Ukraine reverses Naftogaz move after creditor criticism

Photo courtesy of Naftogaz.

 

(Reuters) Ukraine cancelled a decision to transfer control of the gas transport arm of state energy firm Naftogaz to the economy ministry after a warning from international creditors that the move undermined investor confidence.

Ukraine's international lenders have long called for reform of Naftogaz to improve transparency, but a government decision this month to put the Ukrtransgaz transportation business under the ministry without consultation came as a surprise.

The government said it rethought the move after meeting officials from the European Bank for Reconstruction and Development (EBRD) and World Bank, which loaned Naftogaz $800 MM last year to buy gas from Europe for the winter.

"We agreed to cancel the decision," the government said in a statement, adding that a new working group including World Bank and EBRD representatives would decide on steps needed to unbundle Naftogaz's production, transport and sales businesses.

Francis Malige, the EBRD's managing director for Eastern Europe and the Caucasus, welcomed the move and said the government had been "extraordinarily open."

"There was a rapid decision that was considered to be urgent last week, which was not as well thought through as it should have been," he told Reuters by phone.

The EBRD is one of the biggest investors in Ukraine, financing projects worth about $2.5 B in 2014 and 2015 combined, but a political impasse in the first five months of this year has slowed the process.

Reporting by Alessandra Prentice and Natalia Zinets; editing by Susan Fenton and David Clarke

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