Naftogaz asks Cabinet to allow dividend delay, new borrowings

Ukraine’s leading natural gas company Naftogaz is
trying to better prepare for possible troubles with its supply in early 2020,
CEO Andriy Kobolyev wrote on his Facebook page on June 6. In particular, the
company has accumulated 11.5 bcm of natural gas in its storage as of June 1,
which is 1.8 bcm more yoy. By the start of the heating season (mid-October),
the company is going to stockpile 20 bcm of natural gas, or about 3.0 bcm more
yoy.

At the same time, Kobolyev warned that Naftogaz has a
potential liquidity shortage for the timely accumulation of natural gas
stockpiles, and therefore he is asking the Cabinet to help the company to
resolve the issue. First, the Cabinet might agree to a delay on Naftogaz
dividend payments (90% of its 2018 profit, or about USD 450 mln, should be paid
by end-June, according to the Cabinet’s decree). Second, the Cabinet might help
the company to attract credit financing. “This requires the permission and
active participation of the Cabinet as our sole shareholder,” Kobolyev wrote.

Recall, earlier Kobolyev estimated that the total
liquidity gap of Naftogaz in 2019 could reach UAH 71.3 bln (USD 2.5
bln), which could be covered by borrowing from state banks
and a new Eurobond.

Alexander Paraschiy: Such public statements by the Naftogaz CEO suggest the company sees no
support from the Cabinet in resolving its liquidity issues, which is not news,
given the rocky relations between Kobolyev and PM Volodymyr Groysman. At the
same time, the preparation for a possible “gas war” with Russia in early 2020
(when the current Naftogaz-Gazprom contracts expire) is a hot topic, so such
public appeals to Groysman should work. Therefore, we believe the Cabinet and
its head will adhere to Naftogaz’s appeals and will allow the company to delay
dividend payments (as was the case last year) and allow it to tap new
borrowings. We see a high likelihood that Naftogaz will try to issue a new
Eurobond this year, for up to USD 1 bln.