NJSC Naftogaz Ukrainy in 2020 rendered services to PJSC Gazprom (Russia) in organizing transportation of natural gas through the territory of Ukraine for $ 2.11 billion.
“For 2020, Gazprom fully paid for the annual capacity of the Ukrainian gas transmission system (GTS) for gas transportation. According to the agreement dated December 31, 2019 between Naftogaz and Gazprom, the cost of booking 65 billion cubic meters of annual capacity is $ 2.1 billion. In addition, in the fourth quarter of 2020, Naftogaz additionally rendered services to Gazprom for the use of the Ukrainian gas transportation system, for which it receives over $ 30 million,” the press release of the company said.
According to the company, the total volume of Russian gas transported in 2020 amounted to 55.8 billion cubic meters.
The net consolidated loss of the Naftogaz group in January-September 2020 amounted to UAH 17.034 billion compared to a net profit of UAH 21.31 for the same period last year.
“For the nine months, reported loss was UAH 17.0 billion, compared with a profit of UAH 12.9 billion for the same period in 2019, excluding discontinued operations [gas transit transferred from January 1, 2020 to GTSOU], reflecting lower demand and gas prices,” the company said in a statement Thursday.
According to the report, in the third quarter of this year, Naftogaz’s net loss from continuing operations was UAH 5.49 billion, which is 61.8% more than in the third quarter of last year. The group said that if we exclude the profit from transit during this period in 2019, then the increase in loss will not be so significant – 14.6%.
“Operating cash flow for the quarter was UAH 0.5 billion, compared with a negative operating cash flow of UAH 12.6 billion in Q3 2019 (excluding discontinued operations). For the nine months in a challenging environment, operating cash flow was UAH 16.1 billion, almost in line with the operating cash flow of UAH 16.9 billion in the same period last year,” Naftogaz said.
The group said that after abolishment of the Public Service Obligations (PSO) on August 1, 2020, Ukrainian gas consumers can switch freely from gas suppliers and benefit from market-based pricing, whilst gas intermediaries pay for gas supplies. However, payments for deliveries made before 31 July 2020 and under the PSO remain outstanding which results in provisions for bad debts, UAH 3.7 billion in the nine months. “Provisions for bad debts will likely have again a negative impact on profitability in the next quarter,” Naftogaz said.
According to the report, the group expects to receive of compensation from the state in the amount of UAH 32.204 million in 2020 under a law on cross payments with Ukrnafta recently passed, and this could bring the group to profits at the end of the year.
The group reported that adjusted EBITDA in 9M 2020 amounted to “minus” UAH 1.2 billion versus UAH 26 billion in 9M 2019, while in the third quarter the situation was reversed: this year EBITDA was positive – UAH 0.5 billion versus minus UAH 2.8 billion a year ago.
Naftogaz said that the positive contribution of exploration and production to EBITDA in 9M 2020 amounted to UAH 16.3 billion versus UAH 34.5 billion in 9M 2019, while the negative contribution from commerce was UAH 16.3 billion and UAH 9.9 billion respectively.
“Exploration and production result reflected lower gas prices that were partially offset by lower subsoil royalties as compared to the nine months of 2019,” the group said.
The group recalled that 10.7 billion cubic meters were produced and 12 billion cubic meters of natural gas were sold in 9M 2020.
In addition, Ukrnafta, in which Naftogaz owns 51%, increased the negative result of this year by UAH 2.2 billion, while last year its contribution was positive – UAH 1 billion. Ukrnafta’s result were negatively impacted by lower gas selling prices as well as lower volumes of crude oil sold, according to the report.
At the same time, the group managed to increase EBITDA from natural gas storage to UAH 3.8 billion from UAH 0.8 billion and to maintain a positive contribution of EBITDA from transportation, oil refining and sales of oil products – UAH 1.3 billion versus UAH 1.9 billion in 9M 2019.
“Gas storage reflected higher revenues from pumping and storage services due an increased demand. Oil midstream and downstream was primarily attributable to lower selling prices for petroleum products which were not wholly offset by attributable cost savings over the period,” the group said.
