Advisory
Naftogaz of Ukraine
19 September 2018
Presentation of the Gas Transmission System Operator Unbundling Roadmap 2018-2020
PwC
19 September 2018
Input to the presentation
Name Advisor Time Scope Key outcome
1 Naftogaz
Unbundling
Project
Management
06.2017 –
02.2018
To facilitate the efficient and timely unbundling
of gas transmission activity of Naftogaz of
Ukraine
✔ Branch TSO created
in 11.2017
2 Ukrainian Gas
TSO Target
Operating
Model
08.2017 –
07.2018
To prepare a business and structural plan and
a target operating model based on European
best practices
✔ Preparation of TOM
for the future TSO of
Ukrainian GTS
3 Comprehensive
study of
Underground
Gas Storage
Facilities
in Ukraine
07.2017 –
ongoing
To run independent technical review of
existing assets and define optimal storages
portfolio together with implementation
roadmap
✔ Comprehensive
study on UGS facilities
in Ukraine
4 Support in
unbundling
process
implementation
07.2018 –
ongoing
To support NAK in unbundling process
implementation through pilot function
optimization and strategic business plan
Development of the action plan for TSO
extension and separation.
✔ Strategic Business
Plan, investment
planning function
transferred to TSO
Branch;
✔ Action plan for TSO
extension and
separation
2
For the past one and a half year, Naftogaz of Ukraine has been conducting numerous projects supporting unbundling process
List of projects
Naftogaz of Ukraine
EU-
funded
EU-
funded
PwC
19 September 20183
Unbundling action plan is divided into 3 stages which will allow to reach a final goal – formal legal unbundling
Unbundling roadmap
Naftogaz of Ukraine
Storage Branch
separation
TSO Branch extension and optimization
Legal unbundling
1
2
3
Organizational
separation at all levels
Cost and process
optimization
Formal legal
unbundling
Adjustment to comply
with EU standards
PwC
19 September 2018
KharkivTG aparat(3-4 FTEs)
LvivTG aparat (~220 FTEs)
Regional branches
4
Separation of Storage Branch is planned to be based on Lvivtransgaz regional branch and includes also flattening of management structure
Storage Branch separation plan
Naftogaz of Ukraine
As-is To-be
7 units under regional branches
UTG HQ
Services/
other
TSO
Branch
Storage Production Units
(SPUs)
1st
tier
3rd
tier
Cherkasytransgaz
Kyivtransgaz
Prykarpattransgaz
Kharkivtransgaz
Lvivtransgaz
2nd
tier
Storage Branch – based on Lvivtransgaz
Proletar-
ske SPU
Mryn
SPU
Dashava
SPU
Opary
SPU
Stryi
SPU
Bogorod
-chany
SPU
Uhersko
RSS
1st
tier
2nd
tier –
SPUs
From
those
branches
only LPUs
related to
storages
Main
base for
Storage
Branch
✔
UTG aparat(15-20 FTEs)
PrikarpatTG aparat(3-4 FTEs)
KyivTG aparat aparat(3-4 FTEs)
Flattening
structure
from 3-
levels to
2- levels
1 Storage Branch separation
2 TSO Branch extension and optimization
Legal unbundling3
PwC
19 September 2018
Full separation of transmission and storage functions within UTG is planned to be performed till beginning of 2019
2018 2019 2020
Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec H1 H2
I. Storage Branch separation plan
1. Formal decision about
Storage Branch creation
2. Selection and transfer of
assets, people, procedures,
updating IT systems
3. Construction / reconstruction
of measurement points for all
storages
4. Creation of necessary
Storage Branch functions
currently not present in UTG
5. Storage SCADA development
and implementation
6. Optimization and
effectiveness improvement
Storage Branch creation finished – 1.01.2019
5Naftogaz of Ukraine
Schedule of Storage Branch separation plan (main tasks)
1 Storage Branch separation
2 TSO Branch extension and optimization
Legal unbundling3
PwC
19 September 2018
Target structure of Storage Branch could be achieved at the beginning of 2019
6Naftogaz of Ukraine
Storage Branch
Commercial
dispatching
Commercial
relations,
contracts and
customer
service,
international
relations
Strategy and
development
Relationship
with the
Regulator
Technical
dis-
patching
HR
department
Legal
services
Security Materials
and
technical
resources
Procurement Property and
land
Administra-
tive and
household
support
Finance and Accounting
Fuel and
energy
resources,
energy
saving,
ecology
Metrology
(gas
measurem
ent)
Planning and
ordering of
maintenance
and repairs,
supervision
Technical
docu-
mentation
Auto-
transport,
machine
tools, load-
lifting
equipment
Information
technology,
automation
and commu-
nication
Labour
protection
Capital
construc-
tion
Secret
paperwork
and
mobilization
training
Support functions Financial functions
Lvivtransgaz
Branch
Proletarske
UGSSMryn UGSS Dashava UGSS Opary UGSS Stryi UGSS
Bogorodchany
UGSSUhersko RSS
SPUs (all storage SPU’s will be transferred to Lvivtransgaz)
Concept of storage system operator org structure (Storage Branch)
Technical and operational functions Commercial and business dev.
