7. MGU - the role of the company in the process of unbundling of the GTS operator

MGU established at the end of 2016 after active preparation for the separation of the GTS Operator.

 

This company is an essential part of the mechanism that ensures the independence of the future Operator. After all, it will guide his work.

 

MSU's efficiency and independence from the Naftogaz Group are ensured by two key factors.

 

The first is the creation of a strong corporate governance system based on the MGU holding structure, led by an independent Supervisory Board.

 

The second is the direct subordination of MGU to the Ministry of Finance of Ukraine, which ensures the avoidance of conflict of interest with the Naftogaz Group, subordinated to the CMU, at the level of state authorities.

 

MGU is involved in the crucial decision-making process of unbundling. In particular, after the MGU Supervisory Board was formed and started operating, a Memorandum of Understanding on the separation of the GTS operator was signed between it and the Supervisory Board of Naftogaz of Ukraine on July 24, 2018. Within a few months, the parties presented a joint Roadmap. This document is still fundamental today to identify key steps of unbundling process.

 

It is planned that from January 1, 2020, Gas TSO of Ukraine will be legally separated from the Naftogaz Group. The ownership of this company will be transferred from Ukrtransgaz to MGU. This guarantees the independence of the further work of the Operator.

 

MGU will be responsible for making critical decisions in the natural gas transportation activities previously held by the Naftogaz Group as a shareholder of Ukrtransgaz. Besides, MGU will assist the newly established Operator in resolving issues that require the involvement of state authorities, as well as the managing body of MGU - Ministry of Finance.

 

MGU will coordinate between the State Property Management body represented by the Ministry of Finance and the independent GTS Operator. This guarantees effective control by the state and, at the same time, non-interference in the economic activities of the Operator. Also, MGU's function in this corporate relationship structure is to retain the results of the Stockholm arbitration in the dispute between Gazprom and the Naftogaz Group.

 

One of the essential factors of interaction between the Ministry of Finance, MGU, and the GTS Operator is that the state retains 100% control over both the MGU and the newly created Operator. At the same time, it fulfills the requirements of the Third Energy Package regarding the separation of the transportation function from the supply and storage of natural gas. Meeting the requirements of the Third Energy Package is one of the prerequisites for integration into the European gas market and successful negotiations with Gazprom to continue transit through the territory of Ukraine.