In the first half of 2023, Naftogazvydobuvannya, the main production asset of DTEK Oil&Gas, increased investments in gas production development by 35% to almost UAH 1 billion amid a decline in financial performance compared to the same period of the previous year.
According to the company’s report on the stock exchange, the company continued to invest in development despite a 66% decrease in DTEK Oil&Gas’ net profit (to UAH 2.38 billion) and a 31.5% decrease in revenue (to UAH 13.11 billion) in the first half of 2023 compared to the same period last year.
It is noted that the funds were used to increase the drilling and exploration program to return to production growth in the medium term.
The company also reported that it paid more than UAH 5 billion in taxes to the state budget, including more than UAH 2.2 billion in rent for the use of subsoil, part of which (5%) is directed to local budgets.
DTEK Oil&Gas explained the decline in financial performance by the fall in gas prices in the 2023 market.
“In the first half of 2023, the main production asset of DTEK Oil&Gas increased its investments in gas production development by 35%. Last year, due to problems with gas sales, we were forced to reduce our drilling program. This year, the company is focusing on increasing the volume of drilling operations. In the next 2-3 years, this will allow us to return to the growth dynamics to further strengthen Ukraine’s energy security,” the company commented.
“DTEK Oil&Gas is the largest private gas producer in Ukraine. Its portfolio of assets includes Naftogazvydobuvannya and Naftogazrazrabotka, which are engaged in exploration and production of hydrocarbons in three license areas in Poltava and Kharkiv regions.
As reported, DTEK Oil&Gas increased its net profit by 70.6% to UAH 11.46 billion in 2022, with revenue growing 2.2 times to UAH 36.00 billion.
Aid to Ukraine is very different from other humanitarian projects and should largely be aimed at helping to develop private businesses and stimulating investment, Norwegian Foreign Minister Anniken Huitfeldt said at Ukraine Recovery Conference in London on Wednesday.
“When providing the assistance to Ukraine, we must make sure that local businesses will benefit. Therefore, we announced a donation of EUR 25 million to provide more insurances and guarantee mechanisms so that companies are willing to invest,” she said.
Huitfeldt said this is part of the Norwegian program worth EUR 7 billion for Ukraine.
She also noted the importance of a sound legal system, commitment to fighting corruption and burden-sharing when it comes to investment risk, and cited the decentralization reform as positive.
Earlier at the conference, Vice-President of the European Commission Valdis Dombrovskis announced the signing on that day of an agreement to launch an experimental military insurance scheme. He said the EU is also working on a pilot project for export credit guarantee schemes to Ukraine.
Ukraine after the war will be very interesting for private investors to develop renewable energy sources, said Harry Boyd Carpenter, managing director for climate strategy and implementation of the European Bank for Reconstruction and Development.
“There’s also going to be a huge wave of investment in renewable energy. Ukraine does have a success story because before the war there was an extraordinary boom in RE – 5 GW of privately financed renewable energy. And that’s the template for Ukraine in the future,” Carpenter said during a discussion on Ukraine’s transition from coal to clean energy ahead of the London Recovery Conference (URC2023), scheduled for June 21-22.
At the same time, according to him, Ukraine will also receive public sector money, but it should be spent primarily on the development of nuclear energy, as well as on construction and reconstruction of networks, to ensure, among other things, the work of decentralized system of renewable energy.
At the same time, the top manager of the EBRD called the commitment of Ukraine to abandon coal in power generation extremely important, noting that this course determines the further development of not only energy, but also the economy and the whole country.
He noted that the contours of the energy sector of Ukraine in the future are quite clear – it will be built on nuclear and renewable energy, and the country has huge resources in all these areas.
At the same time, Carpenter noted that RES used to develop under conditions of “imperfect market and tariffs”, calling it a difficult transition period, but expressed his belief that in the future their development will be based on three fundamental pillars that will remove these problems.
“The first will be a commitment to a green future (…). The second is market reforms. We need a well-functioning, transparent, clearly delineated market. And the third will be integration with the European energy system, which is already in full swing,” the EBRD top manager pointed out.
Besides, Carpenter assured that EBRD intends to continue to support Ukraine financially.
“We will provide Ukraine with EUR3 billion of support. And we are already halfway there. Much of this has come in the form of liquidity support for the energy sector – Naftogaz and Ukrenergo,” the banker emphasized.
Announcing URC2023 on June, 19 First vice-premier Yulia Sviridenko announced the goals in 10 years to show the new Ukraine and to reach over 100 GW of new green power generation capacity, to produce 40 million tons of “green” steel and to bring GDP to $1 trillion per year from $161 billion in 2022.
As reported, at the end of December 2022, NEC Ukrenergo, inter alia, attracted EUR300 million of credit funds from the EBRD to purchase equipment to restore substations subjected to massive Russian missile strikes, as well as to replenish working capital.
NJSC Naftogaz attracted a EUR300 million loan from the EBRD at the end of last year, and later, in early 2023, it received a grant of nearly EUR200 million for the purchase of gas.
According to the president of the bank, Odile Renaud-Basso, the EBRD in 2022 increased the amount of investment in projects in Ukraine to EUR1.7 billion compared to approximately EUR1 billion that it invested annually before. It plans to invest EUR3bn in Ukraine during 2022-2023.
A five-year period of rebuilding Ukraine after the war will require additional investment of about $50 billion a year thanks to inflows of foreign capital, including private capital, the European Bank for Reconstruction and Development (EBRD) laid out this scenario in its Regional Economic Outlook report published on Tuesday.
“For a rapid recovery, foreign capital inflows need to reach $50 billion a year within five years,” the bank pointed out, citing lessons from history.