1 Storage Branch separation
2 TSO Branch extension and optimization
Legal unbundling3
Initial concept of UTG
PwC
19 September 2018
1st
tierRegional
branches
merged
with
Branch
TSO
2nd
tier –LPUs
manage
technical
processe
s only
1st
tier
3rd
tier
2nd
tier
35 units under regional
branches
7
Extension plan foresees merger of TSO Branch with Regional Branches as well as flattening of the management structure from 3 to 2 levels
Key assumptions of TSO Branch extension plan
Naftogaz of Ukraine
Regional branches
As-is
UTG HQ
Services/
other
TSO
Branch
Linear Production Units
(LPUs)
Kyivtransgaz
Prykarpattransgaz
Cherkasytransgaz
Lvivtransgaz
TSO Branch
LPUs LPUs LPUs LPUsBase for
Storage
Branch
Kharkivtran
-sgaz
Prykarpat-
transgaz
Kyivtran-
sgaz
Kharkivtransgaz
✘
Flattening
structure
from 3-
levels to
2- levels
Reduction
in number
of LPUs
from 35 to
10-12
Cherkasy-
transgaz
1 Storage Branch separation
2 TSO Branch extension and optimization
Legal unbundling3
~ 137 FTEs transferred to TSO Branch in October 2018 (pilot project)
~ 5 200 FTEs transferred to TSO Branch in June 2019
~ 7 200 FTEs shall stay in UTG and should act as external service
To-be
PwC
19 September 2018
Pilot Project assumes creation of the new Network Development and Planning Department in Branch TSO and transfer of the function in October 2018
8Naftogaz of Ukraine
Network Development employees transfer
As-Is location of employees involving
in network development function
Transfer to Branch TSO
Branch
TSO
Transfer before
18.Oct 2018
• The final number of FTEs that will be transferred will
be clarified after confirmation of design of to-be
processes
UTG HQ
16 FTEs
Regional Branches
140 FTEs
LPUs
232 FTEs
Capital
Construction
Sub-
Department
Investment
Project Sub-
Department
UTG HQ’s
departments that
are subject to
analysis in terms
of FTE’s
transferring to
branch TSO
Regional Branches
Departments that are subject to analysis for FTE’s
transferring
1
2
3
1
2
Department
of
compressor
stations
operation
Department
of gas
pipeline
operation
Regional Branches'
departments that are
subject to analysis in
terms of FTE’s
transferring to
branch TSO
Capital
construction
Department
Budget
office (excl.
