Renewal of EBRD loan to Ukraine's Naftogaz will depend on reform progress: EBRD

A man walks past the headquarters of the Ukrainian national joint stock company NaftoGaz in central Kiev, Ukraine, March 15, 2016. REUTERS/Valentyn Ogirenko

KIEV (Reuters) - The European Bank for Reconstruction and Development will not renew a loan facility provided to Ukrainian state-run firm Naftogaz for gas purchases unless the company’s reforms get back on track, the bank’s regional director Francis Malige said on Friday.

Ukraine’s financial and political backers expressed their concern this week after Naftogaz’s independent supervisory board resigned saying authorities were blocking attempts to modernize and clean up the company.

EBRD funding to Naftogaz under a three-year $300 million revolving loan facility has been disbursed and further financing of this sort will depend on the appointment of a new, independent board and the continuation of reforms, Malige said.

“I’m really concerned that we won’t, and we should, see a board reinstated in Naftogaz as soon as possible so that the reform can continue,” he told journalists.

“I think the company would like us to extend it (the loan), to replace it with a similar facility, which we’re frankly willing to look at, but signing a new facility is going to be contingent on continuation of reforms,” he said.

The Ukrainian government has taken steps to improve Naftogaz’s finances and boost transparency in the graft-ridden energy sector.

A reform to bring Naftogaz’s prices in line with the market helped the firm to post profit in 2016 for the first time in five years.

But the EBRD and others say a planned ‘unbundling’ - splitting Naftogaz’s production, transport and sales businesses - is taking too long.

On Wednesday, Prime Minister Volodymyr Groysman said he guaranteed Naftogaz reforms, including the unbundling, would be carried out.

Reporting by Alessandra Prentice; editing by Matthias Williams