Report Diagnostic Analysis 310715 Eng

UK-UA: Reform Assistance
Advisory
Diagnostic analysis of
receivables
National Joint-Stock Company
Naftogaz of Ukraine
31 July 2015
Important notice
This document has been prepared for National Joint-Stock Company Naftogaz of Ukraine (the Company or Naftogaz) within the technical
assistance provided by the UK Government under the UK-UA: Reform Assistance programme. The objective of this document is to assist Naftogaz
with the analysis of its receivables due from the sale of gas as set out in the Memorandum signed by the Ukrainian Government and the
International Monetary Fund (the IMF) on 27 February 2015.
The work has been carried out in accordance with the Terms of Reference dated 9 June 2015, agreed between Naftogaz and the IMF. Given this
work is strongly supported by the IMF and is a key part of their jointly agreed programme with the Government of Ukraine, the IMF can be
conceived of as a secondary beneficiary of this document.
Stephen Oldfield
T: +48227467266
M: +48519507266
stephen.oldfield@pl.pwc.com
Andriy Kobolev
Chairman of the Board
Naftogaz of Ukraine
6, B.Khmelnitskogo Str.,
Kyiv, 01001, Ukraine
Sergiy Konovets
Deputy Chairman of the Board
Naftogaz of Ukraine
6, B.Khmelnitskogo Str.,
Kyiv, 01001, Ukraine
Brett Nevin Rayner
Economist, European
Department
International Monetary Fund
700 19TH Street, NW
Washington, D.C. 20431
Donald Bruce
T: +48227467759
M: +48519507759
donald.bruce@pl.pwc.com
31 July 2015
Dear Sirs
In accordance with your instructions as confirmed in the Terms of Reference dated 9 June 2015 (the ToR - Appendix 1), we
report on National Joint-Stock Company Naftogaz of Ukraine (the Company or Naftogaz) and its subsidiary undertakings
Public Joint-Stock Company Ukrgazvydobuvannia (Ukrgazvydobuvannia ), Public Joint-Stock Company Ukrtransgaz
(Ukrtransgaz ) and Subsidiary Company Gaz of Ukraine (Gaz of Ukraine) (together, the Group).
This report has been prepared in connection with the delivery of the Services set out in the ToR.
We draw your attention to important comments regarding the scope and process of our work, set out in Appendix 2.
Yours faithfully
Stephen Oldfield
Project Leader
Table of Contents
Section
Overview
Page
Executive Summary
Background of the Groups activities and regulations
Overview of receivables recovery process
11
Consolidated receivables of the Group
23
Individual receivables analysis
31
Terms of Reference
41
Scope and Process
46
Additional Information
48
Glossary
56
Appendices
Section 1
Executive Summary
Diagnostic analysis of receivables National Joint-Stock Company

Naftogaz of Ukraine
31 July 2015
1
Section 1 Executive Summary
Summary of key issues (1 of 3)
Observation
Comment
Consolidated debt of the

Group by customer category
and year of origination
As of 31 December 2014
Year of origination
UAH in millions
Heating companies
Oblgases
Industrial companies
Other
as a % from total
before
2010
719
126
788
934
2,567
7%
2010
1,480
2,111
1,926
255
5,772
15%
2011
1,565
250
1,977
26
3,818
10%
2012
2,912
41
381
1,659
4,993
13%
2013
2014
4,226
9,155
1,012
4,436
39
1,698
600
363
5,877 15,652
15%
40%
Total %
20,057 52%
7,976 21%
6,809 18%
3,837 10%
38,679 100%
100%
Source: Receivables ledgers of Naftogaz and Gas of Ukraine
As of 31 December 2014, the total debt of the Group from the sale of gas amounted to UAH 38.7 bln, out of which 74%
related to Naftogaz. Included in the gross amount of debt is UAH 2.9 bln of fines and penalties, which were accrued by
the Group following positive decisions of courts.
Complexity of the market
Historically Naftogaz had limited visibility on amounts paid by the end user (e.g. households) and as such was reliant on
the intermediaries to pass on funds, once they themselves had been paid.
As such the Group was heavily dependent on the transparency and discretion of intermediaries (such as oblgases and
heating companies) and the availability of national budget funds to cover any differences in tariffs and subsidies for the
social vulnerable categories of population (e.g., pensioners). The introduction of special accounts (whereby a proportion
of payments from end users is transferred directly to Naftogaz) has partially remedied the situation, although they have
only recently been introduced for heating companies.

Naftogaz of Ukraine
31 July 2015
2
Observation
Comment
Highly regulated
environment
Under the appropriate legislation Naftogaz is defined as a guaranteed supplier of gas and as such it is required to enter
new contracts with customers despite the failure to pay for earlier gas supplies. However, the standard contractual terms
of Naftogaz allow them to limit or terminate supply of gas or even terminate the respective contracts, if there is an
unsettled overdue debt. Management commented that the clause on limiting or terminating the gas supply is regularly
applied by the Company. However, historically Naftogaz did not terminate the contracts and the first cases where
Naftogaz has applied this clause are currently being challenged by the customers. The respective court decisions are
pending.
Since 2005, legally the Group cannot enforce temporarily debt collection or bankruptcy for certain categories of
customers (further details are provided below). In addition, legislation was introduced in 2011 which imposed a write off
of some debts for gas supplied prior to 2010 and a restructuring of debts for gas supplied in 2010. As a result, the Group
wrote off UAH 10,428 mln of debts and restructured UAH 3,765 mln (payable in instalments over a period of 20 years).
Similar legislation was adopted in May 2015, leading to potential write-off of fines and penalties for the debts of heating
companies which were accumulated prior to 2014, provided the principal is paid, and restructuring of debts which
originated in 2014 (payable in instalments over a 2 year period).
Legal work-out
According to the information provided by the Groups Legal Departments, the Group is currently managing
approximately 5 thousand cases in relation to debts for the sale of gas starting from 2010. The total claims since 2010
amount to UAH 49.5 bln, including UAH 38.8 bln of principal and UAH 10.7 bln of fines and penalties.
Included in the court decisions in favour of Naftogaz are cases totalling UAH 2.5 bln, enforcement of which is currently
suspended, mainly under legislative provisions of the Law of Ukraine On Measures Aimed At Ensuring Functioning of
Enterprises of Fuel and Energy Sector No.2711-IV dated on 23 June 2005 (with the major impact on the debts due from
the heating companies).
In order to decrease the volume of court cases and make the process more efficient, legal actions to collect debts are
delayed until contact expiry, while initiation of the claim to be filed is at discretion of the responsible person. In some
cases, claims are filed before the expiry of the contract (e.g., when a risk of insolvency has been identified).

Naftogaz of Ukraine
31 July 2015
3
Observation
Comment
Legal work-out
There appears to be limited monitoring of the actual cash payment resulting from the debt collection enforced by the
court decision. In addition, the actual enforcement is dependent on the State Enforcement Service and is not controlled
by the Group.
(continued)
Large number of cases is managed in regional courts due to specific legislation norms, which causes additional pressure
on timing of claims and resources of the Group.
Information on the business
groups and beneficial
owners
There is currently no legal requirement for Naftogaz to ask for this information and their internal regulations do not
require it, and as such this information is not maintained on file.
Under the new legislation which becomes effective in September 2015, companies are required to disclose information
on their beneficial owners and provide such information to the State Registrar.
For the purposes of our analysis, we have reviewed records of the public database (smida.gov.ua) and IFRS financial
statements (where publicly available) for the debtors with balances over UAH 50 mln to identify any information related
to shareholders. This by itself does not confirm who the beneficial owners are (with the exception of one company). The
results of our analysis are presented in Section 5.
Receivables from customers
in Crimea and ATO zone
As of 31 December 2014, UAH 10.4 bln was due from customers located in annexed Crimea and ATO zone. In addition,
UAH 3.8 bln was due from customers located in close proximity to the ATO zone.
According to management, since February 2015 the Group terminated the gas supply to customers located within the
ATO, and no supplies are expected going forward, until the conflict is resolved or respective decision to renew the supply
is taken by the Ukrainian Government. Nevertheless this issue requires monitoring from the Companys management to
avoid any debt enlargement.
Next steps
We will work with the Group over the coming period to develop new collection targets and recommendations to improve
and monitor the Groups historic debt recovery and ongoing collection performance.

Naftogaz of Ukraine
31 July 2015
4
Section 2
Background of the Groups activities and
regulations

Naftogaz of Ukraine
31 July 2015
5
Section 2 Background of the Groups activities and regulations
Naftogaz operates in a highly regulated market. The Company is engaged

in development of the respective regulations
Verkhovna
Rada
Cabinet of
Ministers
Government
Parliament
Sets key framework legislation on the

principles of gas market in Ukraine;
Ratifies international agreements in
the energy sector.
Naftogaz
National Commission
Regulator
Issues licenses related to commercial

activity on the natural gas market;
Establishes standard templates of
contracts on gas supply;
Establishes prices for gas and tariffs
for transportation, distribution,
storage, pumping and supply of the
natural gas .
Guaranteed supplier of gas to heating

companies and industrial producers
with annual volumes exceeding 3 ml cm;
Guaranteed supplier of gas to the
regional gas distribution companies.

Naftogaz of Ukraine
Execution of the state policy in the

fuel and energy sectors;
State management of the natural gas
market;
Approves the annual financial plan of
Naftogaz
Approves annual planned volume of
gas consumption in the country
Ministry of
Energy and Coal
Line Ministry
Develops and executes the state

policy in the oil and gas sector;
Develops special programmes for
diversification of gas supply;
Reviews and submits for approval
by the Cabinet of Ministers the
annual planned volume of gas
consumption in the country and the
financial plan of Naftogaz
31 July 2015
6
Debt collection of the Group is highly

impacted by regulations (1 of 3)
Timelines of key legislative changes

1998
Key legislative acts that historically have had a significant impact on the
Groups debt collection performances are discussed below:
Law No.2711-IV On Measures Ensuring Functioning of

Enterprises of the Fuel and Energy Sector adopted by the
Parliament on 23 June 2005, the main objective of which was to
protect state-owned assets in the energy sector from
misappropriation. This Law introduced a ban on bankruptcy and
forced debt collection against participants in the fuel and gas
market, including heating companies and regional gas distribution
companies.
Resolution No.705 of the Cabinet of Ministers of Ukraine dated
25 July 2012, which defined Naftogaz and regional gas distribution
companies as guaranteed suppliers of gas.
On 3 October 2012, the Cabinet of Ministers by its Resolution
No.939 obliged Naftogaz to supply gas to guaranteed suppliers of
gas, i.e. regional gas distribution companies.
Law No. 3319-VI On Debts for Consumed Natural Gas and
Electrical Energy adopted by the Parliament on 12 May 2011,
which resulted in a partial write-off and restructuring of debts of
some customers of Gas of Ukraine (heating companies and regional
gas distribution companies). In particular, debts which originated
prior to 2010 were written off and debts accrued during 2010 were
restructured.

