Cabinet dismisses Naftogaz supervisory board, reshuffles executive board

27 September 2021

Cabinet of Ministers dismissed two executive board members of Naftogaz (NAFTO) and appointed four members to vacant positions on Sept. 27, rbc.ua news site reported. This became possible after the Cabinet dismissed all the members of the company’s supervisory board and, as the sole shareholder, assumed the authority of the board. Last week, the supervisory board dismissed two executive board members, COO Otto Waterlander and CFO Petrus van Driel, according to Interfax-Ukraine. In this way, the Naftogaz executive board has been fully reshuffled and only CEO Yuriy Vitrenko has retained his position.

 

Recall, three independent members of Naftogaz supervisory board announced their resignationon Sept. 7, so they had two weeks to conclude their responsibilities in the board. With their exit, the board has lost its quorum and became dysfunctional.

 

In other news, CEO Vitrenko has sent a letter to PM Denys Shmyhal estimating Naftogaz’ extraordinary expenditures and working capital needs at UAH 123 bln (USD 4.6 bln) in the short-term, rbc.ua news site reported on Sept. 24. They include UAH 17.5 bln for the import of 0.9 bcm of natural gas, UAH 33.7 bln extra gas production royalty (the royalty is tied to the price of imported gas), UAH 53.2 bln in extra working capital needs related to gas supply to heating and gas distribution companies, UAH 10 bln extra tax expenditures related to the division of Ukrnafta assets and other extra costs of UAH 8.9 bln. The company offers to cover the deficit with a UAH 51.2 bln payment from the operators of the gas transit system and the rest with money to be received from the implementation of a special law on debt settlement on the gas market, including budget outlays of UAH 33.7 bln and UAH 10 bln, which are expected collections by the government of extra taxes/royalties from Naftogaz.

 

According to Vitrenko’s letter, Naftogaz had UAH 57.7 bln cash as of May 1, which has been fully spent for stockpiling natural gas (including 2.1 bcm of imported gas for UAH 27 bln).

 

Alexander Paraschiy: Now that the insurgent supervisory and executive board members have left the company, Vitrenko and Shyhal are taking full responsibility for Naftogaz operations, for good or bad. At least, for the company and its shareholder, it will be much easier to adopt any decisions necessary to resolve any liquidity issues. In any case, it is likely that Naftogaz will try to place a Eurobond this autumn to partially cover its working capital needs for the upcoming season and secure the repayment of the nearest Eurobond in July, after the season is finished. Taking into account all the challenges that Naftogaz meets now, its bonds might become more volatile in the short-term.