EU-Ukraine plan on GTS modernization may have neutral credit impact on Naftogaz – Fitch

News / 26 March 2009 | 17:30

Fitch Ratings said that significant investment and reform of NJSC Naftogaz of Ukraine’s (‘B-‘((B minus)) /Rating Watch Negative) gas transit system under the aegis of an EU-Ukraine agreement would at best have a neutral credit impact on the company, the agency’s press release reads.

Proposed changes would increase the transparency, efficiency and stability of Naftogaz’s transit operations.

However, the experts note that consolidated leverage following a capex expansion could increase significantly and core credit problems such as a mismatch between gas costs and domestic tariffs would remain.

On March 23, 2009, the European Commission (EC), Ukraine, the European Investment Bank, EBRD, and the World Bank announced the possibility of multilateral financing for infrastructure renewal of Ukraine’s gas transit system, which is owned and operated by Ukrtransgaz, a fully-owned subsidiary of Naftogaz.

The EC and the multilateral institutions did not make any commitments to fund a capex program that Ukraine has estimated at USD 5.55billion, but stated an intention to consider such funding following a due diligence review of Naftogaz’s proposed capex projects.

Most importantly, a condition for any future funding would be Naftogaz’s adherence to the EU’s 2003 gas unbundling directive, pursuant to which gas transmission operators must run transparent, open-access, fairly-priced gas systems that are functionally and legally unbundled from network owners.

The 2003 EU directive does not require ownership unbundling and Fitch anticipates that a functionally and legally unbundled Ukrtransgaz would remain fully consolidated.

JSC Gazprom and Russia’s Prime Minister, Vladimir Putin, have expressed disappointment that the EC-Ukraine framework agreement does not contemplate Russian involvement.

This suggests some future negotiations with Russian partners will be necessary, which would forestall swift implementation of an investment and reform program at Ukrtransgaz, Fitch notes.

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Tymoshenko promises to solve the misunderstanding between Ukraine and Russia regarding Ukrainian GTS

News / 26 March 2009 | 16:40

Misunderstandings between Ukraine and Russia, which arose after the Brussels declaration on the modernization of the Ukrainian GTS, will be shortly eliminated, Prime Minister Yulia Tymoshenko told a forum with representatives of political, business and scientific elite of Japan.

“I’m sure that misunderstandings among the EU, Ukraine and Russia will be shortly removed. And Russia, as gas supplier, will surely participate in all procedures,” she stated.

As referred to the Brussels declaration, Tymoshenko named three crucial aspects. According to her, the question is about the Ukrainian GTS to remain Europe’s main transport pipeline for a long time, the necessity to modernize this system and the readiness of the EBRD, European Investment Bank and the World Bank to be partners.

Russia was not a party to the declaration, which caused its discomfort, Tymoshenko noted, having reminded that at a press conference with European Commission’s President Barroso a statement had been made that reformation of the Ukrainian GTS is open for the Russian Federation.

“We stated that modernization of the GTS is open for Russian investors, but on the condition that the GTS itself remains in Ukraine’s state property,” Tymoshenko underlined.

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EBRD to bail out 5 banks

News / 26 March 2009 | 15:52

Receiving the first financial aid from the EBRD will be Bank Forum, Ukrsotsbank, Megabank, Ukreximbank and UkrSibbank, UKRINFORM reports with reference to the Delo newspaper.

“Five banks out of thirty, we are cooperating with, have been already approved at the EBRD’s Operations Committee,” said press secretary of the Kyiv’s EBRD Office Anton Usov.

According to him, these deals will be disclosed late in April, while the agreements themselves will be signed in mid May.

On February 16, the EBRD pledged to earmark EUR 500 million for recapitalization of Ukraine’s banks.

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Tymoshenko: Participation of other states in modernization of Ukrainian GTS proves possible only on condition of preserving it as the state property

News / 26 March 2009 | 15:00

Prime Minister of Ukraine Yulia Tymoshenko declares Ukraine is ready to cooperation with the other countries of the world, including with Russia in modernization and reconstruction of the gas transport system of Ukraine. She announced in her speech at the forum of political and scientific elite of Japan, Cabinet’s press office reported.

As Yulia Tymoshenko put it, the GTS of Ukraine through many years has remained a main gas artery for Europe and necessitates urgent modernization and reconstruction. The Head of Government emphasized for now European Bank for Reconstruction and Development, European Investment Bank and World Bank are ready to be the partners of Ukraine in the issue of modernizing of the GTS.

