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Financials

Ukraine backs Naftogaz reforms to unlock $300 mln EBRD loan

KIEV, Oct 16 (Reuters) - The Ukrainian government has backed plans to reform the management of state energy major Naftogaz, which will allow the company to receive a much-needed $300 million loan to buy gas this winter, its chief executive said on Friday.

The European Bank for Reconstruction and Development (EBRD), which approved the loan in September, has urged Ukraine to give Naftogaz more independence, including a board of independent directors. It regards such changes as crucial to the country’s efforts to modernise its loss-making energy sector.

But industry sources have said that the energy ministry has been wary of the proposed reforms and that it does not want to lose control of the country’s largest energy company, whose work affects every part of the sector, from production to sales.

Prime Minister Arseny Yatseniuk said this week that actions by the energy ministry were putting the EBRD financing at risk, without clarifying what the ministry had done to endanger the loan.

Naftogaz Chief Executive Andriy Kobolev said on Friday that the government had approved the reform proposals, which had been drawn by a panel of experts commissioned by the EBRD. The plans include the introduction of a board of directors, some of whom will be appointed though an independent selection process and not by the energy ministry.

Previously, Naftogaz did not have a board of directors.

Kobolev said the decision would allow Naftogaz to sign the loan agreement with the EBRD in Berlin next Friday and buy European gas next month.

“Until this (Naftogaz management) team took it over it was one of the darkest corners of state-owned enterprise inventory of Ukraine and now it will be leading corporate governance reform, ” Sevki Acuner, the EBRD’s Ukraine director, told a news conference.

Ukraine must import gas to get through the winter season and expects to borrow around $1 billion for this purpose from international financial institutions - including the EBRD loan and a $500 million loan from the World Bank. (Reporting by Pavel Polityuk and Alessandra Prentice; Editing by Pravin Char)

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