Naftogaz has to repay USD 2.7 bln to Gazprom by weekend

Naftogaz of Ukraine (NAFTO), the state natural gas production and distribution company, owes USD 2.7 bln to Gazprom for gas bought in 2013 and the deadline for its repayment is Jan. 25, the Interfax-Ukraine news agency reported on Jan. 23 citing Viktor Valov, one of Gazprom’s top managers. He also said that Gazprom anticipates Naftogaz will buy 35-40 bcm of gas from Russia this year.

In other news, Ukrainian Prime Minister Mykola Azarov reported the Ukrainian government may issue another USD 2 bln tranche of Eurobonds soon as part of its arrangement with the Russian government, which will buy them.

Alexander Paraschiy: Gazprom’s payment demand looks like bad news considering that in their December deal, the presidents of Russia and Ukraine agreed on a postponed payment deadline that was broadly assumed to be in spring 2014, as requested by Naftogaz (refer to our Dec. 5 news). Most likely, the preannounced USD 2 bln issue of new bonds will be used by the government to help Naftogaz settle the debt.

Ukraine imported 27.3 bcm of gas from Russia at a total value of about USD 11 bln, according to our estimates. The amount of gas that Valov said Gazprom is “offering” to sell in 2014, even with a “valuable” discount, will result in the same gas bill for Ukraine this year as in 2013.

If Ukraine is able to raise an additional USD 2.0 bln from the Russia-sponsored two-year bond soon, its total amount of Russia-sponsored debt (including those raised in December) will increase to USD 5.0 bln. Out of this amount, at least USD 4.2 bln is coming back to Russian companies immediately, including USD 0.75 bln of government debt repayment to Russian Sberbank and about USD 3.5 bln of payments from Naftogaz to Gazprom. That said, by taking the loans from Russia, Ukraine is just changing names of its creditors, with most of the money effectively remaining within Russia’s borders.