The group’s revenue in 9M 2020 fell compared to 9M 2019 by 6.2%, to UAH 103.17 billion, but in the third quarter it grew by 64%, to UAH 31.77 billion.
“Capital expenditure in the first three quarters of 2020 was UAH 11.8 billion, below the full-year target of UAH 20 billion. Free cash flow was resilient at UAH 4.1 billion,” Naftogaz said.
The group said that in the third quarter of this year capital expenditures totaled UAH 4 billion versus UAH 6.3 billion a year ago.
Its net debt fell from UAH 42.6 billion at the end of 2019 to UAH 19.7 billion at the end of the third quarter, and cash and cash equivalents fell from UAH 77.59 billion to UAH 45.81 billion.
In October-November 2020, the group paid off loans for the amount of UAH 3.36 billion and borrowed UAH 2.67 billion from banks.
Naftogaz Ukrainy unites the largest oil and gas companies in the country. The group is a monopolist in the storage of natural gas in underground storage facilities and the transportation of oil by pipeline throughout the country.
Naftogaz Group received a feed-in tariff and a license to sell electricity for a new solar power plant in Chudniv, Zhytomyr region.
As the group reported on Wednesday, October 21, the planned volume of productive electricity supply for the first year of solar plant operation, built in September 2020, will amount to at least 36,500 MWh with an expected income of more than UAH 153 million.
Naftogaz clarified that the peak capacity of photovoltaic modules is 33.313 MW, and the capacity at the connection point is 25 MW.
The release states that the plant uses graphene-coated monocrystal photovoltaic modules with one of the highest capacity in its class of 430 W from ZNSHINE PV-Tech Co., as well as SUN2000-185KTL string inverters from Huawei.
“All support elements of equipment and materials are of Ukrainian origin,” the company noted.
“According to the company’s forecasts, the reduction of greenhouse gas emissions, in particular, carbon dioxide, will be at least 880,000 tonnes. In addition, the project encourages the economic development of the local community, as only Ukrainian specialists, including local residents, were involved in the construction of the solar power plant,” first deputy chairman of the board of NJSC Naftogaz Ukrainy Serhiy Pereloma explained.
Naftogaz Ukrainy in the evening on October 20 postponed the placement of dollar-denominated eurobonds indefinitely, a source in the market has told Interfax-Ukraine.
According to him, a corresponding report from the company has been sent to investors.
Earlier on October 20 it was reported that the benchmark for the yield of U.S. dollar eurobonds was 9-9.25%. The company planned to place a new issue with maturity in February 2027 and has already opened the order book. Citi is the sole organizer of the placement.
NJSC Naftogaz Ukrainy has offered to buy back all its eurobonds for up to $ 335 million maturing in 2022 by issuing new eurobonds, and in the absence of sufficient supply from their holders – also eurobonds maturing in 2024, keeping the total ransom amount of $ 335 million.
“Naftogaz made offers and a corresponding issue of new bonds to extend the maturity of its debt. Naftogaz expects to finance the offers at the expense of net proceeds from the issue of new bonds,” Kondor Finance Plc, through which the eurobonds were issued, said on the Irish Stock Exchange.
Naftogaz recalls that its 2022 eurobonds with a par value of $ 335 million with a coupon of 7.375% and 2024 eurobonds with a par value of EUR600 million with a coupon of 7.125% are in circulation.
According to the promulgated terms, 2022 eurobonds are redeemed at a price of 102.875% of the par value, 2024 eurobonds at 98.25% of the par value.
The early deadline for applications is October 27 inclusive. The early expected settlement date is October 29, the final one is November 13.
The dealer-manager of the offer is Citigroup Global Markets Limited.
U.S. Businessmen and former diplomat Amos J. Hochstein has notified NJSC Naftogaz Ukrainy that he leaves the company as independent director in the supervisory board of the company and among the reasons behind his decision to leave the supervisory board, Amos Hochstein mentioned growing opposition to gas market reforms and the transformation of Naftogaz into an independent and efficient company, Naftogaz said on Monday.
“Naftogaz faces increasing sabotage from corrupt forces,” Hochstein said in his column in KyivPost publication.