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Naftogaz finalizes preparations for unbundling transmission system operator

Naftogaz has completed preparations for the unbundling of gas transmission function, with the Operator of the Gas Transmission System of Ukraine (OGTSU) branch having been formed and launched within Ukrtransgaz.

The branch includes several tens of thousands of assets necessary for gas transmission; and the relevant staff and business processes are in place. Over the first month of its autonomous operation, OGTSU branch transmitted more than 12 bcm of gas to both Ukrainian and international consumers.

“We promised to finalize all preparations for the TSO unbundling by 1 December 2017 and we have done it. I appreciate the efforts of Naftogaz group employees, especially those of Ukrtransgaz, and I would like to thank our international advisors for the tremendous effort to achieve this important benchmark!” said Yuriy Vitrenko, Chief Commercial Officer of Naftogaz group.

The Law of Ukraine “On the natural gas market” and the EU Third Energy Package pose a number of specific requirements to Naftogaz regarding steps to be made in the process of TSO unbundling. The future progress of the unbundling depends largely on decisions and actions of third parties beyond Naftogaz control.

To finalize the TSO unbundling, Naftogaz needs to to receive the Stockholm arbitration decision on the amendments to the transit contract with Gazprom.

In addition, the Ministry of Energy and Coal Industry, which is to assume control over the TSO according to the restructuring plan approved with the Cabinet’s Resolution #496, must ensure the following steps are made:

– prepare the newly created entity – Mahistralni Gazoprovody Ukrainy (MGU) – for receiving on books and managing gas transmission assets, including the registration of a private placement notice with the National Securities and Stock Market Commission and obtaining the emission certification;

– facilitate the government’s approval of the list of assets needed for operations of the new TSO. The list was compiled by Ukrtransgaz and PwC Polska, and it includes all assets necessary for effective TSO operations. The list does not contain “toxic assets”, which are non-core, loss making, located in the occupied territories or are involved in disputes worth billions of hryvnias. Naftogaz provided the Cabinet of Ministers of Ukraine and the Ministry of Energy and Coal industry with the said list and the substantiation of the assets that are advisable to transfer at the first stage of the unbundling;

– adopt the acts regarding the transfer of enterprises controlled by the Energy Ministry and involved in production (generation) and/or supply of energy to other entities eligible to manage the state-owned property with the view to meet the TSO unbundling and independence requirements as stipulated in paragraph 2 of part 3 of article 23 of the Law of Ukraine “On the natural gas market” and the EU Third Energy package;

– adopt the amendments to the relevant laws that regulate the procedure and concession conditions or some other form of property rights regarding the assets used for gas transmission and storage, as well as the specific requirements to independence of business entities involved in the transmission of natural gas or electricity.

Naftogaz stands ready to cooperate with both the government and the parliament to fulfill these objectives and is ready to provide all necessary assistance.