Successful Conclusion of Negotiations between Naftogaz Of Ukraine and RosUkrEnergo for Joint Venture Establishment

Negotiations between NJSC Naftogaz Of Ukraine and RosUkrEnergo for joint venture establishment have been successfully rounded off today. The main objective of the established Ukrgaz-Energo CJSC is to provide natural gas supplies to the domestic market of Ukraine in the scope required for provision of the annual gas balance in our country.

The company was founded, on a parity basis, by NJSC Naftogaz Of Ukraine and RosUkrEnergo. The authorized capital of Ukrgaz-Energo is equal to UAH 5 millions, which were paid by the founders in cash.

Assets of NJSC Naftogaz Of Ukraine were not transferred to the company established. The Charter of Ukrgaz-Energo allows neither to obtain possession, ownership of the Ukrainian gas transport system, any portion thereof, including underground storage facilities, nor to receive the same for utilization, disposal, and management.

Since Ukrgaz-Energo was founded pursuant to the Ukrainian laws, its transaction-related taxes will be channeled to the state budget of Ukraine. The Company was headed by a representative of the Ukrainian side, pursuant to the Charter.

Today, a contract was signed between Ukrgaz-Energo and RosUkrEnergo for supply of the Central Asian and Russian gas into Ukraine in the quantity sufficient to satisfy the Ukrainian needs, namely 34 billion cbm in 2006 and up to 60 billion cbm on an annual basis – in the nearest 4 years.

The price for gas to be delivered under the contract is fixed for a five year-term at 95 USD/1,000 cbm. It is the lowest price among the countries of the post-Soviet space, save for Belarus. Moreover, some of those countries were forced to share control over their own gas transport networks in order to obtain the gas at a price of 110-130 USD.

NJSC Naftogaz Of Ukraine continues to pursue the highest standards of openness and transparency in its operations. This statement is confirmed by the fact that the company goes through an international audit procedure, which is currently performed by Ernst & Young – a world recognized leader in the area.

The operating results give confidence that NJSC Naftogaz Of Ukraine will fully secure an uninterrupted natural gas delivery to all of the Ukrainian consumers through Gas of Ukraine subsidiary and Ukrgaz-Energo CJSC.

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