Ukraine’s state-owned gas giant Naftogaz lost $1.3 billion (Hr 37 billion) in 2020, according to a financial report published by Ukrainian outlet Ukrainska Pravda on April 9. It’s a massive tumble in fortunes compared to $355 million net profit (Hr 9.9 billion) in 2019.
However, Andriy Kobolyev, the CEO of Naftogaz, refused to comment on what he called an “incorrect” report. “We do not have the right to comment on the company’s financial indicators until the official publication of the report,” he wrote on Facebook on April 10. Kobloyev added the company would publish it soon, without specifying the date.
The company hadn’t released its financial report for 2020 on its website at the time of this story’s publication and Naftogaz’s financial department could not be reached for comment.
Sergey Fursa, an economist and energy expert, essentially backed Naftogaz. He told the Kyiv Post on April 12 that Ukrainska’s Pravda’s financial report was “not reliable” and may not have accurately taken into account the separation of its gas distribution network from the rest of the company, or the so-called “unbundling” of the state monopoly.
In January 2020, Ukraine completed the process of separating its gas production from gas distribution, as required by European Union rules. At the time, the company said it would affect gas volumes worth Hr 32 billion (over $1.3 billion) and could boost the company’s income but this report doesn’t show the effect on the company’s profit, Fursa said.
In August 2020, the Ukrainian government also abandoned public service obligations that forced Naftogaz to sell gas via intermediaries at below-market prices to financially needy customers. With the change, Naftogaz can also sell gas directory to end-users. The firm hopes to increase its retail market share to 35% from the current 9% by 2025. Over 600,000 new customers across Ukraine have chosen Naftogaz as their retail gas supplier since the market liberalization.
Fursa said, however, that low prices for gas may have caused losses in 2020.
In November 2020, Naftogaz reported losing $599 million (Hr 17 billion) in the first nine months of the year, compared to a profit of $454 million (Hr 12.9 billion) for the same period in 2019. “Compared to the previous quarter, the result was impacted by significantly lower gas prices and higher volumes of gas sold,” the company’s press service reported then.
Ukraine’s government has forced gas sales at Hr 7 per kWh, about 30% below the market prices. The government justified the regulation by saying Ukraine doesn’t have a competitive retail market for natural gas. It remains dominated by such regional suppliers as exiled billionaire oligarch Dmytro Firtash.