Naftogaz of Ukraine
establishment of the
Group with Gas of
Ukraine as the main
trader of gas
2008
introduction of special accounts for
regional gas distribution companies
and traders of gas
2011
transfer of trading operations from
Gas of Ukraine to Naftogaz
Law On Write-off and
Restructuring of Debts for
Consumed Gas
2014
introduction of special
accounts for heating and
industrial companies
2005
ban on bankruptcy and forced
debt collection, inter alia, in
respect of the heating
companies and regional gas
distribution companies
2010
Law On Principles Of
Functioning Of Natural Gas
Market
2012
introduction of new algorithm
for special accounts
guaranteed suppliers of natural
gas are established
March 2015
changes to special accounts
algorithm for heating companies
April 2015
May 2015
Law On Natural Gas Market
Law On Stabilization Of Financial

Standing Of Naftogaz
heating companies which produce
electricity using gas
31 July 2015
7


1998
On 14 May 2015, the Parliament adopted Law No. 423-VIII On

Stabilization of Financial Standing of Naftogaz. Under this
Law debt of the heating companies for the natural gas consumed in
2014 (excluding fines, late payment interest and inflation
compensation), which is outstanding as of 6 June 2015, is subject to
restructuring and will be repaid in instalments during a 24-month
period. Such restructuring is possible only if companies repay their
debts (excluding fines, late payment interest and inflation
compensation) for the gas consumed prior to 2014. In this case,
fines, late payment interest and inflation compensation will be
written off.
In addition, according to Law No. 423-VIII, Naftogaz and Gas of
Ukraine may sell their debts for the supply of gas via auctions (at a
discount). The Law became effective from 6 June 2015 and its
application in practice is untested.
Special consideration in the regulations is made to the process for

payments received by Naftogaz from the customers for gas
consumed.
Resolution No.247 adopted by the Cabinet of Ministers of
Ukraine on 26 March 2008 which introduced special bank accounts
for oblgases and traders of gas, where funds received from end
consumers of gas were further automatically split between Naftogaz
and gas transportation companies (Ukrtransgaz and oblgases)
according to a complex formula (approved by the Resolution of the
National Commission No.1529 dated 25 December 2008).

Naftogaz of Ukraine
Group with Gas of
Ukraine as the main
trader of gas
2008
and traders of gas
2011
Consumed Gas
2014
2005
2010
Market
2012
gas are established
March 2015
April 2015
May 2015

31 July 2015
8


1998
On 2 August 2012, the formula was amended by Resolution

No.1000 of the National Commission. According to management,
the new formula did not allow Naftogaz to recover old debts, but
only service the current portion of receivables.
Similar accounts were introduced for industrial companies
(Resolution No.23 issued by the National Commission on 16
January 2014) and for heating companies (Resolution No.217
issued by the Cabinet of Ministers of Ukraine on 18 June 2014
(effective from 4Q2014). The algorithm established by Resolution
No.217 also envisaged repayment of old debts.
Please note that by Resolution No.166 issued by the Cabinet of
Ministers of Ukraine on 18 March 2015 changes to the special
accounts algorithm were introduced which eliminated the
possibility to recover the old debts, negatively effecting the
recoverability of Naftogazs accounts receivable.
On 20 May 2015, the Cabinet of Ministers of Ukraine issued

Decree No. 670-p introducing a new mechanism of settlements
between electricity generating companies and the wholesale
suppliers of electricity. This decree introduced the mechanism of
special accounts in settlements with Naftogaz for the gas used by
the heating/electricity generating companies for the production of
electricity.
Group with Gas of
Ukraine as the main
trader of gas
2008
and traders of gas
2011
Consumed Gas
2014

2010
Market
2012
gas are established
March 2015
April 2015
May 2015

Naftogaz of Ukraine
2005

31 July 2015
9
Naftogaz is a guaranteed supplier of natural gas in Ukraine for almost all

categories of customers
Ukrgazvydobuvannya
(all gas produced is
sold to Naftogaz)
Uktransgaz (gas
transportation )
Other suppliers
(Gazprom, European
suppliers, etc.)
Naftogaz,
Gas of Ukraine*
Gas traders
**
and other customers
***
Regional gas
distributors (0blgases)
Public entities
Heating
companies
and religious organizations

- Group companies
* - a trading company before December 2011.
** - other customers only
*** - for heating purposes only
- supply of natural gas (without

transportation services)
- supply of natural gas including transportation services
- supply and distribution of natural gas by oblgases to

end users
Note: the above chart is presented from the perspective of the Group rather than the market as a whole
Diagnostic analysis of receivables National JointStock CompanyNaftogaz of Ukraine
- gas transportation services (main pipeline)

- supply of heat
- gas distribution services by oblgases when
Naftogaz supplies gas via direct contract (i.e., not
through oblgases)
31 July 2015
10
Section 3
Overview of receivables recovery process

Naftogaz of Ukraine
31 July 2015
11
Section 3 Overview of receivables recovery process
The Gas sales department oversees all interactions with customers from
contract initiation to collection (1 of 2)
Gas sales department

Contractual work and gas
sales division
(9 people)
Development of standard contract

templates for gas sale
Ensure any agreements with
customers are concluded in
accordance with the established
procedures of Naftogaz
Recording the actual volumes of
natural gas consumed by
undertaking acceptance
procedures with customers
Informing the Legal Department
regarding execution of the
enforcement documents by the
debtors
Preparation of gas sales registers
and their submission to the
Accounting Department to reflect
gas sales transactions in the
Companys accounts
Payments control
division
(18 people)
Daily analysis of received

payments and receivable
balances
Daily forecast of cash flows
from sales of gas
Preparation of reports for
management

Naftogaz of Ukraine
Settlements and analytics

division
(8 people)
Daily analysis of payments

received for the gas sold and
payments by Naftogaz for
transportation and distribution
services (including posting
respective entries in the
automated system Navigator-IN
(a system used by the Gas Sales
Department to account for and
analyse sales related operations
and balances)
Based on court decisions and
respective accounting records,
reflecting accruals and
provisions relating to
receivables and payables
balances in Navigator-IN
Debt management
division
(16 people)
Preparation of materials on
overdue debt, respective fines
and penalties and their
submission to the Legal
Department to proceed with
court filing
Off-set arrangements
Regular monitoring of official
information on bankruptcy or
liquidation procedures initiated
in respect of the Companys
debtors
Consolidation of information on
receivables and payables of the
Company
31 July 2015
12
The Gas sales department oversees all interactions with customers from
contract initiation to collection (2 of 2)
As a guaranteed supplier of natural gas, Naftogaz cannot refuse to

conclude new gas supply contracts with its customers even if the
latter have unpaid debts for gas supplied under old contracts. At the
same time, according to the standard gas supply contracts with its
customers, Naftogaz can limit or terminate supply of gas. The
Company actively applies this contract clause in accordance with
the Decree of the Cabinet of Ministers of Ukraine No1687 dated 8
June 2006 On Approval of Mechanism of Limiting (Terminating)
Supply of Gas (Except for Population).
Moreover the standard contractual terms allow Naftogaz to
terminate the contract, if there is an unsettled overdue debt.
According to management, they did not apply the contract
termination clause until 2015, and as a result two court cases where
initiated against Naftogaz (currently in progress). If Naftogaz
successfully defends these cases, they will have an effective tool
against problematic debtors.
Usually, Naftogaz files lawsuits against debtors to demand

repayment of overdue debts and respective fines and penalties only
after expiry of respective gas supply contracts. As such, the lawsuits
cover only that portion of the debt which has not been paid after the
contract expiry date (i.e., problematic debt). According to
management, such approach helps the Group to decrease the
number of claims to be filed and the volume of legal work.
However, in cases where management identifies the risk that the

principal debt may not be repaid, then the decision to file a court
case is made before the contract expiry.
There is no general practice of formal debt restructuring in the

Group, unless there is a respective court decision or restructuring is
initiated by the Parliament (see discussed earlier).
Before proceeding with the legal work-out, the Debt Management

Division of the Gas Sales Department, conducts negotiations with
individual debtors, reaching though regional authorities and trying
to influence payment discipline of the debtors (through regular
calls, official letters, etc.).

Naftogaz of Ukraine
31 July 2015
13
Overview of the main contractual terms of Naftogaz for supply of gas
Contract
duration
Pricing
Supply and
payment terms
Fines and
penalties for
overdue debt
Termination
clauses
Naftogaz concludes annual contracts for the supply of gas, using standard templates which are set by Nafogaz internally
for each category of customers (i.e., industrial companies, oblgases (separately for supply of gas to households, heating
companies, other entities), etc.). Per management, no changes to the standard contractual terms are usually allowed.
Please note that the National Commission sets a standard template for the gas supply contract between owners of gas
(e.g., Naftogaz) and oblgases which Naftogaz uses to prepare respective contract template with oblgases.
Gas prices are regulated at each stage from exploration to supply to end consumers by the National Commission which
sets either fixed prices (for supply of gas to households (through oblgases) as well as to heating companies for production
and delivery of heat to households) or maximum level of prices (for other customers).
Contacts stipulate volume of gas to be supplied at a certain price on a monthly basis. Depending on the customers
category, the payment terms may vary from 30% monthly prepayment with the remaining balance payable in two equal
instalments (i.e., 35% each) on the 5th and 15th day of the month of supply with final settlement to be made by the 14 th day
of the next month (for industrial companies and other customers) to 1oo% payment for the planned volume of gas to be
consumed in the month of supply (for oblgases and heating companies) with the final clearance on the 15th (heating
companies) or on the 20th (oblgases) of the month following the month of supply.
1. Penalties (late payment interest) are calculated on a daily basis by multiplying the NBUs double discount rate and the
amount of payments in arrears.
2. Fines is a one time fee set at 7% from overdue payment (only for supply of gas to industrial companies)
3. Inflation compensation 3% + inflation rate (as set by the State Statistics Service) multiplied by the amount of
payment in arrears (on a daily basis).
In case of overdue payments, according to the standard gas supply contracts (except for those with oblgases), Naftogaz
has the right to limit/terminate supply of gas until the overdue payment is settled.

Naftogaz of Ukraine
31 July 2015
14
Overview of the legal work-out procedures in Naftogaz and Gas of Ukraine
Our analysis was focused on Naftogaz and Gas of Ukraine, since

these companies are mainly involved in the sale and purchase of gas
and, as a result, are engaged in respective litigations.
The Legal Department of Naftogaz includes about 50 specialists of

which 31 are litigation specialists (20 of which participate in
drafting and filing court claims, other staff are responsible for
enforcement proceedings and bankruptcy cases).
This approach is applied with the purpose to minimise costs and to

avoid initiating a number of cases per one contract. This is also
driven by the fact that under effective legislation a court claim
regarding debt collection should be submitted at a debtors place of
registration. Such legislative requirement actually complicates legal
work-out with the Groups debtors, which is managed out of Kyiv.
The Groups lawyers maintain special registers of the current court

cases with indication of debtors, amount of debt, penalties applied
for non-payment or late payment of the debt etc.
In exceptional cases, upon approval of Naftogazs management, the

legal work-out in respect of the debtors is initiated before the
contracts expiry date.
Contract management (including conclusion of contracts, control

over their execution, penalties accrued for non-compliance with
contractual terms) is executed by the Gas Sales Department
(discussed earlier). If a counterparty is in breach of the contractual
terms, this Department prepares and transfers materials to the
Legal Department in order to initiate court proceedings in respect
of such a counterparty. The Economic Security Department is
responsible for monitoring counterparties solvency in order to
timely react in case bankruptcy procedures are initiated in respect
of a debtor.
Gas of Ukraine ceased its activity related to supply of the natural

gas in 2011, however, is actively involved in litigation proceedings
with its debtors regarding unpaid balances of principal debts and
penalties including late payment interest, fines etc.
If a customer has not paid for the supplied gas according to

contractual terms, in most cases Naftogaz will initiate legal
proceedings after the respective contracts term expiration (1-year),
when the final outstanding amount of the principal debt is known.
Before the litigation process Naftogaz estimates additional
penalties (fines, late payment interests etc.) for non-compliance
with the contractual terms, which in most cases continue to be
accrued during the litigation.

