According to the company’s website press/media/news release on November 3, 2022, National Joint Stock Company “Naftogaz of Ukraine” published its consolidated financial statements for H1 2022, reviewed by independent international auditors. As specified in the statements, the Group’s operating and financial results, as well as general market volatility, were driven mainly by the all-out military invasion of Ukraine.
In the statements for H1 2022, separately financial results for Q2 show a profit for this period amounting to UAH 420M. However, total loss during the first half of the year amounted to UAH 57,159M, of which UAH 57,579M was from Q1.
The main factors contributing to Q1 losses were additional deductions for bad debt reserves associated with decreases in the solvency of the company’s counterparties, as a result of the beginning of the all-out war; and the negative difference between the purchase price of imported gas and its sales price in accordance with the public service obligations imposed on the company by the state, also caused by the beginning of the all-out war, and the compensation mechanism for these debts, which was not promulgated by the end of Q1.
Also a factor affecting the company’s Q1 loss was the destruction of company’s assets due to military shelling by the russian federation.
It is worth emphasising that starting from April, despite active military hostilities, the company managed to adapt to new circumstances for conducting its business and ensured profits of UAH 420M in Q2 2022. This was achieved, in particular, due to company cost reductions and the legislative regulation of compensation issues for the state-imposed public service obligations (PSO) on the company.
It should be noted that in accordance with the 2022 consolidated financial plans for Naftogaz, approved by the company’s Executive Board, results forecast annual profits of UAH 91.8B. One of the key factors here is the receipt of compensation for “the difference in tariffs” provided by law, by DHCs and gas distribution system operators. Naftogaz as well should be compensated for the public service obligations imposed by the government, as envisaged by law. Accordingly, such compensation should be paid from the state budget of Ukraine. In particular, this is caused by the difference between the price of imported gas and its sales price established by the state within the framework of the public service obligations (PSO) imposed on the company. Thus, the state shall compensate this difference so that the public service obligations imposed by the state do not cause losses to the company.
The H1 2022 consolidated financial statements is accompanied by a management report (hyperlink). There, Naftogaz management sums up the most relevant issues of the company’s performance from the beginning of the year to the approval of the company’s financial statements by the Executive Board on 02 November 2022. In particular, it summarises the preparations for 2022-2023 heating season; analyses of problematic issues such as default on the company’s Eurobonds; shows the positive financial effect of maintaining production at a relatively stable level against the backdrop of a significant reduction in production by private companies under conditions of war.
The company reminds that based on the 2021 performance results, Naftogaz made UAH 12B profit after UAH 19B of losses in 2020. In August, Naftogaz published its extended presentation to the Annual Report, which reveals all aspects of the company’s performance under the tenure of CEO Yuriy Vitrenko in 2021.
