Ukrnafta refuses to pay UAH 2.4 bln in dividends to the state

Ukraine’s biggest oil producer and gasoline retailer Ukrnafta (UNAF UK) sent a letter to the holder of its 50% stake, Naftogaz, explaining that it has netted all its dividends due with part of its gas confiscated by Naftogaz in 2008. The letter was sent on Aug. 28 and was published by pravda.com.ua news site on Sept. 1.

The amount of confiscated gas in 2008 was 370 mcm, Ukrnafta alleged, while the amount of dividends it owed to the state was UAH 2.41 bln. As a result of the netting, Ukrnafta alleges it owes no dividends and instead Naftogaz must offer compensation.

According to the letter, Ukrnafta owed UAH 1.78 bln in dividends to the state for 2011-2013, due in April 2015. However, Ukrnafta decided to net this debt with 247 mcm of the gas confiscated in 2008 (which was officially priced at UAH 7200/tcm in April). After such netting, the amount of unpaid confiscated gas decreased to 123 mcm. As of August (when Ukrnafta had to start paying dividends for 2014), the company valued this gas at UAH 0.81 bln (based on the official August price of UAH 6600/tcm). The company decided to partially net this debt allegedly owed by Naftogaz with UAH 0.63 bln in 2014 dividends due to the state. After all the nettings, Ukrnafta now estimates that Naftogaz owes it UAH 0.18 bln for the gas confiscated in 2008, and Ukrnafta owes no dividends to Naftogaz, according to its letter.

Alexander Paraschiy: Naftogaz is only a nominal holder of Ukrnafta’s 50% stake, in fact it’s owned by the Ukrainian government. Thus, the ultimate receiver of Ukrnafta’s dividends is the state budget, not Naftogaz. Therefore, if Naftogaz accepts such a netting by Ukrnafta, it will have to pay UAH 2.41 bln in Ukrnafta dividends to the budget from its own pocket. Naftogaz has yet to react to the netting decision.

We hope that such a netting won’t affect Ukrnafta minority shareholders and they will receive their dividends in full and on time.

This move of Ukrnafta confirms that nothing has changed in the company’s policies after the appointment of its new CEO in late July, which was supposed to be a compromise in an ongoing conflict between the largest minority shareholder, Igor Kolomoisky, and the government. The Aug. 28 letter was signed by acting CEO Volodymyr Pustovarov, who is close to Kolomoisky, while the newly elected CEO hasn’t yet started to work. At this stage, it does not look probable that the new CEO will be able to change the balance in Ukrnafta’s top management to the state’s benefit.