The European Bank may provide $150 million for Ukrainian gas-transport system overhaul

The European Bank for Reconstruction and Development (EBRD) may next year extend some $150 million in financing for the first phase of the modernization of Ukraine's gas transport system, but is waiting to see the country take specific steps toward the restructuring and financial rejuvenation of national oil and gas company Naftogaz Ukrainy, the bank's country chief for Ukraine, Andre Kuusvek, has told Interfax-Ukraine. The bank thinks that the entire project will cost around $310 million, of which the EBRD is willing to consider 50% and the European Investment Bank the other 50%, Kuusvek said. The EBRD, he said, wants to see concrete steps taken towards the restructuring of Naftogaz Ukrainy. Tariffs are also an issue, but the bank is not pushing for increases - it wants to see Naftogaz's deficit erased with or without the bank's assistance, he said. There is a problem, and it needs to be solved, he said.

The EBRD understands that it will not be easy for Ukraine to do this job, as a year remains until parliamentary elections. But some targeted steps that would really help the bank and the government understand the situation at Naftogaz, where the money is going, and which subsidiary is losing the most, are necessary, Kuusvek said. Clarification and an audit are needed, he said.

The EBRD does want to have a hand in this project, and the reason it has been moving so slowly in recent years is partially that there have been such major political changes and upheaval in the country, Kuusvek said.

In preparations for the project, Mott MacDonald has already researched possibilities, he said.

There will be another series of meetings with representatives of the Energy and Coal Industry Ministry and Naftogaz Ukrainy before this month is out, he said. The EBRD would like to secure agreement on concrete steps already expected from Ukraine, he said.

If the project moves to the implementation stage, the credit will be issued under governmental guarantee, and the recipient with be that company that numbers the gas-transport system among its assets, Kuusvek said.

The EBRD's offices in Ukraine told Interfax that Mott MacDonald will present the results of its research in Kyiv on September 29 at a conference devoted to the modernization of Ukraine's gas-transport system. European Commission Energy Commissioner Gunther Oettinger will be involved in the conference.