REG - Enwell Energy PLC - Ukraine Update

Enwell EnergyAnnouncement

17/01/2022 07:05

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RNS Number : 5601Y  Enwell Energy PLC  17 January 2022

17 January 2022

Enwell Energy plc

("Enwell" or the "Company")

 

Imposition of Temporary and Partial Gas Price Regulation

by the Ukrainian Government to Support Social Initiatives

 

Enwell Energy plc (AIM: ENW), the AIM-quoted oil and gas exploration and
production group, announces that the Ukrainian Government has issued
governmental decrees to impose temporary and partial gas price regulation in
order to support the production of certain food products through the supply of
gas at regulated prices to the producers of such products.

 

These recently published governmental decrees establish a scheme (the
"Scheme") under which all independent gas producers in Ukraine (as identified
by a committee set up by the Ukrainian Government (the "Committee")) must sell
up to 20% of their natural gas production for the period until 30 April 2022
at a price set at the cost of sales of the relevant gas producer (based on
established accounting rules) for such gas, plus a margin of 24%, plus
existing production taxes (the "Regulated Price"). This gas is then to be sold
to specified producers of designated socially important food products (as
identified by the Committee) at the Regulated Price, so as to reduce the
energy costs of such producers during the period through to 30 April 2022. The
designated products are certain types of flour, milk (with up to 2.5% fat),
bread, eggs, chicken and sunflower oil, for sale in the Ukrainian domestic
market.

 

Under the Scheme, the specified food producers must notify the Committee of
their respective gas requirements for the forthcoming month, based on their
production estimates for the designated food products during that month. The
Committee will then notify the independent gas producers of the quantity of
gas required under the Scheme, and the gas producers are obliged to supply
such quantity of gas on a pro rata basis in proportion to each producer's
prior month's share of the total production of such independent producers. The
gas is then to be sold at the Regulated Price to certain specified gas traders
via an existing electronic gas trading platform named the Ukrainian Energy
Exchange (the "UEE"), who are then obliged to sell such gas to the specified
food producers in accordance with their previously notified gas quantity
requirements. There is also regulation on the margin that the respective
specified food producers can apply in selling their designated products.

 

The Scheme is expressed to be a temporary measure until 30 April 2022 in order
to support the production of the designated food products and to moderate the
price of such food products for domestic consumers in a period where gas
prices have been high in Ukraine. However, the regulation of gas prices
through this mechanism, does present some serious inconsistencies between the
market rules established at the time of deregulation of the gas supply market
in Ukraine in 2015, as well as the commitments given to the international
community at that time in relation to the functioning of the gas supply market
in Ukraine.

 

In light of the very early stage of the Scheme, the precise mechanisms and
procedures of the Scheme are not yet entirely clear, and the actual
functioning of the Scheme in practice will need to be monitored and understood
as it is implemented. Accordingly, the Company intends to closely monitor the
implementation and operation of the Scheme, which will enable an assessment to
be made, in due course, of the likely impact on the Company's operations and
financial condition. However, since the Scheme sets the Regulated Price for a
certain quantity of gas each month (with a maximum of 20% of production), the
overall impact on the Company will be dependent on the quantity of the
Company's gas requested by the Committee each month and the difference between
the Regulated Price and the general market gas price.

 

The Company is continuing to investigate and monitor the Scheme and its
implementation, and will provide a further update when more information is
available.

 

Sergii Glazunov, Chief Executive Officer, said: "The imposition of this gas
price regulation, albeit on a temporary basis, is a very concerning situation
for the independent gas producers in Ukraine, and indeed for the investment
climate in Ukraine generally. However, we recognise the underlying social
issues that this Scheme is intended to address, and will monitor its impact on
the market and our business."

 

This announcement contains inside information for the purposes of Article 7 of
EU Regulation 596/2014, which forms part of United Kingdom domestic law by
virtue of the European Union (Withdrawal) Act 2018, as amended.

 

For further information, please contact:

 

 Enwell Energy plc                                 Tel: 020 3427 3550
 Chris Hopkinson, Chairman
 Sergii Glazunov, Chief Executive Officer
 Bruce Burrows, Finance Director

 Strand Hanson Limited                             Tel: 020 7409 3494
 Rory Murphy / Matthew Chandler

 Arden Partners plc                                Tel: 020 7614 5900
 Ruari McGirr / Elliot Mustoe (Corporate Finance)
 Simon Johnson (Corporate Broking)

 Citigate Dewe Rogerson                            Tel: 020 7638 9571
 Ellen Wilton

 

 

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