Ministry of Finance welcomes adoption of law enabling Ukraine to use long-term loan facility provided by international financial organizations for gas purchase

1/29/16

The Ministry of Finance welcomes the adoption of the draft law No. 3388 by the Parliament on January 26. This law supplements the Law on the state budget for 2016 and paves the way for receiving funding from international financial organizations amounting up to USD 1b for the purchase of natural gas from European suppliers.

This step continues the comprehensive reform in the energy sector which Ukraine and our citizens have been waiting for since 20 years already. The reform is aimed to establish relations to new suppliers and diversify gas supplies, establish transparency and responsibility in the activities of the National Joint-Stock Company «Naftogaz Ukraine», overcome the monopoly of Gazprom and, most important, to foster the energy security of our country.

Last year, the President approved a few revolutionary changes in the Ukrainian gas market in line with the Third Energy Package of the EU. Those changes had been elaborated in the preparation to receive the Second development policy tranche from the World Bank. These changes are already underway, they have opened up our market for free competition; this shall contribute to further gas price reductions as well as to better service quality for gas consumers.

In last six months we have managed to agree long-term revolving loan facilities for Naftogaz with our international partners (including the World Bank, EBRD, IFC). Their total volume is USD 1b. This will enable us to implement new long-term funding mechanisms for the purchase of gas. We have already signed a loan agreement with the EBRD for USD 300m with a duration of three years and started to use these funds. Thanks to these latest changes we also can sign a five-year loan warranty agreement with the World Bank for USD 500m and another one with the IFC for USD 200m. These agreements mean a new standard of transparency and reporting procedures related to the conclusion and execution of purchase contracts as well as a new level of financial responsibility.

«Thanks to our cooperation with international partners, Ukraine is for the first time in its independent history prepared financially for the next heating season. We are grateful to our partners from the EU, USA and to other international partners for their support to Ukraine including revolving loan facilities", Minister of Finance Natalie Jaresko said.

The above changes shall enable Naftogaz to secure smooth supply in heating periods, to diversify the purchase of natural gas and to fill gas storage facilities at the most favorable prices.

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