Naftogaz proposed to the government of Ukraine a new mechanism for secure gas supply to Ukrainian heat generating companies during the winter, said the company’s CEO Andriy Kobolyev at the 5th Ukrainian Gas Forum in Kyiv
Naftogaz proposed to the government of Ukraine a new mechanism for secure gas supply to Ukrainian heat generating companies during the winter, said the company’s CEO Andriy Kobolyev at the 5th Ukrainian Gas Forum in Kyiv.
Under this mechanism, heat generators would have an option to receive gas from Naftogaz even if they have overdue payments. If such companies fail to repay their debt by the end of the heating season, Naftogaz would receive the money from the state budget’s disbursements to the corresponding local budget.
This approach incentivizes municipal authorities to ensure that local heat producers are managed well and pay on time. The new mechanism would open way to a long overdue reform and modernization of Ukraine’s troubled utilities sector.
With all necessary control tools available to them, local authorities will thus bear ultimate responsibility for gas payments by heat producers.
Unpaid gas offtakes by heat producers are one of the key contributors to the growing debts of distribution system operators to Ukrtransgaz for balancing services, totaling UAH 38 billion. This situation is disrupting operations of Ukrtransgaz and threatens the financial stability of Ukraine’s new TSO, which will operate the transmission system independently starting from 1 January 2020, Kobolyev noted.
“Following the introduction of the proposed mechanism, local authorities will have incentives to reform public utility companies while the risk of winter interruptions to heat supply to households will decrease significantly. This will also eliminate payment failures – one of the most complex problems of the Ukrainian gas market. The market will become more resilient and transparent, which will enhance investments in its development,” Kobolyev said.
NJSC Naftogaz of Ukraine