Privat has laid the foundation for a whole chain of oil and gas offsets worth tens of billions of hryvnias.
Igor Kolomoisky
Ukrnafta recently announced its first barter settlement with the state under the gas-for-cash formula. This refers to the public joint-stock company's announcement that it has terminated its dividend obligations to the state for 2011-2014. Specifically, this refers to UAH 2,411 billion, which the oil company wrote off under a mutual offsetting scheme by covering debts owed to Naftogaz of Ukraine for gas received from the public joint-stock company in previous years. "The company accrued UAH 1,779 billion for 247,17 million cubic meters of gas. Thus, dividend obligations for 2011-2013 were repaid. Ukrnafta also accrued UAH 632,304 million for 95,804 million cubic meters of gas, which was used to repay the company's dividend obligations for 2014," Ukrnafta said in a statement.
Naftogaz reacted to this news with hostility, insisting that it disagreed with such settlements, as they violated Ukrainian law. Specifically, according to the Commercial Code, the necessary characteristics of obligations that can be terminated by set-off are their mutuality and homogeneity. "The claims cited by Ukrnafta are neither mutual nor homogeneous," the NAK noted. Thus, Andriy Kobolev (Read more about it in the article Andrey Kobolev. An unnoticed "veteran" of the gas pipeline.) once again confirmed their disagreement with the PJSC's position. But now this opinion no longer has much effect: Ukrnafta's payments were accepted by the State Treasury and, therefore, legitimized.
This fact divided the market into two camps. Some claimed that what happened was further direct evidence of the merging of business and government. Others focused on the cost, arguing that the written-off dividends constitute direct losses for the state. In fact, both camps are mistaken, as Ukrnafta's manipulations are only the first step toward writing off its debts. One argument is sufficient to support this view. The aforementioned UAH 2,411 billion was written off to pay off debts for gas produced in 2008 alone, while Naftogaz's resource debt to Ukrnafta extends over a decade.
Ukrnafta's manipulations are only the first step toward writing off its debts. One argument is sufficient to support this. The aforementioned UAH 2,411 billion was written off to pay off debts for gas produced in 2008 alone, while Naftogaz's resource debt to Ukrnafta extends over a decade.
This refers to the period from 2006 to 2015, during which PJSC de facto transferred its own produced gas to NAK, but de jure refused to sell it. The reason for this paradox is the inconsistency between the parties over pricing: Naftogaz insisted that Ukrnafta sell energy resources at the tariff set by the national regulator, but the company considered it artificially low and simply refused to sell at this rate. This dispute has been ongoing for the past 10 years, during which Andriy Kobolev's company has accumulated more than 10 billion cubic meters of debt. NAK did not deny this debt, although it emphasized that in monetary terms (at prices set by the state regulator), it corresponds to UAH 3,753 billion. But Igor Kolomoisky's ranks categorically reject this figure, believing that it is actually several times higher.
It's precisely in this context that the "dividends for gas" barter agreement is important, as Ukrnafta could subsequently conduct similar offsetting transactions using the same analogy. The company has all the necessary conditions for this. Firstly, it still has significant debts to the state (for example, UAH 3,3 billion in rent payments). Secondly, it has already successfully secured a court overturning the National Commission for State Regulation of Energy and Public Utilities (NEURC) regulations that set its gas prices. On this basis, PrivatBank can easily settle accounts at an alternative tariff.
Incidentally, this process has already begun. For example, the PJSC's dividend obligations for 2011-2013 were written off at a rate of UAH 7,2 per thousand cubic meters, while dividend arrears for 2014 were written off at a rate of UAH 6,6 per thousand cubic meters. These figures are dozens of times higher than the tariffs calculated for PJSC by the National Commission for State Regulation of Energy and Public Utilities (NEURC) (currently UAH 562,5 per thousand cubic meters), but Ihor Kolomoisky's subordinates are unfazed, as they use the so-called maximum gas tariff for industrial consumers as their price benchmark. This year, the regulator set it at UAH 6,6 per thousand cubic meters, which, when converted to the remaining 9,7 billion cubic meters of Naftogaz's debt to Ukrnafta, amounts to a whopping UAH 65 billion.
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