April 30, 2021 – Pursuant to Article 14 of the Law of Ukraine “On Accounting and Financial Reporting in Ukraine”, Gas TSO of Ukraine as a subject of natural monopolies in the national gas market publishes annual financial statements together with the auditor’s report on its website.
Key financial indicators of GTSOU for the period, UAH billion:
- Net income – 20.4
- Revenues from international market operations – 47.5
- Revenues from domestic market operation- 10.1
- Operating expenses – 34.6
- Taxes paid according to the results of the year – 14.9
- EBITDA – 29.7
The specifics of the financial activities of Gas TSO of Ukraine is its focus on international markets. In 2020, 83% of the Company’s income from its core business activities had been derived from international operations, while 17% had fallen to the domestic market segment. At present, the company hardly earns from the domestic consumer: the cost of transportation in the final gas price is only 23 kopiyky / cu.m. (excluding VAT) or about 3%.
A positive innovation in 2020, which added UAH 0.7 billion to the Company’s financial result, was the introduction of a new short-haul service, which allowed customers to order the gas transportation between European countries through the territory of Ukraine with the possibility of storing natural gas in Ukrainian storages at a discounted price. This became possible due to the swift and successful negotiations of the Operator with the Gas TSOs of neighboring countries on the implementation of European rules at the borders.
The Company’s operating expenses in 2020 amounted to UAH 34.6 billion, of which almost one third was the purchase of natural gas for production and technical needs and balancing. Unfortunately, Gas TSO is still forced to spend significant funds on balancing, although under the European rules this is the responsibility transportation service customers themselves, and the Operator only performs the final balancing. Other expenses include repair and maintenance costs according to the GTS Development Plan approved by the NKREKP, administrative expenses, personnel expenses and related social charges, security for legal actions and other guarantees (including 1.7 billion debts for negative imbalances created by market participants in 2020).
“The independent auditors gave a positive opinion on the financial results and balance sheet of GTSOU,” commented Yuriy Kulyk, Financial Director. “High financial performance in 2020 is, among other things, the result of the transformation that is currently taking place in the Company. Thus, in the financial area we have focused on ensuring the transparency of activities in compliance with international standards, sustainable solvency and increasing liquidity. And we succeeded. Nevertheless, I have to state that the challenge of high receivables for balancing services for liquidity management remains relevant in 2021: in the first quarter the receivables of regional gas companies reached almost half of the Company’s annual income”.
Thus, in 2020 due to entering into inter-operator agreements with neighboring countries, the implementation of reverse flow on the Polish, Slovak and Hungarian routes, the creation of virtual interconnection points with Poland and Hungary, capacity allocation through the auctions and introduction of the new services for customers, the volume of orders for natural gas transportation from European countries increased by an average of almost 28%.
According to the results of 2020, Gas TSO of Ukraine transferred UAH 14.9 billion in taxes to the State Budget. This earned the Company the eighth place in the ranking of the largest taxpayers in Ukraine.
“Last year, we focused on two key areas – the development of international cooperation and increasing the transparency and efficiency of operations. The obtained financial result confirmed the effectiveness of the strategy chosen for the development and use of the Ukrainian GTS,” said Sergiy Makogon, CEO of the Company. “In 2021, according to the approved GTS Modernization Plan, it is expected that the volume of investment into the modernization of the gas transportation system – capital construction, repairs, diagnostics – will increase to more than UAH 10 billion, which will become a record for the last 10 years. The key goal is to optimize and modernize the GTS in order to provide a cost-effective tariff to Ukrainian consumers and Company’s customers after the termination of the current contract with Gazprom in late 2024. As well as to increase the competitiveness of the Ukrainian GTS and, consequently, financial reliability and stability of the economic contribution to the state budget.”
It should be recalled that 2020 was the first year of business activities for Gas TSO of Ukraine and the launch point of the Company’s sustainable transformation with a focus on efficiency. Last year, the company implemented a number of strategic initiatives aimed at optimizing, increasing the efficiency and transparency of all functions. Thus, according to the results of the year, GTSOU was recognized as a leader in procurement efficiency on the Prozorro trading platform and entered the list of the best employers according to Forbes.Ukraine in cooperation with Work.ua portal, taking the second place among the energy companies and among public sector enterprises. The transformation within the framework of the Company’s Development Strategy will be continued in 2021.
As of the date of publication, the financial statements have not yet been approved by the General Meeting of the Company.