Pursuant to the order of the Ministry of Energy and Coal Industry of Ukraine dated September 9, 2014, Ernst & Young (EY) LLC was selected as an independent audit company to appraise the value of Naftogaz of Ukraine\'s (the Company) assets.
Pursuant to the order of the Ministry of Energy and Coal Industry of Ukraine dated September 9, 2014, Ernst & Young (EY) LLC was selected as an independent audit company to appraise the value of Naftogaz of Ukraine's (the Company) assets.
As a result of open bidding, EY was picked to assess the value of the Company’s major assets and enterprises in which the Company owns at least 51% of shares.
Bids were submitted by two leading international audit companies. EY offered the lowest cost of services, at UAH 14.8 million.
In the framework of the project, four types of appraisal will be provided using different approaches:
1. The valuation of assets for the Company’s consolidated financial statements in compliance with International Financial Reporting Standards (IFRS), which should reflect the real value of the Company's assets and the assets of its enterprises.
2. The valuation of assets, used during transportation and storing of gas, to be included in the statutory fund of to-be-established companies/ and operators of the gas transport system (GTS) and underground gas storage facilities (USF) of Ukraine, namely — the Main Gas Pipelines of Ukraine company and the Underground Gas Storage Facilities of Ukraine company. The establishment of these enterprises was announced by the Cabinet of Ministers of Ukraine in the framework of a comprehensive reform of the oil and gas sector of Ukraine and corresponds to the requirements of the European Union’s Third Energy Package.
3. The valuation of the market cost of licenses for oil and gas deposits and mineral resources, as well as the assessment of investments in joint activities. The results of this valuation will be used to attract additional financing, through a possible Initial Public Offering by Ukrgasvydobuvannya.
4. The valuation of the market cost of assets to set economically feasible tariffs for transportation and storing of gas on the basis of the RAB-methodology (Regulatory Asset Base). This methodology is widely used throughout the world to regulate tariffs of natural monopolies in gas transportation, electric energy, municipal heating, and other public utilities. This method of long-term tariff setting is aimed at attracting investments into expansion and modernization of infrastructure. It prevents sudden price hikes as the financial burden on redemption of capital investments required for the development is distributed within the tariff over the long-term.
With its order dated September 9, 2014 the Ministry of Energy and Coal Industry agreed to hold an audit of the consolidated financial statements of the Company in compliance with IFRS by Deloitte & Touche LLC (Deloitte).
Deloitte will audit the consolidated statements of the Company, its affiliates and subsidiaries for 2012-2014. The audit will include data from the audit carried out by EY.
According to the open bidding procedure – three other companies also submitted bids. Deloitte offered the lowest cost of services, at UAH 17.88 million.
Following the orders of the Ministry of Energy and Coal Industry, payment for audit services of EY and Deloitte will be provided by the Company upon the endorsement of its financial plan for 2014.
Reference information: EY and Deloitte are leading international professional services firms, which are two of four world's largest audit companies. They provide services in the fields of audit, taxation, consulting, risk management and other business issues.
Public Relations Department
NJSC Naftogaz of Ukraine
NJSC Naftogaz of Ukraine