Ukrainian Finance Ministry expects Ukrenergo national grid operator to start showing profits in 2024-2028

MOSCOW. Oct 30 (Interfax) - The Ukrainian Finance Ministry expects the Ukrenergo national power grid operator to begin making profits in 2024-2028, with paying on average UAH 6 billion annually in taxes and dividends to the state budget over this period, Ukrainian media said citing the ministry's forecast in its annual report on fiscal risks based on data from state-run companies as part of the 2025 state budget adoption procedure.

The document models three possible development scenarios for each of the eight largest state-owned companies based on macroeconomic scenarios drawn up by the Economy Ministry. In particular, the Economy Ministry's positive scenario envisaged the conclusion of the crisis during 2024, the baseline scenario by the end of 2024, and the negative scenario by the end of 2025. Each state-owned company provided input data on specific variables for each scenario.

"The baseline scenario implies that, in the medium term, Ukrenergo will make on average UAH 15.7 billion in profits a year. In the negative scenario, the profit is anticipated to be around UAH 13.9 billion a year because of higher costs and worse market conditions. In the positive scenario [...] the average profits are expected to amount to UAH 14.4 billion a year," the report says.

Hence, taxes and dividends the company is expected to pay to the state budget should amount to around UAH 6 billion annually over the entire period, according to all the three scenarios.

Ukrenergo made its operations more profitable in 2023 through adjusting its electricity transmission rates, the Finance Ministry said. The company recorded a moderate increase in revenues to UAH 83 billion in 2023 from UAH 82.3 billion in 2022, despite the difficult economic environment and disruptions in its operations.

The company's operating profits grew to UAH 10.2 billion in 2023 from a loss of UAH 15.3 billion in 2022, and its net profit also grew to UAH 376.6 million in 2023 from a net loss of UAH 6.1 billion in 2022.

Hence, Ukrenergo improved its solvency, financial stability, and ability to manage its long-term obligations in 2023, it said.

"Ukrenergo's liquidity also showed positive changes in 2023. The current liquidity ratio increased to 0.95 and approached the control value of 1, which indicates that the company is able to meet almost all of its short-term obligations at the expense of its current assets," it said.

At the same time, the number of days of accounts receivable turnover increased to 208.7, and that of days of accounts payable turnover to 284.9, indicating that the company is facing problems in managing its accounts receivable and accounts payable, which may put a strain on its cash flows, it said.

Ukrenergo has attracted funding from international financial institutions to finance both capital investments and operating expenses, the Finance Ministry said. The company was able to service these loans on schedule but had international green bonds restructured to defer principal and interest payments. The company also secured the restructuring of domestic loans from state-owned banks to match its available cash flows.

In line with the baseline and negative scenarios set out in the Finance Ministry's report, Ukrenergo will be raising its rates for transmitting electricity via its grid by 7% to 12% a year, and the amount of electricity transmission should increase by 6% a year on average.