Request for Eurobond holders to delay coupon payments is due to govt's decision to accumulate 19 bcm of gas - Naftogaz of Ukraine CEO
MOSCOW. July 19 (Interfax) - Ukraine's state-owned energy firm NJSC Naftogaz of Ukraine had to ask the holders of its Eurobonds to delay coupon payments for two years due to the Ukrainian government's decision to accumulate 19 billion cubic meters (bcm) of natural gas ahead of the upcoming heating season and to find around $8 billion for these purposes, Naftogaz of Ukraine CEO Yuriy Vitrenko said.
"Given the actual decline in consumption volumes, it would be sufficient for us to have 15 bcm [of gas], which is even slightly more than enough, in our underground storage facilities before the start of the heating season. But the government has set the highest target of 19 bcm," the Ukrainian media quoted Vitrenko as saying during the national telethon.
If the target of 15 bcm had stayed, the company would have needed to import around 1 bcm of gas, and then a further amount during the fourth quarter of the 2022 and the first quarter of 2023 during the heating season, he said.
Meanwhile, the 19 bcm target set by the government makes Naftogaz of Ukraine almost independent of imports in the fourth and first quarters, and the company "may also provide a safety net to energy companies, which will be unable to ensure coal deliveries, or insure against other risks, which are likely to emerge," Vitrenko said.
The company understands the government's concerns and is working together with it to find necessary financing, which is currently estimated at approximately $8 billion, he said.
The amounts of gas currently held at Ukraine's underground gas storage facilities have already topped 11.4 bcm and are approaching 11.5 bcm, thus growing by at least 1 bcm every month, Vitrenko said. Naftogaz is importing gas in July and has already signed contracts on gas deliveries in August, he added.
Naftogaz of Ukraine has reached an agreement with the European Bank for Reconstruction and Development (EBRD) on a new 300-million-euro loan facility, and negotiations are also ongoing with the U.S. DFC and the U.S. Agency for International Development, Vitrenko said.
"We are not saying that we are entering a default [...] We ask you to meet us halfway and to voluntarily postpone these payments," Vitrenko said when commenting on the aforementioned address to Eurobond holders.
Though the Eurobonds mature and the coupon payments are due on July 19, there is a five-day grace period, during which the Eurobond holders are expected to make their decision on July 21 and to hold a meeting on July 26.
The Verkhovna Rada will soon pass government-proposed bills on raising funds to compensate for Naftogaz of Ukraine's gas import expenses and the difference between the price at which gas is imported and the price at which it is sold to households, Vitrenko said, adding that this difference stands at around 400 billion hryvni today, because the price of one cubic meter of gas on the domestic market is 7.4 hryvni, while it is imported at 60 hryvni per cubic meter.
As reported, Naftogaz of Ukraine asked the holders of roughly $1.5 billion of its Eurobonds to delay coupon payments for two years and to extend its notes worth $335 million maturing on July 19 for two years.
Three issues of Naftogaz Eurobonds are circulating on the market, all of them placed in 2019: in July - three-year bonds for $335 million at 7.375% and five-year bonds for 600 million euros at 7.125% (a fifth of the bonds in euros bought by the EBRD), and in November - seven-year bonds for 500 million euros with a yield of 7.625%. The $335-million issue matures on July 19, 2022.
Naftogaz proposes paying all coupons on 2022 and 2024 Eurobonds on July 19, 2024, and redeeming 2022 Eurobonds on the same day. Meanwhile, the company could like to pay coupons on its 2026 Eurobonds on November 8, 2024.