Ukraine`s largest oil producer, Ukrnafta, has sent a new financial recovery plan to the State Fiscal Service of Ukraine (SFS) for approval, according to which it will service current tax liabilities while payments for overdue tax debts estimated at over UAH 13 billion, or about US$493 million, will be subject to three-year restructuring, according to the company`s press service.
”Chairman of the Board of PJSC Ukrnafta Mark Rollins as authorized by the Supervisory Board sent to the State Fiscal Service of Ukraine new proposals for financial recovery of the company through rehabilitation procedure,” the press service said, adding that this plan provides for the repayment the company`s tax debt using solely revenues from operations.
Under the proposed plan, the tax debt in terms of tax liabilities (of all state taxes and fees) will be rescheduled and subject to repayment within the next three years from the effective date of court approval of rehabilitation procedure. At the same time, the company will be paying both tax liabilities included in the rehabilitation plan and current liabilities while implementing the plan.
”According to the schedule of tax debt repayment, half of the debt will be paid off by the end of 2018, while the remainder will be paid off within the following two years,” the press service said.
The company is also seeking the writing-off of the sum of fines and penalties for the tax debt, given the long existence of state holding Naftogaz of Ukraine`s debt problem before Ukrnafta 2 billion cubic meters (bcm) of gas produced in 2006.
”A necessary condition for the fulfillment of this plan [financial rehabilitation] is that all of the existing production licenses will be extended by the State Service of Geology and Mineral Resources in accordance with the law,” the report said.
Ukrnafta is looking to confirm with the SFS the possibility of approval of these proposals, since the tax authority holds over 50% of the company`s accounts payable and the rehabilitation procedure cannot be implemented without its consent, the press service said.
”The [issue] of restructuring of PJSC Ukrnafta`s tax debt cannot be solved without active cooperation with the State Fiscal Service. Delays in finding constructive solutions will only aggravate the already difficult financial situation of the company,” Rollins said.
Earlier, in the spring of 2015, Naftogaz published its financial report for 2012-2013, admitting that it had used at its discretion 10 billion bcm of gas belonging to Ukrnafta.
Because of Naftogaz`s refusal to repay the debt to Ukrnafta for this gas and the broken auctions for the sale of oil, Ukrnafta was incurred a debt to the state on paying taxes. According to the company`s report for 2016, the tax debt was estimated at UAH 13.2 billion, as of the end of last year.
In July 2015, Ukrnafta shareholders elected British citizen Mark Rollins as chairman of the board, who repeatedly stressed that the company would be able to repay debts on taxes, provided that Naftogaz started paying off its debts to the company.
In May 2014, the decision of the Economic Court of Kyiv of January 20, 2011 came into force, according to which Ukrtransgaz, which is the operator of Ukraine`s gas transport system, and Naftogaz were obliged not meddle in the right of ownership of 2 bcm of gas, and also to pump this gas from underground storage facilities and transfer it to Ukrnafta. Therefore, the State Executive Service seized 2 bcm of gas in June 2016.
In late January 2017, the Supreme Administrative Court of Ukraine confirmed the validity of the decision by the Kyiv District Administrative Court, which obliged the State Fiscal Service to accept 2 bcm of gas. In early March, the company reported that the SFS did not fulfill this court ruling and continued charging penalties without any grounds.
In the first quarter of 2017, the company paid UAH 2.7 billion, or $102 million, in tax payments, which was UAH 966 million, or $36.6 million, up year-over-year. At present, Ukrnafta fulfills its tax obligations in full.
Memo. Ukrnafta is the largest state-owned oil and gas company in Ukraine. It accounts for about 68% of oil and condensate production, and 11% of gas extraction in the country. Ukrnafta is one of the key players in the retail market for petroleum products in Ukraine: the company owns more than 560 fuel filling stations throughout the country.
Ukrnafta`s shares are listed on the Ukrainian Exchange (UX) and the PFTS Stock Exchange (Kyiv). Depositary receipts for company`s shares are traded on the Frankfurt Stock Exchange.