Ukraine

                              Gas Supply Security Facility Project

                                         October 18, 2016

                                         Chair Summary*


       The Executive Directors approved a guarantee in the amount of the Euro equivalent of
US$500 million in support of the Ukraine Gas Supply Security Facility Project (R2016-0188) to
be implemented by Public Joint Stock Company “National Joint Stock Company Naftogaz of
Ukraine� (Naftogaz). The guarantee was approved on the terms and conditions set out in the
President’s Memorandum. Mr. Lushin wished to be recorded as abstaining.

        Directors expressed broad support for the operation, which aims to enhance Naftogaz’s
ability to increase Ukraine’s security of gas supply by facilitating access to cost -effective
financing and improving the terms of the gas supply contracts supported under the project.
Directors appreciated the innovative guarantee structure design, which provides needed short-
term financial liquidity to Naftogaz. Directors underscored the importance of security of energy
supply and energy sector performance for Ukraine’s economic situation. They welcomed the
adoption of energy sector laws, the creation of incentives for risk management, transparent
procurement processes, and payment discipline, in line with broader sector reform objectives.

       Directors noted the project’s contribution to financial sustainability, institutional capacity,
and contracting by Naftogaz. They stressed the need for continued attention to social protection
measures, including social safety net reform and access to energy by the poorest and most
vulnerable. Directors also emphasized the need for effective targeting of subsidies to needy
households and effective payment collection for sustainable energy provision.

        Directors highlighted risks that could undermine the sustainability and the impact of the
operation. They urged close monitoring of risks and decisive implementation of gas sector
reforms. Directors encouraged continued dialogue with the Ukrainian authorities and
collaboration with development partners to address critical energy sector issues such as
competition, commercialization, and governance and anti-corruption, noting the importance of
expanding private sector and international investment. Directors urged continued coordination
across the World Bank Group and with the IMF, EIB, and EBRD on macroeconomic and sector-
specific issues.




__________________________________ *This
summary is not an approved record.