Ukrgaz-Energo Seeks Opportunities to Invest USD 165 mln

The Chairman of Ukrgaz-Energo’s (UGE) board, Ihor Voronin, said in an interview with business weekly Kontrakty that he thought it was better for the company to re-invest UGE’s 2006 profits rather than pay dividends to its shareholders (i.e., Naftogaz of Ukraine and RosUkrEnergo, 50/50%). He mentioned that the company is potentially interested in investments in electric power generation companies (GenCos) and in natural gas extraction in Ukraine. According to Voronin, UGE stands ready to supply its locally produced gas, if any, to Ukrainian customers at the price demanded by local legislation. “We want to prove that gas extraction in Ukraine is not loss making”, he said. In the same interview, Voronin said that, in cooperation with Naftogaz, the company is considering gas extraction projects in Russia, e.g. Astrakhan field, which is located relatively close to Ukraine. Elaborating on gas transportation, Voronin said it would be reasonable to sell a minor stake in the company operating Ukraine’s high-pressure gas pipelines (i.e., Naftogaz of Ukraine) “for a several tens of billions of dollars” to increase gas transit volumes and to stop speculation about control over the pipe. Vladimir Nesterenko: It was quite an informative interview and the full version is definitely worth reading. Here we want to draw attention to just two of Voronin’s statements. First, despite not being a big surprise, his statement that UGE is interested in “investing into generation companies” might well warm up GenCo stocks. Second, UGE’s plans for domestic gas extraction can harm availability of new licenses for the country’s upstream businesses, including Ukrnafta (UNAF: SELL) and smaller private companies. Instead of fighting with Privat, Ukrnafta’s second largest shareholder after Naftogaz, the government might opt for dealing with UGE, which declared its readiness to sell gas at regulated prices, in contrast to Ukrnafta.