US$ 88.8 million) is planned to be paid as advance profit tax. Naftogaz’ sole shareholder (the Ukrainian government) will decide on the final amount of dividend to be paid by 30 April 2017.
These payments are planned on the assumption that the necessary legislation and decisions will be approved by the Government and Verkhovna Rada of Ukraine under the government’s Corporate Government Reform Action Plan for Naftogaz.
Otherwise, the group may face a significant liquidity risk, as the credit facilities it has received from international financial organizations are closely tied to the implementation of the agreed corporate governance reform plan.
In 2016, Naftogaz paid UAH 16.3 billion (over US$ 638.0 million) in taxes and other duties to the state budget as a stand-alone entity and became Ukraine’s second largest tax payer after Ukrgazvydobuvannya, also part of Naftogaz Group.
For the first time in the last ten years, Naftogaz has received no support from the state budget. In 2015, the company paid UAH 17.9 billion (US$ 698.1 million) in taxes, with UAH 29.7 billion (US$ 1.4 billion) received from the state budget.
The largest contribution to the company’s net profit of nearly US$ 1.0 billion came from the gas transit segment UAH 28.7 bn (US$ 1.1 billion). The income from gas transit increased by UAH 7.4 billion compared to 2015 due to a 15.1 bcm (22.5%) increase in transit volume and the impact of hryvna devaluation.
In the gas trading segment, the company suffered a loss of UAH 2.9 billion (US$ 113.5 million), with 40% of this loss attributable to the public service obligations imposed on Naftogaz. Due to the progress of the gas market reform in Ukraine, the result of the gas trading segment has significantly improved moving closer to break-even after a loss of UAH 42.2 billion (US$ 1.9 billion) in 2015.
Note to editors: The financial statements and the independent auditor’s report are available on the website (in Ukrainian).
Exchange rates used: UAH 21.84/USD (2015), UAH 25.55/USD (2016), UAH 26.99 (11 April 2017).
For further information, please contact:
+38 (063) 555 5538
Head of Corporate Communications
Naftogaz of Ukraine
NJSC Naftogaz of Ukraine