Ukraine’s Naftogaz and GTS May Be Partially Privatized, but With State Maintaining Control

The Cabinet of Ministers of Ukraine has approved a list of strategic state-owned companies that will be available for privatization, provided that 50% + 1 share remain in state ownership.

The Prime Minister of Ukraine Oleksiy Honcharuk announced the relevant list. In order for this list to come into force, it must still be ratified by the Parliament.

The list of companies that the state is ready to sell includes:

• Naftogaz (national oil and gas company of Ukraine),
• Mahistralni Hazoprovody Ukrayiny (“Main Gas Pipelines of Ukraine”) (Ukraine’s GTS operator, which manages the gas transmission system is owned by this company),
• Ukrtransgaz (a company engaged in transmission and storage of natural gas in Ukraine. The company is 100% owned by Naftogaz),
• Ukrnafta (half of which is already owned by the state in the name of Naftogaz, the rest is owned by private investors, including oligarch Ihor Kolomoisky),
• Ukrtransnafta (a company that manages oil transportation operations through the Ukrainian pipeline network),
• Chornomornaftogaz (a subsidiary of Naftogaz, which was engaged in gas production from the Black Sea shelf near Crimea).

The list also includes Artem company, Kyiv “Radar” Plant, “Fiolent” Plant, “Mayak” (‘Lighthouse’), Research-and-Production Association “Kyiv Automatics Plant”, Feodosiya Shipbuilding Company “More” (‘Sea’), and Ukrainian Research Institute of Aviation Technology.

One of the ways of selling the state's shares in Naftogaz and other companies is through IPO, i.e. by entering the international stock markets. Such a procedure will attract international investors to the management of the company and make the companies themselves much more transparent. A similar procedure has already been agreed for the state rail transport company Ukrzaliznytsya.

READ MORE: Ukraine's PM Honcharuk Presents His Government Program

On October 2, 2019, the Ukrainian Parliament adopted a law abolishing the list of privatized enterprises prohibited for privatization. 250 MPs voted in favor of this decision. Subsequently, the government announced that they plan to develop a new list of companies “not up for privatization” within 3 months, i.e. by the end of January 2020.

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