5. How the unbundling of the Gas TSO of Ukraine will be performed – last decision of the CMU

On September 18, 2019, the Cabinet of Ministers of Ukraine adopted Resolution No. 840 "On Unbundling of Natural Gas Transportation Activities and Provision of Operation of the Gas Transmission System Operator." This document has addressed several issues that have prevented effective completion of the unbundling. 


Deadlines. The CMU confirmed that the legal separation of the TSO should take place as scheduled on January 1, 2020.


ISO model (Independent System Operator) is chosen as the format of the future TSO operation. To ensure the independent operation of LLC Gas TSO of Ukraine, it will be transferred to the state-owned company PJSC Main gas pipelines of Ukraine (MGU). The recent reports to the Ministry of Finance of Ukraine. This will separate gas transportation activities and other Naftogaz Group businesses (including gas production and storage).


The selected ISO model is extended to the EU gas market and fully complies with European legislation. 


The transfer of ownership rights in favor of MGU will take place through the sale of 100% of the authorized capital of LLC Gas TSO of Ukraine" by installment payment up to 15 years.


Steps to be taken by the end of this year


By the State: to amend related Laws related to unbundling of natural gas transportation activities


On the Regulator's part: carry out certification of LLC Gas TSO of Ukraine with further confirmation by the Energy Community Secretariat, set tariffs for transportation services and approve the investment program


On the part of LLC Gas TSO of Ukraine: obtain all necessary certificates, permits, and licenses to ensure the TSO work. It is also definitive to form the internal basis of the future TSO - to complete the transfer of employees, to polish business processes, to create a separate IT environment, to carry out an inventory of assets needed for gas transportation, to renegotiate contracts with customers and so on.


The Naftogaz Group, the CMU, the NERK, and the Energy Community Secretariat have agreed on a step-by-step plan that allows for planned changes to be made within the set deadlines.


To date, the necessary preconditions have been created for the timely and successful completion of the process of underbidding and the independent operation of the Gas TSO of Ukraine from January 1, 2020.