Naftogaz of Ukraine
31 July 2015
15
Naftogaz and Gas of Ukraine undertake any legal work in accordance with
the established procedures set out in the internally approved Regulations
Key Responsible Departments

Gas Sales Department
Legal Department
Economic Security
Department
Collection and preparation of

information necessary to file the claim
Identification of the counterparties for
the legal work-out
Transfer of the case materials to the
Legal Department in order to comply
with statutory terms for filing
documents to the courts etc.
Informing the Legal Department
regarding execution of the
enforcement documents by the debtors
Regular monitoring of the official
publications regarding bankruptcy or
liquidation proceedings initiated in
respect of the Groups debtors
Provision of methodical and advisory

assistance during pre-court workout
procedures
Legal work-out related to drafting
court claims, appeals, cassation of
claims or objections to them
Upon approval of the management,
involves representatives of the
structural departments to represent
the Groups interests in the court
hearings
Control over process of receiving of the
enforcement documents
Maintaining records regarding court
cases and enforcement proceedings
Regular interaction with enterprises,

establishments, organisations and
citizens with the aim to receive
necessary information regarding
financial standing and solvency of the
debtors
Checking on the status and accuracy of
the court decision execution by the
State Enforcement Service
Identification of possible illegal actions
carried out by the debtors aimed at
sidestepping the recovery of the debt
and notification of the law
enforcement authorities if such actions
are identified

Naftogaz of Ukraine
31 July 2015
16
All legal work in the Group related to debt collection is done in-house
Maintaining records regarding court cases and enforcement

proceedings
1.
2.
Preparation and
filing of the claims
This work is
supported by the Gas
Sales Department
Representation in the
court of all instances
Includes also appeal claims

and cassation claims and
bankruptcy cases initiated in
respect of the Groups debtors

Naftogaz of Ukraine
3.
Enforcement
proceedings
Monitor the status of enforcement,

including its initiation by the State
Enforcement Service, execution,
etc.
31 July 2015
17
Starting from 2012 Naftogaz filed claims for the total amount of UAH
27,184 mln
Our analysis of the court cases of the Group was mainly focused on
Naftogaz and Gas of Ukraine, since these two companies were
involved in sale and purchase of gas and were heavily engaged in
related litigation. Although Ukrtransgas and Ukrgazvydibuvannia
are also involved in litigation, this relates to gas transportation and
the collection of intragroup debts and as such falls outside the terms
of reference.
We further split our analysis into two sections: (i) covering Gas of
Ukraine from 2010 till February 2015 (see further in the report);
and (ii) Naftogaz from 2012 to May 2015 (see below), i.e. starting
from the year when they engaged into gas trading activities.
According to legislation, Naftogaz is a guaranteed supplier of the

natural gas to large industrial enterprises with the annual
consumption of the natural gas over 3 mln. cm, heating companies
and regional gas distribution companies.
Contracts are concluded by Naftogaz for a period of one year.

Hence, for each calendar year Naftogaz concludes a new set of
contracts with the same customers (counterparties). As a
guaranteed supplier of the natural gas Naftogaz is not permitted to
refuse concluding a sale and purchase contract for a new period,
even if a customer has debts for the purchase of natural gas under
old contracts for prior periods.
Usually, legal action is initiated after expiry of the sale and purchase
contract in order to minimise the quantity of claims filed and
resources of Naftogaz involved in the process of court claims.

Naftogaz of Ukraine
Other claims filed by Naftogaz in courts relate to its day-to-day

activity (loan agreements, disputes with the state authorities, nonmaterial commercial disputes). However, their number is small
compared to disputes regarding sale and purchase of natural gas.
Our analysis of legal cases of Naftogaz includes legal cases, initiated

from 2012 till May 2015. The total number of legal cases is 2,725.
The total amount of the claims filed during the above mentioned
period, including the principal debt, fines, late payment interest
and inflation compensation (inflation rate and 3% per annum), is
UAH 27,184 mln, including: (i) court cases with the total claims of
UAH 18,953 mln, where final court decision was taken (and with
respect to which UAH 14,327 mln were confirmed by the court);
and (ii) court cases with the total claims of UAH 8,231 mln pending
final decision of the court (see details in table on the next page).
According to the Ukrainian legislation, the court is empowered to

revise downward the amount of fines and late payment interest on
its own discretion, taking into account the following circumstances:
actual execution of the contract by a debtor, financial standing of
the parties, their material and non-material interests. Also the
amount of principal debt may be decreased by the court or by the
parties due to its full or partial payment.
Therefore, the amount of claims satisfied by the court in favour of

Naftogaz may significantly differ from the amount claimed by
Naftogaz. Our analysis shows that the average recovery rate for the
claims where the final decision of the court was taken is 76%
(calculated by dividing the amount of confirmed court claims by the
claims amount where final decision was taken). This does not take
into account the actual outcome from the enforcement.
31 July 2015
18
Out of UAH 18,953 mln of claims, where the final decision of the court has
been taken, Naftogaz is allowed to enforce UAH 14,327 mln
According to the information provided by the Legal Department,

the total claims of UAH 3,577 mln from the confirmed by the court
cases were paid by debtors and UAH 5,154 mln are currently in the
process of enforcement by the offices of the State Enforcement
Service of Ukraine. Currently, enforcement of claims in the amount

of UAH 2,491 mln is suspended mainly under legislative provisions
of the Law of Ukraine On Measures Aimed At Ensuring Functioning
of Enterprises of Fuel and Energy Sector No.2711-IV dated on
23 June 2005, the effect of which is expected to expire on 01

September 2015 (with the major impact on the debts due from the
heating companies).
In addition, UAH 27 mln shall be collected by Naftogaz under outof-court enforcement procedure based on the notarys executive
inscription (in cases this is envisaged by the contractual terms with
customers). This procedure does not involve application to court
by Naftogaz and is not included in the total claims filed to court.
Legal cases filed by Naftogaz against debtors and their status
UAH in
millions
Industrial
companies
Electricity &
heating
Oblgases
Other
Principal
debt
Total claims
Final
court
Fines and
decision
Penalties
taken
Pending
Claims confirmed by the court
Total
amount
Enforcement Restruc
procedure
tured
Paid
Suspended Written
enforcement
off
Bankruptcy
proceedings
ATO zone
and Crimea
Total
amount
% 0f claims
confirmed*
1 868
550
1 51 4
904
2 41 8
538
506
297
1 344
89%
1 5 081
1 466
2 47 6
4 364
393
986
1 3 1 51
1 21 3
3 07 5
6 294
646
387
1 9 445
1 859
3 462
4 369
95
1 52
27 2
30
23
3 1 96
60
24
2 467
21
-
55
-
62
-
47
14
2 096
1 0 41 3
27 5
2 295
7 9%
23%
7 5%
20 891
6 293
18 953
8 231
27 184
5 154
831
3 57 7
2 491
55
62
2 157
14 327
7 6%
* - as a percentage from total claims where final decision have been taken
Source: Information of the Legal Department of Naftogaz

Naftogaz of Ukraine
31 July 2015
19
From 2010 till February 2015, the total claims filed by Gas of Ukraine
amounted to UAH 22,315 mln, out of which UAH 17,734 mln have final court
decision with the recovery of 76%
Legal cases filed by Gas of Ukraine against debtors and their status
UAH in millions
Industrial
companies
Electricity &
heating
Oblgases
Other
Principal
debt
Total claims
Final court
Fines and
decision
Penalties
taken
Pending
Total
amount
Enforcement
procedure
WrittenOff
Restructured
Paid
Suspended
enforcement
Bankruptcy
proceedings
Total % 0f claims
amount confirmed*
5 367
1 932
2 823
4 47 6
7 299
7 42
115
81
1 302
2 240
7 9%
9 401
3 01 9
94
1 908
57 8
16
1 1 220
3 581
110
89
16
-
1 1 309
3 597
110
2 7 26
10
12
2 51 1
1 57 3
13
658
908
1
2 455
1 02
44
14
-
1 28
-
8 492
2 593
70
7 6%
7 2%
64%
17 881
4 434
17 7 34
4 581
22 315
3 490
4 212
1 648
3 903
14
128
13 395
7 6%
Source: Information of the Legal Department of Gas of Ukraine
Starting from 1998 till November 2011 Gas of Ukraine was engaged
in the purchase and sale of natural gas. In November 2011, the
license of Gas of Ukraine for sale and purchase of the natural gas
was terminated. Currently, the main activity of Gas of Ukraine is
collection of debts which accumulated before November 2011.
Our analysis of legal cases of Gas of Ukraine includes legal cases

initiated from 2010 till February 2015. The total number of legal
cases analysed and relating to collection of debts for the sale of gas
is 2,273.

Naftogaz of Ukraine
The total amount of the claims filed during the above mentioned
period, including the principal debt, fines, late payment interest and
inflation compensation (inflation rate and 3% per annum) is UAH
22,315 mln, including (i) court cases with claims of UAH 17,734 mln
where final court decision was taken (and with respect to which
UAH 13,395 mln were confirmed by the court); (ii) and court cases
with the total claims of UAH 4,581 mln pending final decision of the
court.
Our analysis shows that the average recovery rate for the claims
where final decision of the court was taken is 76% (calculated by
dividing the amount of confirmed court claims by the claims
amount where final decision was taken). This does not take into
account the actual outcome from the enforcement.
31 July 2015
20
31% of the claimed amount confirmed by courts was written-off under

provisions of the Law of Ukraine
Legal cases filed by Gas of Ukraine against debtors and their status
UAH in millions
Industrial
companies
Electricity &
heating
Oblgases
Other
Principal
debt
Total claims
Final court
Fines and
decision
Penalties
taken
Pending
Total
amount
Enforcement
procedure
WrittenOff
Restructured
Paid
Suspended
enforcement
Bankruptcy
proceedings
Total % 0f claims
amount confirmed*
5 367
1 932
2 823
4 47 6
7 299
7 42
115
81
1 302
2 240
7 9%
9 401
3 01 9
94
1 908
57 8
16
1 1 220
3 581
110
89
16
-
1 1 309
3 597
110
2 7 26
10
12
2 51 1
1 57 3
13
658
908
1
2 455
1 02
44
14
-
1 28
-
8 492
2 593
70
7 6%
7 2%
64%
17 881
4 434
17 7 34
4 581
22 315
3 490
4 212
1 648
3 903
14
128
13 395
7 6%
According to the information provided by the Legal Department,

the total claims of UAH 3,903 mln from the confirmed by the court
cases were paid by debtors and UAH 3,490 mln are currently in the
process of enforcement by the offices of the State Enforcement
Service of Ukraine.