It noted that a quick recovery is not the norm: historically, most economies that emerge from armed conflict do not experience a long-term quiet period for 25 years afterward, nor do they recover to prewar per capita income levels even in the long run.
At the same time, the report says, 29 percent of economies do reach prewar per capita GDP levels within five years.
“For Ukraine to recover within five years, its economy would have to grow at a rate of 14% per year for the entire period. This would raise average GDP to $225 billion from about $150 billion in 2022 at constant prices,” the EBRD stressed.
In the meantime, the bank has kept Ukraine’s GDP growth forecast for 2023 and 2024 at 1% and 3%, respectively.
The bank added that the main common feature of the periods of stable extremely high economic growth is a high investment-to-GDP ratio. He reminded that before the war the moderate levels of investment in Ukraine were mainly financed by domestic savings: capital inflows were only 3% of GDP per year in 2010-21, while foreign direct investment tends to fall substantially after a war and takes a long time to recover.
This is why the report cites the example of Central and Southeast Europe in the 2000s, where domestic savings were low, but foreign financing helped sustain the investment boom.
In the case of Ukraine, doubling the level of investment (as part of GDP) would require a significant increase in the country’s absorptive capacity, as well as the governance structure needed to develop complex projects and contracts, the EBRD notes.
“In this scenario, the difference between the required level of investment and available domestic savings would probably need to be covered by external financing (net capital inflows) of 20 percent of GDP, or $50 billion per year,” the report summarizes.
The bank draws attention to the importance of private investment, as the private sector provides much-needed technological expertise, management know-how and a focus on economic efficiency.
“In addition to energy-efficient industrial capital and agricultural machinery, the private sector can make an important contribution to the rehabilitation of housing, as well as transport, energy and municipal infrastructure, provided that individual individuals and entities have adequate access to financing,” the report said.
The EBRD reminded that it had committed to invest EUR3 billion in Ukraine in 2022-2023, supporting the real economy, and is ready to play a key role in the recovery when circumstances permit.
As reported, Ukraine’s international financing to cover the state budget deficit is expected to rise to $42.5 billion in 2023, up from $32 billion in 2022.
According to the National Bank of Ukraine, direct investment in the country was $51.1 billion at the end of 2022, and peaked at $65.7 billion at the end of 2021.
Ukraine’s largest mobile operator “Kyivstar” in a year of war paid 10.7 billion UAH of taxes and invested in technological development of 3.5 billion UAH, the president of the company, Alexander Komarov said on Facebook.
The second largest operator “Vodafone Ukraine” reported paying 4.97 billion UAH of taxes and fees in 2022 and almost 4 billion UAH of investments in support and development of telecom infrastructure in Ukraine.
“92% of the network is working as usual today. This is an incredible result, given that 8% are in the occupied territories. At the same time we returned connection to 815 settlements, where we built more than 600 base stations (BS). More 700 new base stations of 4G standard were built, which increased the 4G coverage by 20%”, – wrote Komarov.
He added that the generating capacity of Kyivstar reached 39.2 MW thanks to increase of the number of diesel generators by 75% and installation of 18 thousand new batteries.
“As of today 88% of the network in the country is working in normal mode” – stated “Vodafone Ukraine”.
According to the company, 581 base stations were resumed and 2.9 thousand km of fiber-optic cable were repaired, thanks to which it was possible to restore the availability of services to people in 759 settlements of the country.
“Vodafone Ukraine” also reported that 723 base stations were launched in new locations, 414 additional mobile generators were purchased and 24.71 thousand batteries were replaced.
Capital investments of Vodafone Ukraine in 2022 amounted to about $100 million, not less than before the full-scale Russian invasion, NEQSOL Holding Ukraine regional director Volodymyr Lavrenchuk told the Interfax-Ukraine news agency.
“As a responsible investor in 2022, NEQSOL Holding supported the strategy of capital investments made by Vodafone Ukraine Group in the most difficult conditions at the level of last year. These are investments to provide communications for millions of Ukrainians and data transmission systems for various production and service sectors”, – said Lavrenchuk.
Investments were mainly used to maintain network stability and restore communications in the de-occupied territories, as well as to buy new equipment and improve the company’s coverage, the press service of Vodafone Ukraine specified.
“If during peacetime emergency works accounted for no more than 2% of all works, since the beginning of the full-scale Russian invasion they have taken up more than 95% of the time. Only for 9 months of 2022 more than 1 thousand repairs to restore damaged networks were carried out,” – noted in Vodafone Ukraine.
Since the beginning of the Russian invasion in Kyiv, Sumy, Chernihiv, Kharkiv, Zaporizhzhia, Donetsk, Mykolaiv and Kherson regions more than 500 Vodafone Ukraine base stations were damaged (of those that were able to survey). Operation of 577 base stations has been resumed, the company said.
According to the company, since March, Vodafone Ukraine has restored communications in more than 550 settlements, in particular in 123 towns and villages of Kherson region in the past week. Also 2.56 thousand kilometers of fiber-optic cable was renewed, the total length of unrecoverable and re-laid optics was 37 kilometers.
“Blackouts were an additional challenge. All equipment, except fiber optic, requires power supply and its absence is critical for network operation,” Vodafone Ukraine said, stressing that in order to ensure communication despite long blackouts they provide base stations with backup batteries, as well as use alternative power sources from diesel generators to solar panels.
Vodafone Ukraine in 2022 also invested in expanding coverage in the western part of the country, where most Ukrainians have moved since the war began. Since the beginning of the year, 150 base stations have been installed and a number of existing ones upgraded. In order to expand the 4G coverage 3.8 thousand base stations were installed, 250 new sites were built and 1.5 thousand 3G base stations were modernized.
Also the company continues to provide free services to Ukrainians, in particular in roaming, which has already been used by 14 million Ukrainians, the press service said.
