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Ukrnafta is going to repay its debts by selling a part of its assets

Author : Olena Holubeva

Ukrnafta might offer the government to repay debts by selling the company's oil business and filling station network to "Privat" group. Naftogaz will then obtain the gas and gas-condensate fields
10:30, 20 July 2018

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Chairman of the Board of Ukrnafta Mark Rollins has confirmed that one of the options for paying off the company's tax debt is its division by selling part of the assets to private shareholders or Naftogaz. The overdue tax debt of Ukrnafta and its structural divisions was 0,44 USD billion at the end of the first half of 2018. The debt was formed during the period when the company was under the management of the management connected with the "Privat" group. Then, according to the director of ExPro Consulting Gennady Kobal, the company regularly withdrew the money. Ukrnafta pumped oil and gas from the fields but did not pay the rent.

Sources of in the State Fiscal Service, SFS, say that they have discussed all the possible scenarios for paying off the tax debt with the shareholders of Ukrainafta. In particular, one of the plans was submitted to the government: it provides for the restructuring of the overdue debt with the possibility to repay it in the installments, at the expense of Ukrnafta's own funds. There are some talks about dividing the company and repaying the debt through by purchasing of part of the assets by the shareholders. "We are now at the stage when we evaluate all our assets, all of the company's assets. We are discussing with shareholders what assets they would like to buy," Mark Rollins noted. He did not specify what kind of assets he was talking about.

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

Rollins has stated that the situation would clear up within a month or two, specifying that the plan for dividing the company has not been discussed with the government. In addition, the option of separation is possible only if it is approved by the shareholders. The issue must be approved at the general meeting.

As you know, the management of Naftogaz supports the idea of paying off the debt through the selling of part of the assets by a private shareholder. In this case, the state-owned company is interested in obtaining licenses for gas and gas condensate fields, while the oil division (production and retail network of 537 stations) would be likely obtained by the “Privat” group  (the company is a shareholder of the Kremenchug refinery and develop its own filling network).

Related: Ukrnafta repairs five gas stations in Kyiv region

"Ukrnafta has an attractive business in the form of gas processing plants producing LPG, which might belong to Privat’s interest, and I believe that retail business (refueling) and oil production will attract the Privat’s shareholders," said the expert analyst of "Derzhzovnishform" State Enterprise Viktor Berezin.

The rebranding of 50 filling stations is planned. The estimated investments are about 11 million USD. Rebranding involves a radical change in the format of the gas station - the shops will appear, a cafe with coffee machines. In this vein, Ukrnafta has already changed the format of five filling stations in Kyiv and plans to open at least 10 filling stations in the central and western regions within a month.

Related: Ukrnafta pays $12 million towards overdue tax debt

Experts note that until now, the gas stations of Ukrnafta have been losing to competitors since they did not have cafes and shops. "Until now, the company has been more focused on oil production, it was impossible to drink coffee or eat a hotdog at their refueling stations."Of course, the company did not lose the customers, but rather did not receive additional profit," editor-in-chief of "Naftorynok" Olexandr Sirenko claims. According to him, investments in changing the format turn the company's gas stations into attractive assets that can generate more profits.

If the current combination is implemented, it will be the most advantageous step for the "Privat" group. In fact, the company has already benefited many times. First, by selling part of the refuelings to Ukrnafta. The retail network was purchased from the companies affiliated with the Privat Group in 2003-2006. Now the company can get its bonuses by buying refueling liquid.

However, "Privat" is likely to postpone the real ransom and payment of tax debt, experts say. "I do not think that Ukrnafta's assets division plan will be implemented in the near future. Privat is satisfied with the established status quo. Naftogaz is also looking at the situation through the other way, and it looks more like these negotiations are just a simulation of some activities," Berezin said.

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

Moreover, even if the deal is reached before the real division and redemption of Privat, it will not be easy to conduct it because of a set of unresolved problems. Our source in Ukrnafta says that the plan to repay the debt through the sale of assets is not really new. Negotiation on the issue has been lasting for about a year.

This column does not necessarily reflect the opinion of the editorial board or 112.International and its owners.

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