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Government – Supervisory Board – Naftogaz: cooperating effectively for a common goal

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CLARE SPOTTISWOODE
Сhair of Supervisory Board, Naftogaz

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Government – Supervisory Board – Naftogaz: cooperating effectively for a common goal

  1. 1. Government – Supervisory Board – Naftogaz: cooperating effectively for a common goal 23 February 2018, Kyiv CLARE SPOTTISWOODE Сhair of Supervisory Board, Naftogaz
  2. 2. Ukrainian gas market outlook 2 Where we are Where we go Significant gas imports Monopoly in retail Losses from corruption Gas transit after 2019? Inefficient consumption Self-sufficient in gas Effective competition in retail Encouraging renewable energy Reliable European TSO Incentives to be energy efficient Reform
  3. 3. Objectives of Supervisory Board set by the Government: changing the industry for better future 3
  4. 4. 4 British unbundling case Stage 1: • 100% owned by the government • 100% monopoly
  5. 5. Regulatory regime for upstream to flourish? 5 3rd largest gas reserves in Europe are in Ukraine 36% of Ukraine’s gas demand is still covered by imports (European standards) • Incentivize investment and reward success • Tax away excess profits • Make sure no one sits on licenses without drilling Simple and transparent “one-stop” licensing Sell at market price Fair taxation regime Non- discriminatory access to pipelines and data Protection of property rights
  6. 6. 6 British unbundling case Stage 2: Privatization • 100% sold to shareholders • 100% monopoly overseen by independent regulator Independent Regulator
  7. 7. 7 Independent Regulator British unbundling case: separating pipes from molecules Stage 3: Competition • 100% regulated natural monopoly pipelines • licensed suppliers competing for retail and wholesale customers
  8. 8. Why did we unbundle in the UK? • To introduce effective competition – Lower prices – Higher quality of service – Innovation in services • To remove incentives to misbehave
  9. 9. Roles of players in British gas market after the unbundling 9 Government Companies Independent regulator Sets policy for all companies Do their job Does what is right for the market • Taxation and PSO regime • Policy for energy security • Broad license parameters • Compete for customers • Be efficient • Enable fair returns • Encourage efficiency • Ensure appropriate investment
  10. 10. Roles of players in British companies after the reform 10 Shareholder Supervisory board Management • Decides to keep or sell • Holds management accountable • Receives dividends • Works together with management on: - Creating strategy - Creating budgets • Implements the strategy • Appoints professional supervisory board • Hires and fires management • Works together with supervisory board on: - Creating strategy - Creating budgets Type of shareholder (state or private) is irrelevant Government creates policy
  11. 11. Corporate governance reform: how to empower the supervisory board 11 OECD principles-based corporate governance in state-owned enterprises prevents corruption NABU, SAP and Anti- Corruption Court investigate and prosecute corruption
  12. 12. What needs to be done in Ukraine for successful unbundling? 12 50%of Russian gas transits to EU via Ukraine 1 Gazprom is the only client that uses UA system for transit Introduce more potential users of the system Ensure competitive transit fees and system’s reliability Build efficient TSO with top-notch corporate governance system Engage a reputable partner Ensure independence and quality of regulator

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