State-owned gas giant Naftogaz generated a net profit of $325 million (Hr 8.5 billion) between March and June, according to a report published on the company’s website on Oct. 28.
It’s an $880 million swing compared to the company’s net loss of $562 million (Hr 14.7 billion) for the same period in 2020.
The company’s statement appears to hint that this result is linked to Vitrenko, who replaced his predecessor Andriy Kobolyev on Apr. 28.
“In the second quarter of 2021, at the beginning of which Yuriy Vitrenko replaced Andriy Kobolyev as Chairman of the Board, Naftogaz received a net profit of Hr 8.5 billion,” the post read.
Under the management of Kobolyev, Naftogaz posted losses of $684 million in 2020, which it officially blamed on below-market gas sales and reduced demand for gas during the COVID-19.
Kobolyev was forced out of the company, allegedly for poor performance, without the consent of the company’s supervisory board, who resigned on-masse in protest of the decision.
However, experts believe it is too early for Naftogaz to draw conclusions from Vitrenko’s management.
Naftogaz’ financial statement shows that the $325 million (Hr 8.5 billion) profit in March-June 2021 did not compensate the results of Jan.-March 2021 that accounted for $388 million (Hr 10.2 billion). It means that Naftogaz still lost roughly $64 million (Hr 1.7 billion) in total for the first half of the year.
Sergey Fursa, an investment banker at the Ukrainian investment company Dragon Capital, told the Kyiv Post that it is impossible to show any result in such a short period.
“This is all due to accounting and not due to the managers’ skills,” he said.
Bad blood
Vitrenko and Kobolyev regularly clash. Appearing on TV host Savik Shuster’s “Svoboda Slova” (Freedom of speech) show on Oct. 15, both sides accused each other of being responsible for Ukraine’s current energy crisis and the financial situation of Naftogaz.
Kobolyev stated that the current financial crisis was caused by Vitrenko’s failure to buy gas during the summer months.
Vitrenko similarly accuses Kobolyev of failing to purchase 3 billion cubic meters of gas under existing agreements, focing Naftogaz to buy gas during the expensive witner months.
The debate became so heated that the host eventually had to interrupt the two rival executives.
Vitrenko had previously served as a top executive at Naftogaz in 2014-2020, serving under Kobolyev and helping him to develop various anti-corruption schemes and successful business strategies.
Vitrenko is credited for taking a lead role in successful litigation against Russia’s Gazprom that ended in a more than $3 billion payment last year to Ukraine for violation of gas contract terms.
As part of the Stockholm arbitration court agreement, Gazprom and Naftogaz reached a settlement and dropped mutual claims involving a 2009 gas supply contract.
He also negotiated an agreement through 2024 that guarantees Russia will transport no less than 40 billion cubic meters of gas through Ukraine’s transit pipelines, even if the Russian-German bypass Nord Stream 2 pipeline was completed.
This meant that Russia was obliged to meet minimum transit volumes, otherwise, it would have to pay fines.
But the two executives later became increasingly at odds and Vitrenko was dismissed on May 13, 2020.
Vitrenko alleges that he was fired for standing up to Kobolyev regarding the appointment of Ihor Kolomoisky’s favored candidate as the CEO of Ukrnafta, the Naftogaz subsidiary in which the billionaire oligarch has a minority stake.
Now the CEO of Naftogaz, Vitrenko has stated that he considered Kobolyev’s results at Naftogaz to have been unsatisfactory, lashing out at his former boss and labeling him a “parasite on the achievements of others.”
Vitrenko’s strategy
Under Vitrenko, Naftogaz is developing new strategies to meet Ukraine’s energy needs.
On Oct.10, Vitrenko unveiled his 10-year plan for Naftogaz, pledging to almost double Ukraine’s gas production to 24 billion cubic meters, up from 13 billion this year.
As part of this plan, Naftogaz envisages conducting a gas exploration of Ukraine’s southern Black Sea shelf and improving existing on-land gas wells.
On Oct. 29, Naftogaz announced that it plans to produce 1 gigawatt of energy from “green” sources by 2030 as part of Ukraine’s involvement in the European Green Deal.
To achieve this, the company hopes to attract $1 billion in investment from foreign investors.