Naftogaz of Ukraine
Debts of Gas of Ukraine considered by courts in the amount of UAH

4,212 mln were written-off under provisions of the Law of Ukraine
On Certain Issues on Debts for the Consumed Natural Gas and
Electricity No.3319-VI dated 12 May 2011. In 79 court cases with
the total claims of UAH 1,648 mln debts are restructured.
31 July 2015
21
Positive court decisions with low chances to be executed are estimated at

UAH 9,281 mln
Case
Description
Debtors located in Crimea and ATO

zone
Debts confirmed by the court decisions in the amount of UAH 6,374 mln for Naftogaz and UAH 1,193 mln for
Gas of Ukraine are due from companies registered in Crimea, Donetsk and Lugansk regions, which are not
controlled by the Ukrainian Government. Currently local offices of the State Enforcement Service of Ukraine
responsible for execution of the court decisions on these territories are not operating. Therefore, it is uncertain
whether enforcement proceedings in these cases will result in actual recovery of debt.
Debtors in bankruptcy procedure
UAH 1,714 mln (Naftogaz - UAH 975 mln, Gas of Ukraine UAH 739 mln) is subject of collection from the
companies which are currently in the bankruptcy procedure. Chances of collecting such debts are low, since it
is unclear whether debtors will be able to pay their debts in full.
Source: Information of the Legal Department of Gas of Ukraine and Naftogaz

Naftogaz of Ukraine
31 July 2015
22
Section 4
Consolidated receivables of the Group

Naftogaz of Ukraine
31 July 2015
23
Section 4 Consolidated receivables of the Group
Naftogaz and Gas of Ukraine account for almost all debt of the Group for
the sale of gas
The Group companies' receivables in respect of gas sale
operations as of 31 December 2014
UAH in million
Naftogaz
Trade receivables
Fines and penalties
Gas of Ukraine
Trade receivables
Fines and penalties
Heating
Industrial
companies companies Oblgases
2,548
78
2,626
5,535
108
5,643
2,924
647
3,570
26,889
1,769
28,658
2,559
678
3,237
3,871
309
4,181
2,267
66
2,333
192
74
266
8,889
1,128
10,017
3
3
3
3
1
1
38,679
100%
% from total
Total
15,882
937
16,819
Ukrgazvydobuvannya
Trade receivables
Ukrtransgaz
Trade receivables
Other
20,056
6,807
7,976
1
1
3,840
52%
18%
21%
10%

Naftogaz of Ukraine
As of 31 December 2014, the gross receivables of the Group for the

sale of gas, excluding intra-group balances, amounted to UAH
38,679 mln (including UAH 2,897 mln of fines and penalties).
Receivables are recorded in the Groups accounting records based

on gas sales registers provided to the Acounting Department by the
Gas Sales Department before the 15th day of the month following
the month of supply.
According to the standard contractual terms, acceptance acts

confirming volumes of gas supplied and its price should be signed
by Naftogaz and its customers by the 8th of the month following the
month of supply. Once acceptance acts are signed, they are
transferred to the Accounting Department. If there are differences
between the sales registers and the signed acceptance acts in terms
of volume or price of gas supplied, respective adjustments are made
in the Companys accounts.
As discussed earlier in the report, the gas supply contracts stipulate

fines and penalties for the late payments. According to
management, such fines and penalties are recorded in the Groups
books only if there is a respective decision of an appeal court. Until
such ruling is obtained, no respective accrual is made in the Groups
accounting records.
31 July 2015
24
Recoverability of the Groups debt is impacted, primarily, by the amount

recovered from heating companies (1 of 2)
Recoverability of current debt*, %
100
80
60
40
Heating companies
Other clients
20
Oblgases
Total
0
2010
According to the information provided by Naftogaz, in 2012 heating

companies received UAH 9.8 bln of such compensation, which was
eventually used to settle the debt for the gas consumed, while in
2013 no such compensation was paid to heating companies. In
2014, the compensation from the budget amounted to UAH 10.8
bln.
2011
2012
2013
2014
- recovery rates were calculated by dividing the amount of payments received during the year
for the gas supplied by the amount of revenue (including VAT) accrued in the respective
period
Recoverability of old debt*, %
As mentioned earlier in the report, in 2014 2015 some initiatives

were introduces to improve the payment discipline of the heating
companies (eg, introduction of special accounts, adoption of Law
No.423 allowing Naftogaz to limit supply of gas to heating
companies in case of overdue payments).
While in 2011 2013 recoverability of the current debt of oblgases

was rather stable (appx. 84%), in 2014 it dropped to 71%. The major
factor that has negative impact on the recoverability in 2014 was
increase of prices for gas, including gas purchased by oblgases for
production purposes, i.e. industrial and technical losses (ITL). At
the same time, the price of gas for ITL included in the gas
distribution tariff and charged to customers in 2014 was lower
compared to the actual price, resulting in oblgases inability to pay
for respective gas in full. Naftogaz intends to recover full amount of
debt for gas for ITL but it may prove to be challenging.
Heating companies
Oblgases
80
Other clients
60
Total
40
20
0
2010
2011
2012
2013
2014
- recovery rates were calculated by dividing the amount of payments received during the year and
relating to debts which originated in prior periods by the amount of such debts outstanding at the
beginning of the year
Source: Accounting records of Naftogaz and Gas of Ukraine

Naftogaz of Ukraine
The debt recovery rate for the heating companies is the lowest when
compared to other categories of the Groups customers. There is a
significant dependency of debt recovery rates in respect of the
heating companies debt on the amount of transfers from the state
budget. Heating companies receive compensation from the state
budget for the difference between the price of gas purchased for the
purposes of heat production and supply to households and the price
of gas included in the respective heating tariffs to households.
31 July 2015
25
Recoverability of the Groups debt is impacted, primarily, by the amount

recovered from heating companies (2 of 2)
Recoverability of current debt*, %
100
Quarterly recovery rates were calculated on a

cumulative basis as gas sales contracts are for a
period of one year and payments made by
customers during the year are not linked to the
month of supply in the Groups accounting
system.
Fluctuations of quarterly recovery rates for the

current debt of oblgases and heating companies
reflect the seasonality of gas consumption
during the year (i.e., which is increasing in cold
months with respective payments being delayed
and made in the following periods). In the first
quarter of the year, the current debt recovery
rate is the lowest, while it improves in the
following quarters.
For industrial companies and other clients the

consumption is less dependant on the season.
Improvement of recoverability of the current

and old debt of heating companies in the 4th
quarter of 2014 reflects receipt by Naftogaz of
the heat tariffs compensation from the state
budget which related to the supply of gas in the
current and previous years (UAH 10.8 bln).
80
60
40
20
0
1Q13
Heating companies
Oblgases
Other clients
2Q13
3Q13
4Q13
Total
1Q14
2Q14
3Q14
4Q14
- recovery rates were calculated by dividing the amount of payments received during the year for
the gas supplied by the amount of revenue (including VAT) accrued in the respective period.
Calculation was done on a cumulative basis.
Recoverability of old debt*, %

50
Heating companies
Other clients
Oblgases
Total
40
30
20
10
0
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
- recovery rates were calculated by dividing the amount of payments received during the year and
relating to debts which originated in prior periods by the amount of such debts outstanding at the
beginning of the year. Calculation was done on a cumulative basis.

Naftogaz of Ukraine
31 July 2015
26
As of 31 December 2014, heating companies and oblgases accounted for

72% of the Groups total debt
Debt as of 31 December 2014, UAH in millions
*Heating companies
Oblgases
15%
Other
2,912
15%
719
934 788 126
Prior to
2010
3,818
1,565
1,977
5,772
2,111
1,926
2010
1,480
1,659
363
4,226
4,993
10%
1,698
60%
of the total debt was

originated prior to
2014
20,057
4,436
5,877
13%
2,567
100%
38,679
9,155
7%
40%
15,652
1,012
41
381
39
600
7,976
250
26
47%
out of the debt which

originated prior to 2014 is
due from heating
companies
67%
of debt of industrial
companies is due from
companies of the
chemical sector
6,809
255
3,837
2011
2012
2013
2014
Total
* - includes heating companies which also produce electricity
Payment discipline of heating companies is one of major concerns of

the Groups management. In 2014, settlements through special accounts
were introduced for these companies and, according to management, it
has a positive impact on the recoverability of their debt.
Annexation of Crimea, ATO, increase of maximum level of gas

prices in 2014 for industrial companies from UAH 3,113 per
thousand cm to UAH 5,900 per thousand cm (which is also applicable to
gas purchased by oblgases for ITL as well as gas consumed by heating
companies to produce heat for commercial and public entities) were the
major factors negatively impacting the debt repayment of the Group in
2014 (see analysis further in the report).
Naftogaz of Ukraine
53%
of the total debt of other

customers is due from
one counterparty (UAH
2,046 mln) - LLC
Gazukraina-Commerce.
31 July 2015
27
As of 31 December 2014, 49% of the Groups debt was originated under gas
supply contracts for households and public organisations
2%
0%
Receivables of Gas of Ukraine and Naftogaz by the end consumer,

as of 31 December 2014
UAH in millions
Heating companies
Public organizations
Households
Industrial companies*
Municipal organizations
Heating companies**
Religious organisations
Other
Oblgases
Industrial technical losses (ITL)
Households
Households - heating
Public organizations - heating
Other
Municipal organizations - heating
Other
Other***
Households - gas
Public organizations - gas
Gas of
Ukraine
Naftogaz
Total
25%
1,451
982
254
541
3,228
6,948
5,573
2,472
1,105
708
1
12
16,819
8,399
6,555
2,726
1,105
708
1
553
20,047
22%
17%
7%
3%
2%
0%
1%
52%
1,049
671
449
52
1
9
101
2,332
3,322
1,812
261
133
55
45
15
5,643
11%
6%
2%
0%
0%
0%
0%
0%
21%
4,142
35
4,177
2,546
43
22
15
2,626
4,371
2,483
710
185
56
45
24
101
7,975
6,688
78
22
15
6,803
237
14
21
4
3
279
10,016
3,256
188
65
61
3,570
28,658
3,493
202
86
65
3
3,849
38,674
9%
1%
0%
0%
0%
10%
100%
26%
Oblgases
Other
Households
Public and municipal organizations
Heating companies
11%
24%
Religious organizations
11%
All contracts concluded by Naftogaz with its counterparties are split by the
end consumer category as gas prices and heat tariffs vary depending on the
consumer category (i.e., the price of gas sold for households is lower than the
price for the industrial companies). Note that there is no separate category of
households entitled to subsidies (individuals identified as socially vulnerable)
as prices at which gas is supplied to oblgases and heating companies are the
same for all households. The subsidies are paid from the State budget to
oblgases and heating companies.
Given that payments for consumed gas are made by customers of oblgases
through special accounts with further automatic distribution between the
provider of gas (i.e., Naftogaz) and providers of transportation and
distribution services (Ukrtransgas and oblgases), debt structure of oblgases
accurately reflects the ultimate debtors of the Group.
17%
0%
0%
0%
18%
*- primarily for production of electricity

*** - primarily, traders, Chornomornaftogas, condominiums, public organizations, etc.
Source: Receibables ledgers of Naftogaz and Gas of Ukraine