The Premier added during the Brussels conference, which resulted into signing of the declaration with the Eurounion on modernization and reconstruction of Ukrainian GTS, the Russian party was not a signatory to this document. At the same time, according to Yulia Tymoshenko, she personally and the President of European Commission Jose Manuel Barroso declared this project is open for participation of the other parties, including Russia but on the only condition: the gas transport system of Ukraine will remain the property of the country.

“I am convinced within nearest time misunderstandings between Ukraine and Russia in this issue will be removed and Russia will become a participant of this process,” the Prime Minister emphasized.

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Ukraine seeks to be active actor in European security system – Prime Minister

News / 26 March 2009 | 14:10

Prime Minister of Ukraine Yulia Tymoshenko states that Ukraine intends to be an active actor of the European collective security system, she was speaking at a forum of political, business and scientific elite of Japan, UKRINFORM reported.

According to her, Ukraine cannot be outside all systems of collective security and it has clearly stated an intention to be an active participant in this process. Tymoshenko noted that Ukraine quite fruitfully cooperates with NATO, implements joint programs successfully.

The Prime Minister reminded that Ukraine’s top officials have recently sent a letter to NATO’s leadership on Ukraine’s joining the NATO Membership Action Plan. “Ukraine is trying to near to NATO, however, there are some obstacles on this way that are not easy to overcome,” she stressed.

The Ukrainian Premier also noted that all Ukraine’s political forces, including President Viktor Yushchenko, are confident that Ukraine’s NATO accession should run solely based on the returns of a nationwide referendum. Besides, only 30% of Ukraine’s citizens share the idea of entering the Alliance, and there is no consolidated opinion among NATO member-states on the intensification of Ukraine’s NATO accession process. “Ukraine expressed its intention to be an active participant in the collective security and defense system, and this direction could be promising for Ukraine,” Y. Tymoshenko underlined.

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President addresses European Banking & Financial Forum

News / 26 March 2009 | 13:20

In Prague President Viktor Yushchenko took part in the European Banking & Financial Forum, presidential press office reported.

Addressing participants of the forum President Yushchenko expressed assurance that IMF mission would return to Ukraine already next week.

He reminded that Ukraine has to solve a number of internal economic and political problems such as introducing changes to the budget, balancing Pensions Fund and Naftogaz budget, etc. “As the President I will be the first to call upon the Government to begin deep reforms, liberalize prices and conduct comprehensible pension reform,” said Yushchenko.

President Yushchenko also expressed assurance that Ukraine would not allow default neither on corporate, nor on state obligations.

According to Yushchenko in 2009 Ukrainian authorities would find answers to challenges in domestic economy and stressed that he does not share pessimism in this regard. “I suggest conducting a more detailed analysis and evaluation of the situation in Ukrainian economy,” he said.

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Street crime level grows

News / 26 March 2009 | 12:30

Street crime level in Ukraine increased by 12 percent in Q1, 2009, Internal Minister Yuriy Lutsenko informed.

According to him, in different regions the crime level is 5-10 percent up. “I consider it as an absolutely objective figure due to a growth of unemployment and return of workers from Western Europe and Russia”, he emphasized. Mr Lutsenko also informed that the Internal Ministry strengthened the militia subdivisions that patrol the streets by 30 percent.

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Gazprom warns Ukraine over changes to gas transport system

News / 26 March 2009 | 11:40

Russia’s Gazprom warned on Wednesday that any changes made to Ukraine’s natural gas transport network without Russia’s approval will affect European supply contracts, RIA Novosti reported.

Russia’s leadership has reacted furiously to plans discussed by Ukraine and the European Union earlier this week, without Russia’s participation, on modernizing the Ukrainian gas grid.

Gazprom official Oleg Aksyutin told reporters: “In view of the level of integration of our gas transport system and the fact that Ukraine’s gas transit system is an inseparable part of Gazprom’s gas export regime and our export contracts, Gazprom must approve any work relating to changes in the throughput capacity of Ukraine’s pipelines.”

Prime Minister Vladimir Putin on Monday threatened to review ties with the EU if it goes ahead with the plans without Russia’s involvement, and President Dmitry Medvedev said the following day that inter-governmental talks with Ukraine had been suspended until the issue is resolved.

Aksyutin, who heads Gazprom’s department for gas transport and underground storage, said any unauthorized changes to the transport system will have an impact not only on Russia’s export contracts with European states, but also on Russian and Central Asian gas production.

Ukraine, the EU and several banks signed a pledge of cooperation in Brussels on Monday to encourage investment and avoid a repeat of the dispute at the start of the year, which resulted in a temporary cut-off in Russian gas supplies. Russia, which transits about 80% of its Europe-bound gas via Ukraine, said it was excluded from the talks.

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