Vitrenko suggests cabinet to replace Naftogaz supervisory board, top management

Acting energy minister Yuriy Vitrenko sent a letter on
Feb. 12 to PM Denys Shmyhal suggesting to immediately consider replacing the
supervisory board and top management of Naftogaz (NAFTO), lb.ua news site
reported on Feb. 15.

Vitrenko motivates the need of replacement by weak
natural gas production numbers of Naftogaz (14.9 bcm in 2020, short of the plan
of 20.1 bcm stipulated by the cabinet in 2017), its plan to further decrease
gas production (to 9.9 – 12.5 bcm by 2025) as well as alleged financial violations revealed by the State Audit Service
for UAH 75.5 bln and tax authorities for UAH 37.3 bln.

According to Naftogaz charter, the company’s
supervisory board can be replaced any time by a shareholder meeting (where the
cabinet is the only shareholder). Members of the company’s management board are
appointed and dismissed by the supervisory board, its CEO is appointed and
dismissed by a shareholder meeting upon suggestions of the supervisory board.

Recall, Vitrenko served in top positions at Naftogaz
since 2014, where he was associated with leading successful court battles with
Gazprom. In late 2019, he lost some of authorities within Naftogaz and started
actively criticizing top management, which eventually led to his dismissal in
July 2020. In late December, the cabinet appointed Vitrenko acting
energy minister.

Alexander Paraschiy: Poor
natural gas production is indeed a weak point of Naftogaz, while the company
has always been referring to objective reasons for that (it was not able to
acquire new gas production licenses).

Despite Naftogaz turned from Ukraine’s key loss-making
company and the burden to state budget in mid-2010s to a profit-making holding,
there are still a lot of inefficiencies there. Therefore, some refreshing of
its top management is not a bad idea. However, the revealed letter can be
interpreted as an attempt of Vitrenko’s revenge for his dismissals in 2019 and 2020.
Moreover, the key question is whether the government will be able to find
adequate replacement for Naftogaz top positions, as the history of appointments
during Zelensky’s presidency is not much encouraging.

Such news does not look encouraging for Naftogaz
(whether Vitrenko’s recommendations are implemented or not) since it decreases
the chance for the company to issue new public or IFI debt in the near future
(recall, the company put off placement of USD 500 mln Eurobond in late
October).