Kharkiv)
Transferred at
a later stage
~16 FTEs
~121 FTEs
NA
1 Storage Branch separation
2 TSO Branch extension and optimization
Legal unbundling3
~137 FTEs
PwC
19 September 2018
2018 2019 2020
Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec H1 H2
III. TSO separation plan
1. Formal decision about TSO extension
2. Assets (low value assets, land)
2.1. Selection of assets related to transmission not
yet transferred to TSO and subsequent transfer
2.2. Identification and resolving of land plot issues
3. Organizational structure & people
3.1. Analysis, approval and development of Extended
TSO 2-level org structure
3.2. Selection and transferring of people, merger of
RBs with Branch TSO and merger of LPUs
4. Preparation and/or updating of internal processes
and procedures
5. SLAs & internal agreements preparation,
acceptance and signing by all sides
6. Selection and transferring of existing contracts to
Extended TSO
7. IT systems - selection and transferring of IT
related assets to TSO together with Identification of
required changes to IT system and implementation
8. Headcount outsourcing – SLA with UTG
9. Project Management activities execution
Creation of fully functional and certifiable extended TSO based on Branch TSO and Regional Branches is planned to be finished in mid 2019
9Naftogaz of Ukraine
TSO extension
kick-off - 1.10.2018
TSO extension finished - 1.06.2019
1 Storage Branch separation
2 TSO Branch extension and optimization
Legal unbundling3
Schedule of TSO extension plan (main tasks)
TSO ready for conditional
certification – mid 2019
PwC
19 September 2018
A new optimized TSO structure will be developed and equipped with all needed functions prior to legal unbundling in 2020
10Naftogaz of Ukraine
TSO HQ*
Unbundled TSO structure
Regional service
centers
Regional service
centers
Regional service
centers
Regional service
centers
RSCs (not filias) based
on reduced number of
LPUs
Regional branches
within TSO HQ
All critical functions
within TSO HQ
(centralized)
Target TSO structure assumes that:
✔ All decisions will be made at TSO
✔ FTEs will be mostly optimized
✔ Follows EU recommendations on TOM (WECOM)
✔ 2 level structure will be developed
✔ All critical functions will be transferred or created
within TSO HQ
1 Storage Branch separation
2 TSO Branch extension and optimization
Legal unbundling3
Concept of target TSO structure
PwC
19 September 2018
Unbundled TSO structure will centralize functions, so far scattered, improving operational efficiency of the entity
11Naftogaz of Ukraine
C
Commercial
C2 Strategy, business
development and internat.
relations
C3 Network development
and Invest. planning
C4 Contracting and
customer relations
C5 Allocation and
commercial balancing
TM
Transport
management
TM2
Metering data
management
TM 3
Dispatching execution
IT
IT 2
IT operations and projects
F
Finance
F 2
Financial accounting
F 3 Management
accounting budgeting
F4 Economic and financial
analysis
CS
Corporate services
CS 2
Legal services
CS 3
Procurement
CS 4 Facility and fleet
management
CS 5
Cyber security
AM
Asset management
C1
Regulatory management
TM 1
Dispatching
IT 1
IT policy & strategy
F 1 Treasury and cash
management
CS 1
HR
AM 1
Strategic asset
management
AM 3
Project management
AM 4
Inspection and
maintenance
AM 5
Right of way
AM 6
Technical documentation
AM 2
Engineering
Supervisory board
Executive body (executive board or CEO)
Compliance officer*
Corporate secretary*
HSEQ Officer
Risk management*
Internal audit*
Corporate communication
Target TSO organizational structure according to WECOM’s TOM – HQ
* Reporting either to the supervisory board or the executive body
1 Storage Branch separation
2 TSO Branch extension and optimization
Legal unbundling3
EU-
funded
PwC
19 September 2018
2018 2019 2020
Sep Oct Nov Dec H1 H2 H1 H2
III. TSO legal unbundling
1. Creation of the new company
under UTG (NewCo TSO)
2. Transfer of TSO employees to
the NewCo TSO
3. International partner
involvement
4. Application for conditional
certification
5. Change of ownership of
NewCo TSO
6. Transmission assets to
NewCo TSO
7. Implementation of conditional
certification decision
TSO legal unbundling plan assumes TSO readiness for certification in mid-2019, while conditional certification is expected in H1 2020
12Naftogaz of Ukraine
Schedule of TSO legal unbundling (main tasks)
High-level roadmap – work in progress
1 Storage Branch separation
2 TSO Branch extension and optimization
Legal unbundling3
NewCo TSO operational - 1.06.2019
(aligned with TSO extension)
NewCo TSO applies for conditional
certification – mid 2019
Conditional
certification H1 2020