Ministry of Energy and Coal Industry of Ukraine

Government policy, its results and experience

of the 2015-2016 winter season

March 1, 2016

Maximal use of own resources: nuclear power generation and thermal generating units of coal, which is produced by state mines

Diversification of imports of energy resources: Anthracite imports from South Africa have tripled, gas imports from Russia ceased being critical

Focus on energy self-sufficiency: Smooth completion of heating season leads to discussion on electricity exports

Increase of nuclear power generation

Independence from Russian gas supply

Heating season 2015-2016: Resources for the country’s interests

The key conclusion of the season: Ukraine meets challenge of oligarch’s threat and Russia

Established control over state enterprises and over companies with a government stake

The regulator rules on the basis of the strategic interests of the country

Losses mitigated and profits significantly increased, with the prospect of future dividends to the budget from State enterprises and companies with a government stake

Ukrgidroenergo Energoatom Ukrenergo0.5

-6.5

-1.2

1 1.2 0.8

PROFIT (BLN UAH)

2014 2015

Ukrnafta Ukrtransnafta Ukrtransgaz0.8 1

-0.8

4

1.8

7.3

PROFIT (BLN UAH)

9M2014 9M20152

Strong State: The ability to change the rules of the industry to European and pro market

The beginning of implementation of the new Gas Market Law: new codes adopted, at this stage - transparent unbundling of the NJSC “NAFTOGAZ of Ukraine” and promotion of market competition

Electricity Market Law must be in Parliament on 2nd of March

The Law on the Independent Regulator is in Parliament, it was completed with due consideration given to the opinion of independent experts

Attracting investment: maximum use of loans from international financial institutions

Being implemented: 8 projects$ 0,74billion and €2 billion

Hydrogenation: Ready projects totaling $3,4 billion, possibility to increase generation by 2.8 GW and enhance stability in the system

Thermal generation: Ready projects totaling $2,47 billion, possibility of emissions reduction and increase of effectiveness

Electricity: Ready projects totaling $3 billion, optimizing the use of different types of generation and loss reduction

Nuclear power generation: Ready projects totaling $6 billion, increasing generation to 3,000 MW.

Production of uranium products: Ready projects totaling $0.8 billion, increasing production of uranium concentrate

Modernization of gas pipeline system: Ready projects totaling $2 billion, increasing reliability and supply efficiency

Potential: 14 projects$ 17,7 billion.

Privatization today: Companies, which are put up for sale by Ukraine in 2016

Coal mining complex: readiness for investors on each of the state mines

Heating and power plants (HP's) for Kherson, Mykolaiiv, Odessa, Kryvyi Rih, Severodonetsk: searching for investor with the goal of modernization

Thermal power plants: Zmievska, Trypilska and Vuglegirska (PJSC "Centrenergo") –transferred to the State Property Fund last week

District electricity distribution companies: Sale of the state share in Zaporizhia, Kharkiv, Khmelnytsky, Ternopil and Cherkasy regions

The policy of energy independence:encouragement of domestic gas production

Vision for 2020: 27 billion CBM of domestic gas production

annually

Implementation of stimulating tax policy for the industry:• Royalties for gas production were cut in half in comparison to the

previous year• Over the course of the year the State producer “Ukrgazvydobuvannya”

will be transitioned to the general taxation scheme, which is currently applicable to private producers

• Long-term tax system for the gas production industry that is based on taxing profits is being prepared for implementation

Deregulation of the oil and gas industry:• In cooperation with relevant business associations and MPs a

comprehensive deregulation package was developed for the oil and gas industry, aiming at decreasing time from the beginning of the project till the commencement of commercial development

• Simplification of the Production Sharing Agreement (PSA) process

Further liberalization and reformation of the gas market

Thank you for your attention!