Ukrenergo declares technical default on eurobond payments for $825 mln

Starting November 9, Ukrenergo will suspend payments on its green and sustainability-linked bonds for $825 million, the company has announced.

"This technical measure will remain in effect until the planned debt restructuring is completed in the coming months. Ukrenergo, together with the Ukrainian government, is taking all necessary steps to reach an agreement with bondholders in the near term," the company stated on its Facebook page Wednesday.

According to it, the grounds for the termination of payments are the provisions of a separate law (the law of Ukraine on the peculiarities of conducting transactions with state, state-guaranteed debt and local debt and state derivatives), as well as two resolutions of the Cabinet of Ministers and an order of the authorized governing body of Ukrenergo from the state – the Ministry of Energy. The said regulations were adopted as part of Ukraine's fulfillment of the terms of cooperation with the International Monetary Fund.

"Ukrenergo informed its partners and creditors about the suspension of payments on eurobonds and assured them of the operational and financial stability of the company. We continue to fulfill our obligations and functions stipulated by Ukrainian legislation and the company charter. In particular, with regard to current tasks – preparation for winter, restoration, arrangement of protection and strengthening the stability of the energy system of Ukraine in the conditions of martial law," the company emphasized.

According to the company's website, in the near future it plans to organize negotiations with representatives of the bondholders (in particular, the EBRD) to agree on fair and mutually acceptable changes to the terms of their issue in order to ensure the long-term financial stability of Ukrenergo.

The company recalled that in 2022 the parties agreed to defer payments on bonds, which helped support it during wartime and significantly contributed to financial stability over the past two years.

Energy Reform sources in the government commented that the suspension of payments on eurobonds is a technical decision of the company's shareholder, which has nothing to do with financial and operational indicators. They also noted that a necessary condition for completing the restructuring process of eurobonds is the formation of a new supervisory board of the company, which is necessary after the dismissal of chairman of the board of Ukrenergo Volodymyr Kudrytsky and early resignation of two independent members of the supervisory board in connection with this. The new supervisory board must be formed by December 9.

As reported with reference to the memorandum on economic and financial policies on the fifth review of the EFF program with the IMF, Ukraine, after the successful restructuring of eurobonds in August of this year, also intends to restructure a number of remaining obligations to private creditors, including GDP warrants and state-guaranteed eurobonds of Ukrenergo, and allows for another restructuring if necessary closer to the end of the EFF program with the International Monetary Fund in 2027.