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Fields for Naftogaz, gas stations for Privat: How Ukrnafta is going to pay back its debt

Author : Olena Holubeva

Ukrnafta may offer the government to pay back the debt through selling its oil operations and a network of gas stations to Privatbank. Then, Naftogaz would acquire gas and gas-condensate fields.
17:08, 18 July 2018

zn.ua

Ukrnafta's Chairman of the Board Mark Rollins, while commenting on the matter exclusively to 112.ua, confirmed that one of the options for tax debt settlement for the company is unbundling through a sale of a part of its assets to private shareholders or to Naftogaz-Ukraine. The cumulative overdue tax debt of Ukrnafta and its subsidiaries stood at UAH 11.05 billion, as of the end of the first half of 2018. As 112.ua wrote earlier, the debt built up during the period when the company was managed by individuals affiliated with Privat group. Then, according to the director of ExPro Consulting Hennadiy Kobal, money was regularly withdrawn from the firm. Ukrnafta was drilling oil and gas from the fields without paying its due rent.

Related: Ukrnafta repairs five gas stations in Kyiv region

112.ua’s sources in the State Fiscal Service are claiming that all of the possible scenarios for settlement of Ukrnafta’s tax debt have been discussed with the company over the last few years. In particular, one of the scenarios was presented to the government: it provides for the restructuring of the overdue debt over a couple of years with an option to settle it in parts with Ukrnafta’s own funds. Now the possibility of the company unbundling and debt settlement through the purchase of a part of assets by shareholders. “We are now at a stage where we are evaluating all our assets, all of the company’s assets. We are talking to shareholders about the assets they would like to purchase and what the structure of those transactions could be. It remains unclear exactly which assets those could be. The idea is to sell certain assets and to pay the tax debt with that money”, - Mark Rollins told 112.ua. He did not specify which assets he was talking about exactly.

Rollins also pointed out that the situation is likely to become clearer within 1 or 2 months. He explained that the unbundling plan has not yet been discussed with the government. The division is only possible if the shareholders grant their consent. The issue needs to be discussed at a general meeting.

 

Related: Ukrnafta boosts net profit by 17.7 times in Q1 2018

It is known that the Naftogaz management supports the idea of debt settlement through a sale of certain assets by a private shareholder. If that is the case, the state-owned company is interested in obtaining licenses to operate gas and gas-condensate fields, whereas the oil division (mining and a retail network of 537 branches), should the division actually happen, is likely to be transferred to Privat (the company owns a stake in the Kremenchuk oil refinery and is developing its network of gas stations).

Ukrnafta has an attractive business in an oil refinery that produces Liquefied Hydrocarbon Gases. That could be of interest to Privat. I suppose that Privat’s shareholders will also find the retail business (gas stations) and oil mining rather interesting. It is highly likely that is the reason for rebranding that the company has been pursuing. Gas stations that were losing customers due to lack of offers Ukrnafta’s competitors had are now being turned into attractive assets, which would be interesting when being sold. Suffice it to say, if the sale does take place eventually”, - chief analyst of the state-owned company Derzhzovnishinform Viktor Berezin said.

As Ukrnafta representatives said, a rebranding of 50 gas stations is scheduled for 2018-2019, and is going to cost some UAH 300 million. The rebranding provides for a dramatic change of the gas station format – they will include stores that weren’t there earlier, cafes with coffee machines and food dispensaries. That was the approach used on 5 gas stations in Kyiv and seeks to add at least 10 facilities in the Central and Western regions of the country.

Experts point out that until now, Ukrnafta's gas stations were at a disadvantage compared to the company’s rivals, as they could not offer the desirable options such as cafes and stores. “The company has focused on oil mining. One could not get a coffee or a hot dog at their stations, which were available at rivals’ stations. The company did not lose customers because of that, but also did not obtain additional profits”, - chief editor of NefteRynok Oleksandr Sirenko said. According to him, the investment in the format change is turning of gas stations in attractive assets that are capable of generating more profit.

Related: Ukrnafta pays $12 million towards overdue tax debt

It is worth pointing out that the current approach if it comes to fruition eventually, is very desirable for Privat group. In reality, the company has made money, and not even once. First, through the sale of some gas stations to Ukrnafta. The retail network was acquired from companies affiliated with Privat between 2003-2006. The company may now receive its bonuses if the gas stations are purchased when fluid. That is despite the fact that the investment in the rebranding will be payable by Ukrnafta.

However, a genuine sale and settlement of the tax debt may take Privat as long as it sees fit, experts say. “I don’t think the plan of unbundling of Uknafta’s assets will be realized soon. In the current situation, Privat should be comfortable with the status quo. Naftogaz also seems careless and it seems as though these talks about the search for an option to settle the tax debt is only to pretend like something is being done”, - Berezin said. 

Moreover, if a real division and acquisition of Ukrnafta’s oil division actually happens in the end, it will be difficult to organize due to a number of unresolved problems. “It is going to be difficult to separate the assets of the company – Privat and Naftogaz have a wide array of unresolved issues. In particular, the issue of the gas extracted by Ukrnafta in 2006-2011 and delivered by Naftogaz to the public”, - Oleksandr Sirenko said.

112.ua's source at Ukrnafta says that the plan for debt resettlement through the sale of assets is actually nothing new. Discussions on the topic have been active for over a year, but the matter hasn’t gone past that stage yet.

 

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