Ukraine Seeks Chinese Funds to Cut Waste

State monopoly Naftogaz Ukrainy has submitted four investment proposals to Ukraine's Ministry of Economic Development and Trade, covering five projects to improve the country's balance of payments.

It has received a line of credit from the state-owned China Development Bank worth $3.65bn intended to reduce imported gas and boost gas production at home.

The largest investment Naftogaz wants to make is to modernize individual heating in private homes for low-income consumers which would cost about $1.7bn.

The list also includes $1.3bn to build two power plants, in Kiev and Lviv, aimed at reducing imports.

Another $400mn will be spent on drilling and auxiliary equipment to raise output by Naftogaz subsidiary, Ukrgazvydobuvannya.

The fifth project involves the installation of individual heating units in apartment buildings.

This credit agreement is the largest potential source of funding at Naftogaz’ disposal for boosting efficiency and cutting imports, and it is the most cost-effective way of achieving the same results, it said.

Ministerial approval will lead to a formal request to the Chinese bank, by a deadline of June 24 and, if funds are released, the first project must begin this year.

Kiev is also addressing the problem of the gas price for domestic consumers, which is too low to encourage any economy; and the problem of collecting debt from the utilities, who all buy gas from the state monopoly at low prices but do not pay and go on to accumulate large debts. This year Naftogaz Ukrainy expects to break even, after a deficit of $10bn in 2014 and $1.5bn this year.

William Powell