Amendments introduced to Ukraine's unbundling plan

Ukraine

June 2019, the Ukrainian Cabinet of Ministers (CMU) approved amendments to the comprehensive plan for restructuring the national joint-stock company Naftogaz, which is expected to accelerate its unbundling and to ensure certification of the natural gas transmission system operator (TSO) by 1 January 2020 when this Amended Plan comes into force.

The CMU adopted the original unbundling plan in Resolution No. 496 on 1 July 2016. Law-Now publication on the topic can be red here.

The Amended Plan was created to ensure Ukraine’s compliance with both the EU's Directive 2009/73/EC concerning common rules for the internal market in natural gas, and the Gas Market Law of Ukraine (No.329-VIII, 9 April 2015). The Ownership Unbundling Model contained in the plan can be seen in the chart below.

(*Naftogaz will manage corporate rights of the state in the public JSC Main Gas Pipelines of Ukraine (MGU) until 1 January 2020. **GTS will be transferred to the MGU's balance sheet on 1 January 2020.)

Within ten days, Naftogaz is required to submit to the CMU details for the Amended Plan's implementation. The following is an overview of the further actions and measures for implementation of the Amended Plan's unbundling process:

 

The Government’s Measures and Actions

Deadline

1.

Submit for the CMU's consideration:

  • a draft act on transfer of management powers for the state's corporate rights in MGU to Naftogaz for a period ending 1 January 2020, and the unconditional return of such powers to the Ministry of Energy no later than 1 January 2020;
  • a draft act on introduction of amendments to the Charter of Naftogaz, which will be effective until 1 January 2020 and afterwards.

20 June 2019

2.

Submit for CMU's consideration, a draft act on transferring to MGU (GTS and GSF) the state property and fixed assets necessary for natural gas transmission and storage.

1 July 2019

 

3.

Ensure engagement of a gas transmission system operator (or a consortium of operators) that is a party to the Energy Community or the U.S. to the MGU's activities.

1 August 2019

 

4.

Resolve the issues related to Naftogaz credits and loans upheld by state guarantees to prevent default.

5.

Ensure that MGU applies for TSO certification and establishment of tariffs for natural gas transportation services.

6.

Ensure that MGU applies for a natural gas transportation license.

Within 5 days from the date of TSO certification

7.

Procure protection of Naftogaz’s position at the Arbitration Institute of the Stockholm Chamber of Commerce in its dispute with Gazprom over revision of tariffs for the transit of natural gas by Ukraine's GTS through the government's unbundling implementation model.

1 October 2019

8.

 

In consultation with the ECS, develop and submit to the CMU the legislative act ensuring that the government authority responsible for management of MGU is independent from public authorities and other entities when making decisions on MGU management.

In practice, such an act should provide the Ministry of Energy with independence from the CMU in all decisions concerning MGU's management.

1 November 2019

 

9.

Ensure the transfer of state property and fixed assets necessary for the transmission and storage of natural gas between Ukrtransgaz and MGU; and settle the issue of the transfer of Ukrtransgaz's private property to MGU.

1 January 2020

10.

In consultation with the ECS, develop a legislative act regulating transfer of state-owned enterprises and authorities controlling the state’s interests in business entities from the Ministry of Energy to other state bodies. This will ensure compliance with the Gas Market Law.

11.

In consultation with the ECS, conduct a complex analysis of Ukrainian gas storage facilities and develop a draft plan for their effective use.

1 May 2020

For more information on the Amended Plan and Ukraine's energy sector, contact one of the following local CMS experts: Maria Orlyk, Vitaliy Radchenko.

Legislation: Resolution of the Cabinet of Ministers of Ukraine No. 484 “On Amendments to the Resolution of the Cabinet of Ministers of Ukraine dated 1 July 2016 No. 496” dated 5 June 2019.