The Cabinet of Ministers entitles Minister of Finance O. Danyliuk to sign loan warrants from the World Bank for the purchase of gas

11/2/16

Today, the Cabinet of Minister of Ukraine has entitled Minister of Finance O. Danyliuk to sign the Agreement on a loan warrant for the purchase of gas between Ukraine and the International Bank for Reconstruction and Development (IBRD is an affiliated structure of the World Bank). The Government has also approved the members of the delegation for negotiations with the IBRD chaired by Deputy Minister of Finance Yuri Butsa.

What is this about?

The IBRD executive board decided on October 18, 2016, to provide a loan warrant amounting 500 million USD to Ukraine for the purchase of gas by the JSC “Naftogaz”. Funding will be provided according to a loan agreement between “Naftogaz”, Citybank and Deutsche Bank.
Thanks to the active cooperation of the Ministry of Finance and “Naftogaz”, funding will be provided at favorable terms for “Naftogaz”. The loan warrant provided by the IBRD lowers risks for creditors and enables them to provide funding at a lower interest rate.


What is in it for Ukraine?

The loan taken with the IBRD loan warrant will let Ukraine purchase enough gas for the winter season 2016-2017 and ensure stable heating services for the citizens.
Why is it important?
The loan warrant from the World Bank was agreed as a part of the consistent energy supply reform in Ukraine which helped reduce the deficit of the JSC «Naftogaz” from more than 10 billion USD to zero and make it profitable.
Last year, the EBRD provided a loan equal to 300 million EUR to “Naftogaz” for the purchase of gas on the European market. This step not only ensured stable heating services in the winter season but also speeded up the diversification of energy supply to Ukraine and had a positive impact on the energy independence and security of Ukraine.

For information:

The IBRD loan warrant is provided at the following terms:
• Amount of the loan warrant – up to 0.5 billion USD;
• Loan warrant fee – 0.5% of the loan warrant p.a. (to be paid in advance every half a year);
• Booking fee – 0.25% of the loan warrant p.a. (to be paid for the period between the signing of the Cooperation Agreements and the entry into force if the loan warrant);
• One-time fee – 0.25% of the loan warrant;
• Provision fee – 0.15% of the loan warrant;
• Issue fee – 0.10% of the loan warrant.
All above fees shall be paid by the JSC “Naftogaz”.

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