Odesa Port-Side Plant will borrow UAH 600 million to buy gas / Photo from yuzhny.in.ua
Ukraine's Cabinet of Ministers on February 24 approved an instruction issued by State Property Fund of Ukraine (SPF) to allow state-run Odesa Port-Side Plant (OPP), which is now being prepared for privatization, to borrow UAH 600 million from Ukrgasbank to buy gas and stay afloat.
The funds are aimed to replenish the plant's working capital and will be spent on natural gas purchases, as the plant has been sustaining losses amid a decline in prices of its products on the global markets, SPF head Ihor Bilous said.
"Due to the collapse of the commodity markets, prices of ammonia have fallen by 15%. Prices of carbamide have also seen a decline by about 14-15%. Early in 2016, prices plunged by another 25%. In fact, the prices are now lower than production costs. Half of the [plant's] equipment has been disabled to reduce the company's losses," Bilous said.
Thus, in January the OPP posted a loss of UAH 53 million, with the February loss being expected at UAH 57 million. The SPF chief said the loan would allow the company to avoid a halt in production and bring it to profitable operation when demand for the company’s products is high, i.e. in late spring.
According to Bilous, expenses on gas purchases account for about 90% of the production costs. The plant now consumes about 65 million cubic meters of gas per month, against 120 million cubic meters when it works at full capacity.
The credit line will be available as of November 15, 2016, the funds will be lent at an interest rate of 22% per annum in the local currency and 12% in U.S. dollars, he said.
Prime Minister of Ukraine Arseniy Yatsenyuk ordered the SPF chief to ensure transparent gas purchases with the use of the loan.
Yatsenyuk also asked Bilous to inform the Cabinet about gas suppliers.
"Twenty million cubic meters of gas is being bought on the [Ukrainian-based] Universal Commodity Exchange on January and February each. The price is lower than that of NJSC [Naftogaz Ukrainy]. Another 45 million cubic meters of gas will be bought from local suppliers. As of today, 45 million cubic meters is provided by SK Pivnich company," Bilous said.
He also informed he held talks on February 23 with French company Gaz de France, which offered to supply about 30 million cubic meters of gas at a price of $190 per 1,000 cubic meters at the border of Ukraine at the first stage.
Naftogaz CEO Andriy Kobolev responded to Bilous' report, saying that NJSC can offer the Odesa plant even a lower price of gas. According to Kobolev, Naftogaz did not receive gas price requests from the plant.
"They haven't contacted us. Our price could be lower," Kobolev said.
As UNIAN reported earlier, the Odesa Port-Side Plant is one of the most controversial state-owned enterprises in Ukraine. The media has often discovered and reported the company's fraudulent activity, which leads to the depletion of the company's assets, especially when it comes to purchases of natural gas.
A number of experts have repeatedly pointed out that the company's privatization has been postponed many times in view of the fact that large amounts of funds have been siphoned from the company.
The SPF plans to launch the plant's privatization on June 30, 2016. Earlier in his interview with UNIAN Bilous stated that the company's privatization could not be postponed any more, since the situation on the ammonia and carbamide markets was not expected to improve, while the company was running out of its capacity margin.
UNIAN's memo. Odesa Port-Side Plant, which is located in the town of Yuzhny in Odesa region, is Ukraine's second largest ammonia and carbamide producer, and the third largest producer of nitrogen fertilizers. The company also handles shipments of chemical products arriving from CIS countries, as well as exports. The company holds a monopoly position in the national market of specialized services for acceptance, cooling and transshipment of ammonia.