Naftogaz of Ukraine
31 July 2015
28
As of 31 December 2014, 73% of the Groups debt was originated under gas
supply contracts with oblgases and heating companies
Receivables of Gas of Ukraine and Naftogaz by the end consumer,
UAH in millions
Heating companies
Households
Industrial companies*
Municipal organizations
Heating companies**
Other
Oblgases
Industrial technical losses (ITL)
Households
Other
Municipal organizations - heating
Other
Other***
Households - gas
Public organizations - gas
Gas of
Ukraine
Naftogaz
Total
The debt structure of heating companies may not properly reflect the ultimate
debtors, as the mechanism of special accounts for heating companies started to
function only in November 2014 (following the adoption of the respective
legislation in June 2014) and till that time payments for purchased gas had
been made by the heating companies at their discretion and did not reflect the
actual payment discipline of the ultimate customers.
Please note that till May 2015, payments for the gas supplied by Naftogaz to
oblgases for ITL (price of which is included into the distribution tariff of
oblgases) were outside the special accounts mechanism and were made at
discretion of oblgases. In May 2015, changes in the respective regulations were
made introducing the algorithm for such payments, but only when there was
an overdue debt under gas supply contracts for the network operation
purposes.
In such cases, a part of the distribution tariff of oblgases which relates to cost of
gas purchased for ITL is automatically distributed from special accounts of
oblgases to special accounts of Naftogaz, once payments for gas and connected
services (i.e. transportation and distribution) are made by the end consumers.
If the overdue debt is settled, respective payments are made at oblgases
discretion.
1,451
982
254
541
3,228
6,948
5,573
2,472
1,105
708
1
12
16,819
8,399
6,555
2,726
1,105
708
1
553
20,047
22%
17%
7%
3%
2%
0%
1%
52%
1,049
671
449
52
1
9
101
2,332
3,322
1,812
261
133
55
45
15
5,643
11%
6%
2%
0%
0%
0%
0%
0%
21%
4,142
35
4,177
2,546
43
22
15
2,626
4,371
2,483
710
185
56
45
24
101
7,975
6,688
78
22
15
6,803
237
14
21
4
3
279
10,016
3,256
188
65
61
3,570
28,658
3,493
202
86
65
3
3,849
38,674
9%
1%
0%
0%
0%
10%
100%
17%
0%
0%
0%
18%
** - Includes UAH 675 m of debt due from Kharkivski Teplovi Merezhi which originated from debt
assignment agreement concluded between Nafrogaz and Kharkivska TETs-5. According to this agreement,
debt of Kharkivska TETs-5 due from Kharkivski Teplovi Merezhi was reassigned to Naftogaz as a
settlement for debt of the former originated under gas supply contracts
*- primarily for production of electricity

*** - primarily, traders, Chornomornaftogas, condominiums, public organizations, etc.
Source: Receibables ledgers of Naftogaz and Gas of Ukraine

Naftogaz of Ukraine
31 July 2015
29
As of 31 December 2014, 26% of the Groups debt was due from customers
located in the ATO zone (or in a close proximity) or in annexed Crimea
6,376
In 2014, Naftogaz continued to supply gas to its counterparties located on

territories, which were not under control of the Ukrainian Government
(primarily, to heating companies and oblgases). During the second half of
2014 repayment of the respective debt for gas supplied deteriorated
significantly resulting in accumulation of overdue balances.
Heating companies*
Oblgases
3,986
2,039
1,759
538
Foreign countries
ATO zone
Lugansk region
461
Donetzk region
Chernigiv region
253
354
Khmelnytsk region
Chernivtzi region
342
Kherson region
1,027
303
Ternopil region
Cherkasy region
393
Cumy region
281
Mykolaiv region
744
350
Kirovograd region
Poltava region
570
Ivano-Frankivsk region
579
Zhytomyr region
371
379
Volyn region
Zakarpattya region
551
Vinnytya region
1,165
Zaporizzhya region
1,674
Rivne region
1,640
Odessa region
1,157
Lviv region
Kyiv region
Kyiv
Kharkiv region
Dnipropetrovsnk regio
1,184
2,415
2,939
Other
Crimea
4,849
Debt as of 31 December 2014 by region, UAH in millions
Source: Naftogaz information

Naftogaz of Ukraine
31 July 2015
30
Section 5
Individual receivables analysis

Naftogaz of Ukraine
31 July 2015
31
Section 5 Individual receivables analysis
As of 31 December 2014, 91% of the Groups debt was due from 119 debtors
Concentration analysis of the Group's debt

Debtors owing less
than UAH 50 m
Debt
Heating companies*
Oblgases
Other
% from total
Number of
debtors
Debtors owing
between UAH 50 m
and UAH 500 m
Number of
Debt
debtors
2,377
234
495
356
453
15
277
1,553
7,262
6,443
1,269
1,434
3,462
2,298
9%
95%
Debtors owing
between UAH 500 m
and UAH 1000 m
Number of
Debt
debtors
47
31
13
7
4,997
1,299
2,691
-
16,408
98
8,987
42%
4%
23%
Debtors owing more

than UAH 1000 m
Debt
8
2
4
-
5,421
2,354
2,047
14
9,822
1%
25%
Number of
debtors
Total
Number of
Debt
debtors
4
2
1
20,057
7,976
6,809
3,837
512
48
296
1,561
38,679
2,417
0%

The largest category of debtors includes balances between UAH 50 mln UAH 500 mln, which in total represent 42% of the
Groups debt for the sale of gas, covering 98 debtors.
48% of the total debt is due from 21 debtors with individual exposure over UAH 500 mln.
Such clients include trading companies (e.g., LLC Gazukraina-Commerce UAH 2,047 mln.), large chemical producers (such as
Rivbeazot PJSC, Concern Stirol PJSC, Severodonetzke objednannya Azot CJSC and Cherkassy Azot PJSC) with total debt of UAH
3,881 mln), as well as heating companies (Kharkivski teplovi merezhi CE UAH 1,569 mln., Kyivenergo PKSC - 1,331 mln., etc.).

Naftogaz of Ukraine
31 July 2015
32
The Groups receivables by ownership category of the debtor
Consolidated debt owed to the Group by group of customers and year of origination,
As at 31 December 2014, 54% of the total debt of the

Group was due from privately owned companies with
oblgases and industrial companies being the main
categories of customers.
60% of the debt owned by the Group from heating

companies were attributed to legal entities in
municipal ownership.
67% of the debt due from the industrial companies

were concentrated within the chemical sector, with the
majority of legal entities being privately owned.
Year of origination
UAH in millions
Privately owned companies
Oblgases
Heating companies*
Other
Chemical
Metallurgical
Other industries
SOEs
Oblgases
Heating companies*
Other
Chemical
Metallurgical
Other industries
Municipally owned companies

Heating companies*
Other
Households
Public entities
Total
2014
7,848
4,049
2,991
5,936
3,931
1,107
898
5,936
20,824
4,342
2,648
156
1,060
84
895
81
1,060
8,206
128
4,026
763
870
658
2
210
870
5,787
94
1,362
164
637
568
2
67
637
2,257
11,982
35
3
2013
984
755
584
39
9
30
39
2,362
2012
2011
2010
before
2010
41
238
1,421
379
2
377
379
2,079
247
140
10
1,951
1,725
226
1,951
2,348
2,108
191
5
1,859
1,813
46
1,859
4,163
28
1,057
7
1,092
805
236
1
1
1
1,042
3
498
2
25
23
2
25
528
3
242
246
67
62
5
67
558
62
108
140
5
135
140
310
5,145
27
1
2,414
4
-
1,869
2
1
927
1
1,047
-
580
2
-
12,020
5,173
2,418
1,872
928
1,047
582
20
28
38,679
6
10
15,652
4,993
12
2
3,818
1
3
5,772
1
8
2,567
5
5,877
126
77
815
648
298
212
138
648
1,666
-


Naftogaz of Ukraine
31 July 2015
33
As of 31 December 2014, the top 20 debtors accounted for 47% of the

Groups total debt (1 of 7)
The Group's debtors with debt more than UAH 50 m, UAH in million
Year of origination
Name of the debtor
Gazukraina-Commerce LLC
Kharkivski Teplovi Merezhi MC
Rivneazot PJSC
Kyivenergo PJSC
Donetskmiskteplomerezha MC
Kryvorizhskaya Teplocentral SE
Concern Stirol Gorlivka PJSC
Severodonetsk union Azot JSC
Donetskteplocomunenergo MC
Krymteplocomunenergo RE
Lvivhaz PJSC
Luhanskgas PJSC
Cherkasy AZOT PJSC

Teplocomunenergo Luhansk MC
Miski Teplovi Merezhi Koncern
Lisichanskiy glass factory Proletary PJSC
Dnipropetrovsk Mis'ki teplovi merezhi MC
Odessa Port Plant PJSC
Kryvorizhteplomerezha MC
Odessa Teploelektrotsentral PJSC
Owner
No information
No information
Ostchem Enterprises Limited (Cyprus) 96.4898%
Mr. Rinat Akhmetov
No information
No information
Ostchem Investments Limited (Cyprus) 90.5271%
Ostchem Ventures Limited (Cyprus) - 100%
No information
No information
Naftogaz - 25%,
Roloks PJSC - 10.6%,
Hastek PJSC - 13.1%
Ternopromservis - 10.6%
Meteron Limited PJSC - 22.95%
Naftogaz - 25%
Gastek PJSC - 26%
Holder Stock PJSC - 23.9%
PLG UA LIMITED, Cyprus - 75.57%
OMBRYDZH Ltd. - 20.1%
Uralkali PJSC - 11.3403%
No information
No information
FG Plant Holdings Limited, (Cyprus) 66.6685%
No information
State-owned
No information
State-owned

Naftogaz of Ukraine
Category
Before
2010
40
227
159
2012
1,420
109
2013
579
113
2014
47
921
Total
2,046
1,569
Heating companies
Heating companies
Heating companies
297
0
0
0
978
24
114
20
21
236
407
381
36
333
288
47
1,295
502
215
1,341
1,331
1,287
1,235
Heating companies
Heating companies
0
5
75
556
92
25
935
344
38
24
233
147
163
294
299
277
1,009
900
825
773
Oblgases
318
26
313
657
Oblgases
307
87
247
641
Heating companies
Heating companies
102
-
204
25
40
427
83
69
150
100
158
164
109
219
631
627
592
Heating companies
Heating companies
Heating companies
0
-
7
55
38
200
73
38
77
375
20
7
111
11
140
89
192
5
329
568
361
125
592
569
568
550
544
Other
Heating companies
2010
2011
31 July 2015
34

The Group's debtors with debt more than UAH 50 m, UAH in million (continued)
Year of origination
Name of the debtor
Owner
Krymteploelektrotsentral PJSC
Asermill Ventures LTD, (Cyprus) - 62.7717%
Kyivoblgas PJSC
Dnepropetrovskgas PJSC
Itera LLC
Kharkiv Teploelektrotsentral-5 JSC
Makiivteplomerezha MC
Kharkivhaz PJSC
Dniprodzerzhyns'k Teploelektrotsentral PJSC
Donetskoblhaz PJSC
Sevteploenergo MC
Zakarpathaz PJSC
Horlivskteplomerezha PJSC
Ivano-Frankivskgas PJSC
Vinnitsagaz PJSC
Naftogaz - 25%
LLC TRANSIT-Invest - 15%
LLC Omega-Capital - 20.4%
LLC MASHDIBUR - 13.6%
Naftogaz - 25%,
PJSC Haztek - 50.8%
Rosneft
Limited liability companyt UKRISTHAZ 99.8563%
No information
Lasfano Ukraine LLC - 17.65%,
Sodeman Limited -17.19%
No information
Naftogaz - 38%
GrandGas - 24.9%
GasCity - 24.9%
No information
Roloks PJSC - 15%
Haztek PJSC - 21%
Ahropromkomplekt PJSC - 15% PJSC
Ternoprominvest - 15%
No information
Naftogaz - 25%
PJSC Haztek - 35%
PJSC Rolyuks - 15.2%
Naftogaz - 25%
Rolyuks PJSC - 19%
Hastek PPJSC- 34.7%
Ahropromkomplekt PJSC - 19.1%

