13:58 15.12.2014

Ukraine, EBRD sign agreement on EUR 150 mln loan to modernize Ukrainian GTS

3 min read
Ukraine, EBRD sign agreement on EUR 150 mln loan to modernize Ukrainian GTS

Foreign Minister of Ukraine Pavlo Klimkin and Managing Director for Energy and Natural Resources of the European Bank for Reconstruction and Development (EBRD) Riccardo Puliti have signed a credit agreement worth EUR 150 million, the funds from which will be sent to modernize the Urengoi-Pomary-Uzhgorod gas pipeline, the press service of public joint-stock company Ukrtransgaz reported on Monday.

Ukrtransgaz Head Ihor Prokopiv took part in the ratification of the financial agreement. Puliti and Prokopiv signed the project agreement between the EBRD and the company.

"This is not only a project on the modernization of the gas transport system, but an ability to help establishing the full transparency of the Ukrainian energy sector as a whole," reads the report citing Puliti.

"The implementation of the project will allow not only increasing reliabilities and energy efficiency of the gas transport system, but it will also strengthen Ukraine's sovereignty," Prokopiv said.

According to a report of the EBRD, Puliti stressed that Ukraine, with the largest gas storage capacity in Europe and a key transit system, could potentially become an important European energy centre.

"Transparency and openness are the basic conditions for Ukraine to re-establish itself as a major European energy hub," he added.

In turn, Klimkin said by financing of the modernization of the Ukrainian gas transport system, EBRD invests in strengthening energy security of the entire region.

EBRD said that as part of the project, Ukraine’s government has committed to reforms in the gas market that will help move the sector towards best practice with respect to market-based principles and liberalization. The EBRD’s financing is offered on the conditions of further improvements in transparency and corporate governance within both national joint-stock company Naftogaz Ukrainy and Uktransgaz.

As reported, Ukraine and the European Investment Bank (EIB) earlier signed a EUR150 million loan agreement to finance the modernization of the Urengoy-Pomary-Uzhgorod trunk gas pipeline. The agreement was signed by Ukrainian Prime Minister Arseniy Yatseniuk on behalf of Ukraine and by EIB President Werner Hoyer on behalf of the EU on December 1, 2014 in Kyiv.

Ukraine's Cabinet of Ministers on October 22, 2014, issued resolution No. 1143-r to borrow up to EUR 150 million from the EIB and up to $200 million from the European Bank for Reconstruction and Development to upgrade the Urengoi-Pomary-Uzhgorod gas pipeline. In keeping with the resolution, the funds will be transferred to state-run Ukrtransgaz as a subloan at 2% per annum to implement the pipeline modernization project.

Ukrtransgaz, which is 100% owned by Naftogaz Ukrainy, operates a system of trunk pipelines and 12 underground storage facilities in Ukraine. The capacity of Ukraine's gas transport system is 288 bcm at the entrance and 178.5 bcm at the exit, of which 142.5 bcm goes to European countries and 3.5 bcm goes to Moldova.

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