Fitch sees Naftogaz’ improving FY08 position

In a statement yesterday, Fitch Ratings said FY07 financial results from Naftogaz of Ukraine will be weak, but the agency upgrades its expectations for the company’s FY08 financials. According to the rating agency, low FY07 results stem from the company’s inability to fully recover gas import prices from its domestic sales. Fitch will review Naftogaz’s FY08 results in light of favorable Ukrainian government decisions in 2008 that have led to an improved business profile. Fitch is watching for two potential developments that could significantly impact Naftogaz’s rating: (1) an increase in the state subsidy to Naftogaz to UAH 8 bln from UAH 4.3 bln for the balance of FY08, and (2) Naftogaz’ ability to secure a new source of funding to continue purchasing gas for storage ahead of the winter heating season.