Naftogaz of Ukraine
Category
Before
2010
2010
2011
2012
2013
2014
Total
Heating companies
55
18
198
207
479
Oblgases
75
49
354
478
Oblgases
Other
457
142
-
34
-
285
-
461
457
Heating companies
Heating companies
14
57
4
41
26
161
120
288
166
454
423
Oblgases
Heating companies
2
0
92
-
3
33
71
35
113
263
161
396
378
Oblgases
Heating companies
18
63
85
61
100
295
72
356
337
Oblgases
Heating companies
10
158
15
7
47
46
97
117
150
329
325
Oblgases
15
118
29
156
317
Oblgases
78
16
220
314
31 July 2015
35

Year of origination
Name of the debtor
Poltavaoblenergo PJSC
Chernomorneftegaz PJSC
Zaporizhgas PJSC
Chernihivgas PJSC
Odesagas PJSC
Zuevskaya experimental Teploelektrotsentral SE

Dniprogaz PJSC
Volynhaz PJSC
Poltavagaz PJSC
State Reserve Agency of Ukraine
Teplopostachannya of Odessa MC
Lvivteploenerho MC
Owner
FC Meridian LLC - 12.6%
Ltd. IR Business-Invest - 12,75%
Larva Investments limited - 25%
UA Energy Distribution Holding Limited 23.29%
Bikontia Enterprises Limited - 23.9%
State-owned
Naftogaz - 25%
Hastek PJSC - 49.9%,
Centragas Holding Limited - 14.5%
Naftogaz - 25%
Lasfano Ukraine LLC - 13.28%
Roloks PJSC - 19.65%
Hastek PJSC - 13.08%
Ahropromkomlekt PJSC - 10%
Zemare Limited - 20.36%
Semenco Limited - 20.3%
Vorean holdings & Investments Limited 20.74%
Raysure Limeted - 20.31%
No information
Sagacity Limited - 16%
Humgate Holdings Limited - 21%
Tanter Holdings Limited - 16%
Eriswell Trading Limited - 16%
Roloks PJSC - 14.3%
Hastek PJSC - 38.6%
Ahropromkomplekt PJSC - 14.3%
Ternoprominvest PJSC - 14.3%
No information
State-owned
No information
No information

Naftogaz of Ukraine
Category
Before
2010
2010
2011
2012
2013
2014
Total
Heating companies
Other
1
-
37
231
92
-
166
49
296
280
Oblgases
79
21
172
280
Oblgases
93
49
131
279
Oblgases
Heating companies
0
0
15
59
59
19
71
97
145
85
275
274
Oblgases
42
104
51
73
271
Oblgases
Oblgases
Other
Heating companies
Heating companies
2
0
108
31
238
0
45
0
4
2
25
38
18
63
19
40
120
144
187
102
248
240
238
231
229
31 July 2015
36

Year of origination
Name of the debtor
Severodonetsk teploelektrotsentral SE
Teploenergo Dnipropetrovsk City Council MC
Zhytomyrteplokomunenerho MC
Khmelnitskgaz PJSC
Zhytomyrhaz PJSC
Sumyhaz PJSC
Chernivtsihaz PJSC
Luhanskteplokomunenerho
CP HMR coals Vuhlyk MC
Orion Kyiv
Kherson Teploelektrotsentral JSC
Oblteplocomunenergo PJSC
Alchevsk Metallurgical Plant PJSC
Kharkivmiskgaz PJSC
Rivnegaz PJSC
Vinnytsyamiskteploenerho MC
Mykolayivgas PJSC
Energomashspetsstal PJSC
Lysychanskteplomerezha MC
Management of infrastructure of territory HO MC
Owner
No information
No information
No information
Naftogaz - 25%,
Hastek PJSC - 50%
Khmelnitskgaz PJSC - 24%
Naftogaz - 25%
Stoke Holder PJSC - 20.85%
Oksilend Ltd. - 24.17%
Roloks PJSC - 14.69%
Hastek PJSC - 34.3%
Ternopromservis PJSC - 14.69%
No information
No information
No information
State-owned
No information
No information
Sodeman Limited - 18.1%
Humgate Holdings Limited -19.17%
Tanter Holdings Limited - 18.88%
Eriswell Trading Limited - 20.06%
Naftogaz - 25%
Hazek - 31.6%
Ahropromkomplekt - 16%
MATHERON LIMITED - 24.8%
No information
Naftogaz - 25%
Haztek PJSC - 50.22%
EMSS Holdings Limited (Cyprus) - 92.6771
No information
No information

Naftogaz of Ukraine
Category
Before
2010
2
-
2010
11
1
55
2011
20
7
3
2012
14
11
32
131
48
2014
180
64
74
Total
225
216
212
Oblgases
21
44
13
130
208
Oblgases
71
13
123
207
Oblgases
55
25
104
186
0
162
3
178
10
9
-
48
5
11
11
27
-
0
4
15
12
8
-
8
25
34
48
-
31
58
22
24
-
101
1
66
86
56
166
181
179
179
178
176
171
166
Oblgases
35
28
10
86
159
Oblgases
Heating companies
14
0
38
3
15
13
47
87
82
151
147
Oblgases
Heating companies
Heating companies
21
4
50
22
6
2
8
25
7
26
39
9
18
41
83
129
24
33
144
137
136
130
Heating companies
Heating companies
Heating companies
Oblgases
Heating companies
Heating companies
Other
Heating companies
Heating companies
2013
31 July 2015
37

Year of origination
Name of the debtor
Dneprovskiy Metallurgical Plant im.F.Ye.
Dzerzhinsky PJSC
ISD
Ivano-Frankivskteplokomunenergo SME
Rivneteploenergo LLC
Owner
No information
Bilotserkivteplomerezha MC
Power system MC
Ukravtohaz SE
No information
No information
No information
Sodeman Limited - 21%
Humgate Holdings Limited - 19%
Tanter Holdings Limited - 14%
Eriswell Trading Limited - 22%
No information
No information
Naftogaz - 25%
Ltd. PROMTEKHRESURS - 42.75%
State-owned
PJSC Dniprogaz - 10.7%
Sodeman Limited - 13.8%
Humgate Holdings Limited - 21.08%
Tanter Holdings Limited - 15.02%
Eriswell Trading Limited - 17.77%
Sagacity Limited - 12.51%
No information
No information
No information
Mariupol met. Plant Ilyich PJSC
Mr. Rinat Akhmetov and Mr. Vadim Novinskyy
Teplotrans MC
Edyni Energy Systems of Ukraine
Kirovohradteplo LLC
Energetyka ta palyvo Ukrainy SE
No information
No information
No information
No information
Makiyivka metallurgist. integrated works
Kirovogradgas JSC
Heat supply system MC
State-owned
No information
Donetskmiskhaz PJSC
Nikopolteploenergo MC
Ternopilmiskhaz PJSC
Ternopilhaz PJSC
Hlib of Ukraine SE
Kryvorizhhaz PJSC

Naftogaz of Ukraine
Category
Heating companies
Heating companies
Before
2010
2010
2011
2012
2013
2014
Total
121
0
-
29
10
7
11
38
-
14
3
123
0
31
94
123
121
119
119
1
0
9
8
8
8
12
20
23
11
6
30
19
104
46
45
118
118
112
6
110
4
-
26
-
1
-
20
-
56
-
112
110
0
-
8
22
1
-
1
0
-
10
1
-
8
16
43
-
88
53
53
98
103
102
98
98
Heating companies
Other
Heating companies
Other
94
0
90
5
-
3
17
-
5
22
-
41
21
-
97
46
29
-
97
96
94
93
90
Oblgases
Heating companies
89
0
1
-
3
5
21
12
63
71
89
89
88
Oblgases
Heating companies
Oblgases
Oblgases
Oblgases
Heating companies
Heating companies
Other
31 July 2015
38

Year of origination
Name of the debtor
Donetsk-Energy LLC
Interpipe Niko Tube LLC
Owner
PJSC Kyyivenerhoholdinh - 60%
DEPARTMENT OF KYIV municipal property
executive body of Kyiv City Council (Kyiv City
State Administration) - 28.4553%
No information
No information
Lasfano Ukraine LLC - 20.35%,
Interregional trade company Ltd - 15.81%
Perrit Select investments Limited - 22.56%
State-owned
No information
No information
Zaporizhstal-PC LLC - 21.83%
Kyiv Sekyuritiz Group LLC - 24.5%
Hals-Invest Ltd.- 17.06%
Global steel investments limited - 12.35%
Midland Capital Management LLC -11.22%
PJSC Neycherel end likvified Petrolem CEO 60.9%
No information
No information
Interpipe Nizhnedneprovskiy Rolling Plant PJSC
Saleks Investments Limited - 60%
Poltavateploenerho
Umanteplokomunenerho Uman MC
Ukrspirt SE
No information
No information
State-owned
Naftogaz - 25%
Limited Liability Company investment
company FINLEKS-INVEST - 40.8%
No information
No information
No information
No information
Kyivgas PJSC
Alchevskteplokomunenerho MC
SGS Plus LLC
Cherkasygaz PJSC
Sumykhimprom PJSC
Pavlohradteploenerho MC
Chervonohradteplokomunenerho MC
Zaporizhstal JSC
Khersongas PJSC
Melitopolhaz JSC
UZHKH MC
Mykolayivoblteploenerho RMC
Lutskteplo SE
Melitopol's'ki Thermal Network LLC

Naftogaz of Ukraine
Category
Oblgases
Heating companies
Heating companies
Before
2010
2010
2011
2012
2013
2014
Total
13
4
20
2
9
1
1
17
1
6
36
36
26
30
33
25
88
87
87
Oblgases
Heating companies
Heating companies
0
0
-
62
7
6
23
15
4
15
26
25
12
26
61
31
19
86
85
80
80
80
80
Oblgases
Heating companies
4
-
18
22
-
56
45
70
74
71
70
Heating companies
Heating companies
2
5
-
1
1
-
9
-
12
-
69
63
38
66
69
67
66
66
13
4
-
20
5
11
10
0
1
3
3
25
2
21
10
10
12
1
17
22
17
47
38
21
64
64
62
61
61
Oblgases
Heating companies
Heating companies
Heating companies
Heating companies
31 July 2015
39

Year of origination
Name of the debtor
Owner
Mykolaiv Teploelektrotsentral PJSC
Chernivtsiteplokomunenerho MC
State-owned
Naftogaz - 25%
Haztek PJSC - 24%
National Joint Stock Company
Chornomornaftogas PJSC - 15.5%,
Lasfano Ukraine LLC - 15%
No information
PJSC Azovstal
Smela Energoinvest LLC

