President Viktor Yushchenko asked Ukraine`s government on Thursday to return to state energy firm Naftogaz its role of supplying industrial businesses, with the aim of improving the company`s ailing financial situation, according to Reuters.
The government has said that Naftogaz is teetering on the brink of bankruptcy. It has failed to pass on to ordinary consumers steep gas price rises from Russia since 2006 and lost the right to supply industry.
Also on Thursday, Yushchenko`s office said Naftogaz has paid off 500 million hryvnias (about $100 million) of its gas import debts, which Russia`s Gazprom says amount to $1.5 billion.
Naftogaz had paid the money to Ukrgazenergo, one of the intermediaries that gets the gas from Gazprom via another intermediary called RosUkrEnergo.
The company is in technical default on its $500 million Eurobond after failing to give bondholders audited accounts for 2006 on time. A meeting is expected this month to decide whether to extend the deadline.
Yushchenko issued a decree that called on the government to "give Naftogaz the right, taking into account signed agreements on gas supplies now and in future, to be the main authorised body controlling gas used to meet the needs of end users, including industry."
Much of Naftogaz`s trouble began in 2006, after a row between Ukraine and Russia`s Gazprom (GAZP.MM: Quote, Profile, Research) over gas import prices which led to a brief supply cut that affected Europe.
The row was settled with a deal that almost doubled gas import prices to $95 per 1,000 cubic metres and created the two gas import intermediaries, RosUkrEnergo and Ukrgazenergo, which currently supplies industry.
After the latest dispute with Moscow over debt arrears, the two countries agreed on Tuesday that Gazprom and Naftogaz should create a 50-50 joint venture to replace the two intermediaries.
Energy Minister Yuri Prodan said on Thursday that Naftogaz and Gazprom officials were now discussing how and exactly when the Ukrainian energy firm would repay in full the debt, accumulated between November last year and January.
Yushchenko`s decree also ordered the government to allow Naftogaz to find a refinancing deal for its debts and to guarantee the company some compensation for the money lost from paying steep gas prices yet supplying at fixed prices.
The decree asked that Naftogaz receive some of the profit made by Ukrgazenergo and oil company Ukrnafta from their distribution activity.
