Kyivenergo receives UAH 900 mln from Kyiv city to repay its gas debt

According to Kyivenergo (KIEN), the city of Kyiv has paid the company UAH 900 mln – part of compensation owed to it for the company’s accumulated losses from inefficient heating tariffs. According to Kyivenergo, the company’s accumulated losses from heat supplies (which are due to be compensated by the city) as of Jan. 1, 2009, were UAH 1,515 mln. Kyivenergo directed the money to partially repay its debt to Gaz Ukrainy for gas supplies. The remaining debt of Kyivenergo for gas is UAH 395 mln. Alexander Paraschiy:  This is the first time the city has recognized its obligations to Kyivenergo to compensate for the difference between heat tariffs and heat production/supply costs. Even though compensation for that difference from the city budget is stipulated by the law “On Prices and Pricing,” it is not technically possible without a decision from the Kyiv City Council. The transaction became possible after the Cabinet of Ministers allowed Kyiv to take UAH 1.2 bln in debt by issuing promissory notes. According to the Cabinet order, the city is required to use the debt to repay its obligations to Kyivenergo, amounting to at least UAH 924 mln. Currently Kyivenergo is lobbying to increase heating tariffs in Kyiv to the level that will allow the company to earn a 12% profit margin from heat supply. We believe Kyiv will raise heating tariffs, but less than is being proposed by Kyivenergo.