Ternopilmiskteplokomunenerho MC
No information
No information
Ltd. Mahraz - 76,9%
UITC LIMITED - 11,24%
No information
Krymhaz PJSC
Mariupolgaz PJSC
Heat networks meters. Volnogirsk MC
Eastern European teploenerhoheneruyucha
company
Stanislav thermal power Co., LLC
Teplocomunenergo Antratsitovsky MC
No information
No information
No information
Category
Before
2010
2010
2011
2012
2013
2014
Total
Heating companies
57
61
Oblgases
Heating companies
37
3
2
12
15
3
6
41
60
59
Heating companies
Heating companies
1
-
8
1
9
-
18
-
57
20
55
57
57
56
Oblgases
Heating companies
1
-
11
15
8
25
46
-
55
53
Heating companies
Heating companies
Heating companies
17
3
16
1
20
5
11
5
17
24
25
14
53
53
51
Source: smida.gov.ua, IFRS financial statements for 2014 (where publicly available)

Naftogaz of Ukraine
31 July 2015
40
Appendix 1
Terms of Reference

Naftogaz of Ukraine
31 July 2015
41
Appendix 1 Terms of Reference
Terms of Reference (1 of 4)

Naftogaz of Ukraine
31 July 2015
42
Terms of Reference (2 of 4)

Naftogaz of Ukraine
31 July 2015
43
Terms of Reference (3 0f 4)

Naftogaz of Ukraine
31 July 2015
44
Terms of Reference (4 0f 4)

Naftogaz of Ukraine
31 July 2015
45
Appendix 2
Scope and Process

Naftogaz of Ukraine
31 July 2015
46
Appendix 2 Scope and Process
Scope and process
Scope
Process
Scope of our work
This report covers analysis of external receivables due from the sale of gas and recorded on the books of Naftogaz,
Ukrgazvydobuvannia, Ukrtransgaz and Gaz of Ukraine (the Group). It does not cover any intra-group receivables
which originated from transactions between the companies of the Group.
Exclusions from scope
As instructed, we have not carried out any analysis of other receivables recorded on the books of the Group and
which did not relate to the sale of gas. In addition, the following receivables were excluded from our analysis:
Receivables of Ukrtransgaz due for the transportation services in relation to the gas sold by Naftogaz to the
regional gas distribution companies for further supply to households and budget organisations, as such
services and related receivables are subject to individual contracts between Ukrtransgaz and its customers and
are separate from Naftogazs contracts for the sale of gas;
Receivables of Gaz of Ukraine for the sale of condensed gas, as this type of gas is classified as oil product which
is subject to seprate regulations.
Review process
Our work was performed over the period starting from 12 June 2015. We visited the headquarters of the Group as
well as offices of Ukrgazvydobuvannia, Ukrtransgaz and Gaz of Ukraine. We had access to the Deputy Chairman
of the Board Mr. Sergiy Konovets and various other members of senior management.
Access to information
Our work has comprised a review and analysis of the financial and other information provided to us by the Group
and discussions with management. We have assumed that this information and managements explanations and
representations are complete, accurate and reliable.
We note that we were not provided with the information on the business groups and beneficial owners of the
Groups debtors, as such information was not available in the books and records of the Group.
Basis of our work
We have not carried out anything in the nature of an audit nor, except where otherwise stated, have we subjected
the financial or other information contained in this report to checking or verification procedures. Accordingly, we
assume no responsibility and make no representations with respect to the accuracy or completeness of the
information in this report, except where otherwise stated.

Naftogaz of Ukraine
31 July 2015
47
Appendix 3
Additional Information

Naftogaz of Ukraine
31 July 2015
48
Appendix 3 Additional Information
The Groups receivables by customer category and year of origination
Debt owed to Gas of Ukraine by customer category and year of origination,

Year of origination
UAH in millions
Heating companies
Oblgases
Other
as a % from total
before
2010
708
126
338
245
1,417
14%
2010
2011
1,480
1,991
1,926
5
5,402
54%
974
215
1,916
16
3,121
31%
2012
2013
75
1
76
1%
0%
2014
0%
Total
3,237
2,333
4,180
266
10,016
100%
%
32%
23%
42%
3%
100%
Debt owed to Naftogaz by customer category and year of origination, as of

31 December 2014
Year of origination
UAH in millions
Heating companies
Oblgases
Other
before
2010
11
450
684
1,145
4%
2010
120
250
370
1%
2011
591
35
61
10
697
2%
2012
2013
2,837
40
381
1,659
4,917
17%
4,226
9,155
1,012
4,436
39
1,698
600
363
5,877 15,652
21%
55%

Naftogaz of Ukraine
2014
Total
16,820
5,643
2,629
3,566
28,658
100%
%
59%
20%
9%
12%
100%
31 July 2015
49
The introduction of special accounts was an important step in improving

payments from the Groups major customers (i.e., heating companies and
oblgases)
Industrial companies and other
entities
End customers
Special distribution accounts

opened by oblgases for each
group of customers*

opened by Heating
companies for each group of
customers**

opened by Naftogaz
Current accounts of
oblgases (gas supply and
distribution fee (including
ITL))
Current accounts of
oblgases (gas distribution
fee (including ITL))
Current accounts of
oblgases (gas distribution
fee (including ITL))
Current account of
Ukrtransgas (gas
transportation fee)
Current account of
Ukrtransgas (gas
transportation fee)
Current account of
Ukrtransgas (gas
transportation fee)
Current accounts of Heating

companies (premises
heating and water heating
fee)
Naftogaz special account
Naftogaz current account (gas)

Gas supply company level
Heating company level
Distribution of fees for ITL of gas (if there is an overdue

debt)
* Population, Public organizations, Industrial companies and other
entities, religious organizations, Heating companies and other
customers
Special accounts were introduced for all

categories of the Groups customers in
2008 (except for heating companies, for
which they were introduced only in
2014).
Payments from customers for gas (to

Naftogaz or oblgases) or heat (to heating
companies) are made to special account
where they are automatically distributed
between providers of gas, heat and
transportation services (i.e., Naftogaz,
heating companies, Ukrtransgas and
oblgases).
The major advantage of special accounts,

is that oblgases and heating companies
are not allowed to withdraw funds from
such accounts and payments to Naftogaz
do not depend on their discretion, but on
the level of payment made by end
customers.
Naftogaz level
** Population, Public organizations, other customers

Naftogaz of Ukraine
31 July 2015
50
Debtors with the largest claims from the Group (1 of 2)
Debtors of Naftogaz with the total claims over UAH 500 mln
Principal
debt
UAH in millions
1 Ky iv energo, PJSC
2 Gas Ukraine Commerce, LLC
3 Kharkiv ski teplov i meregi, MC
4 Kry v orizka teplocentral, SC
5 Kharkiv ska TEC-5, PJSC
6 Mariupolteplomerega, MCC
Donetskteplocomunenergo
7 Oblasne, MC
8 Kry mteplokomunenergo, LC
9 Cherkasy gaz, OJSC
10 Poltav aoblenergo, PJSC
11 Donetskmiskteplomerega, MCC
Ly sy schnsky y sklozav od
12 Proletariy , PJSC
13 Interpipe NZD, OJSC
14 Kry mteploelectrocentral, LLC
Electricity and
heating
Other
Electricity and
heating
Electricity and
heating
Electricity and
heating
Electricity and
heating
Electricity and
heating
Electricity and
heating
Oblgases
Electricity and
heating
Electricity and
heating
Industrial
companies
Industrial
companies
Electricity and
heating
Tot al claims
Final
court
Fines and
decision
Penalt ies
t aken
Pending
Tot al
amount
Enforcement
procedure
Rest ruct
ured
Claims confirmed by court

ATO
zone
Suspended
and
Paid
enforcement Crimea
Tot al
amount
% 0f claims
confirmed*
2 491
1 896
496
7 17
1 367
2 494
1 620
119
2 987
2 61 3
332
-
7
-
96
-
1 60
-
2 081
595
2 081
44%
83%
7 80
335
97 1
1 44
1 115
11
77
627
7 15
7 4%
81 2
233
1 045
1 045
51 6
1 28
322
966
92%
7 39
269
1 008
1 008
64
1 95
557
81 6
81 %
7 67
227
544
450
994
17 0
1 68
45
383
7 0%
57 6
17 0
549
1 97
7 46
253
11
267
49%
595
650
114
12
37 8
41
331
621
7 09
662
235
36
9
-
244
40
65%
98%
329
293
90
532
622
68
68
7 6%
501
95
441
1 55
596
65
65
1 5%
481
92
57 3
57 3
29
486
51 5
90%
432
1 32
564
564
n/a
426
11 47 5
1 03
3 288
29
9 530
500
5 233
529
14 7 63
1 7 14
663
28
584
1 7 32
2 090
28
6 7 83
97 %
7 1%

Naftogaz of Ukraine
31 July 2015
51
Debtors with the largest claims from the Group (2 of 2)
Debtors of Gas of Ukraine with the total claims over UAH 400 mln
Principal
debt
# UAH in millions
1
2
3
4
Ky iv energo, PJSC
Riv neazot, PJSC
Concern Stirol, PJSC
Sev erodonetsk union Azot, CJSC
5 Kharkiv ski teplov i merezhi, MC

6 Cherkasy Azot, OJSC
7 Interpipe Nizhnedneprov sky y
Rolling Plant, PJSC

8 Kry v orizka Teplocentral, SE
9
Donetskmiskteplomerezha, MCC
Electricity and
heating
Industrial
Industrial
Industrial
Electricity and
heating
Industrial
Industrial
Electricity and
heating
Electricity and
heating
Fines and
Penalt ies
Tot al claims
Final
court
decision
t aken
Claims confirmed by court
Tot al
amount
Pending
Enforcement
procedure
Rest ruct
ured
Writ t enOff
Tot al
amount
Paid
% 0f claims
confirmed*
2 244
1 41 7
1 009
81 7
351
326
660
483
2 595
47 5
-
1 268
1 669
1 300
2 595
1 7 43
1 669
1 300
19
-
1 027
446
-
1 027
465
-
40%
98%
n/a
n/a
954
539
1 97
240
1 1 51
631
1 48
1 1 51
779
658
631
43
-
291
-
992
631
86%
1 00%
57 1
67
57 1
67
638
57 1
57 1
1 00%
493
113
606
606
320
258
57 8
95%
399
80
47 6
47 9
95
79
17 2
1 49
495
1 04%
8 443
2 517
6 505
4 455
10 960
1 7 23
122
7 21
2 193
4 7 59
7 3%

