Uzbekistan’s largest oil and gas company to become independent legal entity

Uzbekneftegas (UNG), Uzbekistan’s largest state-owned enterprise, the oil and gas company will be restructured to improve its long-term sustainability and credit quality following a decision by the country’s government to implement a corporate transformation plan prepared with support from the Asian Development Bank (ADB), Trend reports with reference to the Bank.

The decision was announced in a decree signed by the President of Uzbekistan Shavkat Mirziyoyev, on July 10 and is a part of a series of comprehensive energy sector reforms underway in Uzbekistan to strengthen the country’s resilience to external economic shocks and increase economic growth.

UNG’s financial sustainability is critical to the country’s economy and energy sector. The company provides more than 80 percent of Uzbekistan’s energy and electricity, contributes almost 20 percent of the national tax revenues, and accounts for 10 percent of gross domestic product.

In 2018, the government requested ADB technical assistance to help UNG develop a corporate transformation plan to improve transparency in its financial reporting and increase financial discipline, efficiency, and production.

Under the terms of the transformation plan, UNG will be restructured into a corporate legal entity that is run independently with enhanced governance and financial management structures. Meanwhile, Uztransgaz, a subsidiary of UNG that controls gas transmission in Uzbekistan, will be unbundled from the parent company and function as a standalone entity. The move is expected to remove any conflict of interests between gas producers and suppliers, while improving transparency.

The transformation of UNG will bring the company in line with international financial reporting, auditing, and governance standards that are expected to improve its ability to raise capital from international investors to finance the expansion and modernization of its gas transmission network.