Naftogaz initiates split of Ukrnafta amid risk of multibillion claims from minorities

Andriy Kobolev, CEO of state company Naftogaz of
Ukraine (NAFTO), has filed a letter to the supervisory board of Ukraine’s leading
oil company Ukrnafta (UNAF UK) asking the board to study the possibility of
dividing the company’s assets between two groups of shareholders,
Interfax-Ukraine reported on Feb. 3. Namely, Naftogaz (which owns 50%+1 shares
in Ukrnafta) wants the board to consider dividing the company by business
directions to further separate the company between Naftogaz and a group of
minority shareholders (related to tycoon Igor Kolomoisky, who owns with his
partners at least a 41% stake in the company). In his letter, Kobolev asks to
create a working group for the assets split, hire one of the big-four audit
companies to undertake an assets valuation and hire a legal advisor that will
conduct the process. Kobolev expects that such issues will be considered at
Ukrnafta’s next shareholder meeting.

Interfax-Ukraine also reported on Jan. 28 that
Naftogaz had directed a letter to minority shareholders of Ukrnafta informing
them about the intention to hold a shareholder meeting as soon as possible. The
minority shareholders aligned with Kolomoisky filed legal complaints against
Ukrainian government in 2016 demanding compensation for an alleged
USD 4.67 bln in losses. According to Ukraine’s Justice
Minister Denys Maliuska, the Arbitration Court in Stockholm might rule on this
case in February 2021. He estimated the potential loss for the government from
the claim at about USD 6 bln.

Alexander Paraschiy: Kolomoisky,
as a powerful minority shareholder in Ukrnafta, was always a headache for
Naftogaz, so the intention of the state company to divorce itself from this
group is natural. If the separation happens, this will add stability to
Naftogaz operations. However, the process does not promise to be fast: most
likely it will take a couple of years.

Meanwhile, the claim of Ukrafta minorities against the
government, however absurd it could look at first glance, is a risk that should
not be ignored. If the minorities win their claim in Stockholm, their leverage
in Ukrnafta will significantly increase. Moreover, in such case, it might
happen that the government will have to compensate the minorities by providing
them some shares in Ukrnafta, which would result in losses for Naftogaz.