Naftogaz of Ukraine
31 July 2015
52
Regional allocation of Naftogaz claims against debtors
T otal claim s
Principal
UAH in m illions
debt
Ky iv
16
Ky iv region
3 01 9
Lv iv region
396
Odessa region
51 0
Riv ne region
492
Zaporizzhy a region
41 9
Vinny tsy a region
244
Voly n' region
117
Zhy tomy r region
208
Zakarpatty a region
Iv ano-Frankiv sk region
1 09
Kirov ograd region
250
My kolaiv region
1 06
Poltav a region
47 6
Sumy region
83
Ternopil region
76
Kharkiv region
1 990
Kherson region
251
Khmelny tsk region
228
Cherkasy region
883
Cherniv tzi region
1 42
Chernigiv region
381
Donetzk region
2 852
Lugansk region
1 060
Dnipropetrov sk region
2 91 7
Crimea
3 666
20 891
Fines and
penalties
20
7 98
1 69
21 5
1 88
1 61
75
38
78
10
68
67
50
357
45
21
7 56
59
80
64
38
90
7 29
21 2
7 85
1 1 20
6 293
Final
court
decision
taken
34
1 950
456
489
67 5
118
17 8
1 51
27 9
10
1 67
255
113
250
76
90
2 502
27 1
1 92
323
17 9
354
2 284
1 21 6
2 7 13
3 628
18 953
Claim s confirm ed by court
Pending
2
1 867
1 09
236
5
462
1 41
4
7
10
62
43
583
52
7
244
39
116
624
1
117
1 297
56
989
1 1 58
8 231
T otal
am ount
36
3 81 7
565
7 25
680
580
31 9
1 55
286
10
17 7
31 7
1 56
833
1 28
97
2 7 46
31 0
308
947
1 80
47 1
3 581
1 27 2
3 7 02
4 7 86
27 184
Enforcem ent
procedure
5
621
289
1 91
525
61
89
3
1 96
38
68
8
1 00
12
19
1 49
1 28
92
17 0
27
6
630
37 1
97 6
380
5 154
Written- Restructu
Off
red
2
30
31
3
1
4
17
3
6
74
2
18
17 0
39
485
1
55
831
Paid
1
1 59
54
34
36
4
17
380
5
3
63
21
22
9
1
360
90
54
69
38
115
598
10
1 1 49
285
3 57 7
Suspended
enforcem ent
21 0
36
39
7
5
10
24
1
69
59
38
1
1 1 83
29
67
95
58
560
2 491
Bankruptcy
proceedings
56
6
62
AT O zone
and
Crim ea
4
1
2 1 52
2 157
T otal
am ount
6
1 022
41 0
264
568
73
1 07
393
229
1
1 27
1 90
29
1 60
24
21
1 772
247
1 48
239
65
262
1 503
964
2 686
2 81 7
14 327
% 0f claim s
confirm ed*
1 8%
52%
90%
54%
84%
62%
60%
260%
82%
1 0%
7 6%
7 5%
26%
64%
32%
23%
7 1%
91 %
77%
7 4%
36%
7 4%
66%
7 9%
99%
7 8%
7 6%

Naftogaz of Ukraine
31 July 2015
53
Regional allocation of Gas of Ukraine claims against debtors
T otal claim s
Final
court
Principal Fines and decision
UAH in m illions
debt
Penalties
taken
Pending
Ky iv
2 496
407
2 901
2
Ky iv region
17 9
50
229
Lv iv region
395
81
47 4
2
Odessa region
825
95
920
Riv ne region
1 594
364
690
1 268
Zaporizzhy a region
1 27 9
61 3
421
1 47 1
Vinny tsy a region
247
54
301
Voly n' region
1 67
30
1 97
Zhy tomy r region
231
62
288
5
Zakarpatty a region
204
29
233
Iv ano-Frankiv sk region
27 1
51
322
Kirov ograd region
99
30
1 29
My kolaiv region
1 37
23
1 60
Poltav a region
205
47
233
19
Sumy region
1 38
34
1 68
4
Ternopil region
1 53
31
1 84
Kharkiv region
2 1 83
778
2 245
7 16
Kherson region
83
19
1 02
Khmelny tsk region
223
55
27 7
1
Cherkasy region
689
285
826
1 48
Cherniv tzi region
24
5
29
Chernigiv region
207
41
248
Donetzk region
1 81 7
421
2 01 4
224
Lugansk region
1 384
27 7
1 033
628
Dnipropetrov sk region
2 07 3
444
2 439
78
Crimea
57 8
1 08
67 1
15
17 881
4 434
17 7 34
4 581
Claim s confirm ed by the court
T otal
am ount
2 903
229
47 6
920
1 958
1 892
301
1 97
293
233
322
1 29
1 60
252
17 2
1 84
2 961
1 02
27 8
97 4
29
248
2 238
1 661
2 51 7
686
22 315
Enforcem ent Written- Restruct

procedure
Off
ured
72
39
49
1 04
33
16
40
27 0
116
1
112
1 00
54
77
53
71
1 91
76
3
1 08
3
39
90
1 07
115
2
1 60
32
25
17 3
95
33
35
1
1 07
10
27
112
1
1
81
15
1
54
61
7 05
7 83
89
21
14
64
66
649
57
1
8
8
45
1 38
36
51 2
31 0
41 8
27 7
326
221
400
7 55
1 20
237
64
61
3 490
4 212
1 648
Paid
1 083
50
8
1 51
480
47
1 48
24
20
2
42
49
19
37
222
8
64
82
9
10
340
19
966
23
3 903
Suspended Bankruptcy
enforcem ent proceedings
36
7
25
1
14
17
27
15
14
128
T otal % 0f claim s
am ount confirm ed*
1 243
43%
203
89%
434
92%
400
43%
664
96%
385
91 %
269
89%
17 8
90%
245
85%
223
96%
295
92%
110
85%
118
7 4%
1 89
81 %
116
69%
1 53
83%
1 7 99
80%
43
42%
1 94
7 0%
7 88
95%
26
90%
229
92%
1 607
80%
858
83%
2 241
92%
385
57 %
13 395
7 6%

Naftogaz of Ukraine
31 July 2015
54
Recently adopted legislation regulating general principles of the natural

gas market in Ukraine
Law No. 1645-VII On Reform of the Unified Gas
Transportation System adopted by the Parliament on 14
August 2014
This Law envisages, inter alia, creation of the Operator of the united
gas transportation system (UGTS), a company founded by the state
or by a company owned by the state/the company with at least 51%
of the corporate rights owned by the state. Such Operator should be
determined by the executive body responsible for the oil and gas
sector. Co-founder of the UGTS Operator can be a legal entity,
which is owned or controlled by the resident of the European
Union, the USA, or from the countries included to the European
Energy Union under certain conditions set by the mentioned Law.
Law No. 329-VIII On the Natural Gas Market adopted by the

Parliament on 9 April 2015
This Law was developed in order to fulfil the Law of Ukraine On

Ratification Of The Protocol Regarding Accession Of Ukraine To
Incorporation Of Energy Union No.2787-VI dated 15 December
2010 and implementation of the EU Association Agreement. It
establishes economically substantiated approaches to the
organisation of the natural gas market. Key pillars are as follows:
1) Separation of the Operators functions from functions of gas
producers and suppliers;
2) Clear division of functions of the state and the National
Commission;
3) Free pricing for wholesale and retail natural gas market, except
for cases when the Cabinet of Ministers uses its right to impose
special obligations on the market participant;
4) Free choice of natural gas supplier, etc.

Naftogaz of Ukraine
31 July 2015
55
Appendix 4
Glossary

Naftogaz of Ukraine
31 July 2015
56
Appendix 4 Glossary
Glossary of terms and abbreviations
Term
Definition
ATO zone
Parts of Donetsk and Lugansk regions which are not controlled by the Ukrainian Government
CJSC
Closed Joint-Stock Company
cm
Cubic meter
Company or Naftogaz
National Joint-Stock Company Naftogaz of Ukraine
EU
European Union
Gas of Ukraine
Subsidiary Company Gaz of Ukraine
Group, the
Naftogaz and its subsidiary undertakings Ukrgazvydobuvannia, Ukrtransgaz and Gas of Ukraine
IMF
International Monetary Fund
LC
Lease Company
LLC
Limited Liability Company
LLP
Limited Liability Partnership

Naftogaz of Ukraine
31 July 2015
57
Appendix 4 Glossary
Glossary of terms and abbreviations (contd)
Term
Definition
m, mln
Million
MC
Municipal Company
MCC
Municipal Commercial Company
MLC
Municipal Lease Company
National Commission
National Commission for State Energy and Public Utilities Regulation of Ukraine
Oblgases
Regional gas distributors
OJSC
Open Joint-Stock Company
PJSC
Public Joint-Stock Company
SE
State-Owned Enterprise
Quarter
ToR
Terms of Reference
UAH
Ukrainian hryvnya

Naftogaz of Ukraine
31 July 2015
58
Appendix 4 Glossary
Glossary of terms and abbreviations (contd)
Term
Definition
UGTS Operator
Operator of the united gas transportation system
UK
United Kingdom
Ukrgazvydobuvannia
Public Joint-Stock Company Ukrgazvydobuvannia
Ukrtransgaz
Public Joint-Stock Company Ukrtransgaz
VAT
Value Added Tax
Gas distribution
Transportation of gas through distribution pipelines
ITL
Industrial technical losses

Naftogaz of Ukraine
31 July 2015
59

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UK-UA: Reform Assistance

Background of the Groups activities and regulations

Overview of receivables recovery process

Consolidated receivables of the Group

Individual receivables analysis

Scope and Process

Diagnostic analysis of receivables National Joint-Stock Company

Section 1 Executive Summary

Summary of key issues (1 of 3)

Consolidated debt of the

Source: Receivables ledgers of Naftogaz and Gas of Ukraine

Diagnostic analysis of receivables National Joint-Stock Company

Section 1 Executive Summary

Summary of key issues (2 of 3)

Diagnostic analysis of receivables National Joint-Stock Company

Section 1 Executive Summary

Summary of key issues (3 of 3)

Diagnostic analysis of receivables National Joint-Stock Company

Diagnostic analysis of receivables National Joint-Stock Company

Section 2 Background of the Groups activities and regulations

Naftogaz operates in a highly regulated market. The Company is engaged

Sets key framework legislation on the

Issues licenses related to commercial

Guaranteed supplier of gas to heating

Diagnostic analysis of receivables National Joint-Stock Company

Execution of the state policy in the

Develops and executes the state

Section 2 Background of the Groups activities and regulations

Debt collection of the Group is highly

Timelines of key legislative changes

Law No.2711-IV On Measures Ensuring Functioning of

Diagnostic analysis of receivables National Joint-Stock Company

Law On Natural Gas Market

Law On Stabilization Of Financial

Section 2 Background of the Groups activities and regulations

Debt collection of the Group is highly

Timelines of key legislative changes

On 14 May 2015, the Parliament adopted Law No. 423-VIII On

Special consideration in the regulations is made to the process for

Diagnostic analysis of receivables National Joint-Stock Company

Law On Natural Gas Market

Law On Stabilization Of Financial

Section 2 Background of the Groups activities and regulations

Debt collection of the Group is highly

Timelines of key legislative changes

On 2 August 2012, the formula was amended by Resolution

On 20 May 2015, the Cabinet of Ministers of Ukraine issued

ban on bankruptcy and forced

Diagnostic analysis of receivables National Joint-Stock Company

Law On Natural Gas Market

Law On Stabilization Of Financial

Section 2 Background of the Groups activities and regulations

Naftogaz is a guaranteed supplier of natural gas in Ukraine for almost all

and religious organizations

- supply of natural gas (without

- supply and distribution of natural gas by oblgases to

Diagnostic analysis of receivables National JointStock CompanyNaftogaz of Ukraine

- gas transportation services (main pipeline)

Diagnostic analysis of receivables National Joint-Stock Company

Section 3 Overview of receivables recovery process

Gas sales department

Development of standard contract

Daily analysis of received