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    Ukraine's gas company 'cooked the books': CEO


The Q1 results hid some nasty secrets in order to flatter the then-CEO's performance, claims his successor.

by: William Powell

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Ukraine's gas company 'cooked the books': CEO

Ukraine's national gas company Naftogaz may have to revise its financial results to the extent of turning its Q1 2021 profit into a loss following some major flaws in the accounting, CEO Yuri Vitrenko told RBK-Ukraina in an interview.

In a statement on the company website July 27, he said the problems were unearthed during the preparation of the Q2 2021 financial statement. Vitrenko took over as CEO at the end of April following the surprise dismissal of Andriy Kobolev, after he reported a loss for 2020. Vitrenko, formerly part of Kobolev's management team, took over the position having been acting energy minister, which rang alarm bells in the West.

The problems Vitrenko identified would have resulted in a loss for the state of 105mn hryvnias ($3.9mn), he claimed. Naftogaz reported early May an unaudited Q1 profit of 12.6bn hryvnias and he questioned the accuracy of this figure at the time.

The first flaw was the poor finances of the district heating companies which had given no firm undertaking of their ability to pay for the gas they had used when the Q1 results were being compiled, Vitrenko said. The second is the money Naftogaz owes Ukrnafta for gas deliveries. It was to be expected when the accounts were being compiled that Ukrnafta would have requested settlement for these, Vitrenko said, and there are grounds for using today's very high prices to calculate Naftogaz' liabilities.

The CEO said that the results should have been checked by an audit. Otherwise losses can become profits as the management wants to show a good result and hence receive a bonus, and tomorrow can take care of the losses, he said.

He also blamed low gas production under his predecessor for having to spend $2bn this summer on gas imports. However, he said in another interview earlier in July that the state was receiving more in transit revenue than it was spending on gas.

Naftogaz' supervisory board however had nothing but praise for Kobolev and they quit en masse in April, saying that sacking him directly went against Ukrainian law. Some members have since reached an agreement with the government and are back in their posts.