A gas trader co-owned by controversial former monopolist RosUkrEnergo has won the right to obtain 4.86 billion cubic meters of blue fuel from state-owned Naftogaz Ukraine, according to a court ruling earlier this year. The decision means some $2 billion of natural gas, according to Ukrainska Pravda calculations, must be surrendered to UkrGaz-Energo.
Grounds for the Kyiv Commercial Court ruling were that Naftogaz failed to provide documented proof that certain transactions took place in November 2007. Thus, and as a result of subsequent and parallel court actions, Naftogaz lost not only about 17 percent of the equivalent gas volume it imported this year, but also its 50 percent stake in the profitable gas trading company.
UkrGaz-Energo was founded by Naftogaz and Swiss-based RosUkrEnergo AG in February 2006 on a 50 percent parity basis. In turn, RosUkrEnergo has two owners, according to its website: Russian gas monopolist Gazprom and Centragas Holding AG, which is a part of Firtash’s vast business empire.
UkrGaz-Energo, Naftogaz and Firtash’s Group DF didn’t respond to Kyiv Post information requests. On the end of the gas supply spectrum, RosUkrEnergo was the monopoly middleman gas supplier to Ukraine from 2006 until the beginning of 2010. Neither the company, neither Russian nor Ukrainian leaders would disclose its end-owners until investigative journalists discovered that Gazprom and Firtash controlled 95 percent of the company.
The most successful period in UkrGaz-Energo’s activity lasted from April 2006 until April 2008, when the company was a monopoly gas importer and supplier of gas to industrial enterprises. As a result, it got Hr 865.6 million in 2006 and Hr 940.8 million in 2007, according to Ukrainian News agency.
The company lost its lucrative position after Yulia Tymoshenko became prime minister in 2008. In 2008-2009 Tymoshenko’s government repeatedly tried to compel UkrGaz-Energo to pay Naftogaz dividends for its business activity in 2006-2008 but failed. In October 2008, in legal action started by the government, the Kyiv Commercial Court decided to liquidate the public-private joint venture. According to an appellate court ruling, the two founders – Naftogaz and RosUkrEnergo – had to take liquidation measures together. A liquidation commission, however, was never even formed.
Until 2011, UkrGaz-Energo kept a low public profile, but continued litigation in courts. In June 2011, an appeals court ruled to eliminate Naftogaz as the co-founder UkrGaz-Energo, according to Ukrainian News agency. Afterward, the company actively started to trade and in 2011-2012 sold almost 1.5 billion of cubic meters of gas.
In 2012 the company suddenly decided to sue Ukrtransgaz, the gas transit subsidiary of Naftogaz, demanding 4.86 billion of cubic meters of gas from the state-owned gas company. According to Ukrainska Pravda calculations, the current price of the demanded gas is about $2 billion. Surprisingly, the Kyiv Commercial Court took UkrGaz-Energo’s side and in April 2013 ordered Naftogaz to transfer 4.75 billion of cubic meters of gas to the plaintiff via Ukrtransgaz.
According to court documents, the main reason why Naftogaz lost in courts in 2012-2013 was that it couldn’t produce “acts of reception and transmission of gas in 2007.” However, these acts previously existed, an Oct. 25 Ukrainska Pravda article states, and can be found in past TV reports shown on TSN in February 2008.
The biggest part of the disputed gas – 3.96 billion of cubic meters – was pumped into state-owned gas storage facilities in 2007, and in November-December it was sold to consumers. The sale was made on the basis of a contract signed on Nov. 29, 2007. However, the court ordered Naftogaz to give the gas back to UkrGaz-Energo after finding that the contract wasn’t fulfilled and the state-owned company got the fuel without permission.
The non-supply of gas, the court determined, was because Naftogaz didn’t provide proof of “reception and transmission of gas in 2007.” The fact that Naftogaz paid for this gas in 2008 wasn’t taken into account by judges. Later Naftogaz published a statement that the company provided all the needed proof in their favor.
Surprisingly, in 2008 UkrGaz-Energo presented the same “acts of reception and transmission” to journalists, Ukrainska Pravda emphasizes. In February 2008 the company’s spokesperson, Vitaliy Kysil, persuaded media that Naftogaz paid Hr 2.4 billion for the gas bought within the mentioned contract and showed the missing documents to cameras. Back then, UkrGaz-Energo was demanding Hr 1.367 billion from Naftogaz. This amount is equal to about 1.5 billion of cubic meters of gas based gas prices from that time.
Tymoshenko’s government decided not to pay this amount because Naftogaz didn’t receive 50 percent share of profits from UkrGaz-Energo’s business activity for two years.
Moreover, the volume of gas was not the end of Naftogaz’s losses. As a result of another trial, in June 2013 a Kyiv court forced the state-owned gas enterprise to give its 50 percent of UkrGaz-Energo shares to the company. Two higher court rulings didn’t help: at the end of November, Naftogaz lost a third consecutive trial. Even before the end of the last trial, on Nov. 7 Naftogaz lost all its shares, according to the Stock Market Infrastructure Development Agency.
Naftogaz now is deprived of the right to claim half of any of Ukr UkrGaz-Energo’s profits.
Kyiv Post staff writer Kateryna Kapliuk can be reached at [email protected].
