The international rating agency Fitch on Friday confirmed the long-term issuer default rating of NJSC Naftogaz of Ukraine in foreign and national currencies at the level of “CCC” (“default is possible”). reports this RIA Novosti with reference to the agency’s message.

Fitch emphasizes that the company's rating continues to reflect the real possibility of default given the company's weak business and financial condition, in particular due to its dependence on the Ukrainian government to maintain liquidity levels.

“One of the key problems for Naftogaz is the discrepancy between prices for gas imported by the Russian Gazprom (which has a long-term Fitch rating of BBB with a positive outlook) and tariffs for Ukrainian heating companies,” the report notes.

According to the rating agency, tariffs for Ukrainian consumers and heat supply organizations have increased by 50% since August 1, 2010, but the Ukrainian government has refused to further increase prices. While the price of gas supplied by Russia increased by almost 60% from the end of 2010 to the end of 2011.

Meanwhile, an increase in gas prices for the population is one of the conditions for providing Ukraine with the next tranche of an IMF loan. The Ukrainian government continues to hope for a revision of prices for imported gas from Russia.

According to Fitch experts, “a scenario of closer cooperation with Gazprom on gas transit through Ukraine and lower import prices could have a positive impact on Naftogaz’s position.” At the same time, analysts take into account the decrease in Gazprom’s dependence on gas transit to EU countries through Ukraine and, as a consequence, a possible decrease in the volume of transit through Ukraine.

Earlier on Friday, Deputy Chairman of Naftogaz Vadim Chuprun said that the price of Russian gas for Ukraine in the first quarter is $416 per 1 thousand cubic meters, in the second and third quarters it will be $418, in the fourth quarter - $413. The average annual price will be $415.77 per 1 thousand cubic meters.

Since the beginning of 2011, Ukraine has been negotiating with Russia to reduce gas prices, which Kyiv considers unfair. The Russian government agrees to revise the price of gas, subject to the creation of a joint venture with Gazprom and Naftogaz. A new round of gas negotiations is due to begin on January 17.

Fitch views the outcome of the negotiations as highly uncertain.

Fitch experts also note a possible increase in the cash gap (negative free cash flow) of Naftogaz in 2012 compared to 2011, based on current prices for imported gas and domestic tariffs.

In addition, in 2012, an irrevocable undrawn credit line in the amount of $25 million (200 million hryvnia) and debt payments of approximately $1.3 billion (10.4 billion hryvnia) come due. Naftogaz expects to receive subsidies from the state and new loans to make payments due. Thus, the company's liquidity remains weak.

In November 2009, Fitch upgraded the long-term issuer default rating of NJSC Naftogaz of Ukraine from RD (limited default) to CCC with a negative outlook.

Fitch confirmed the rating of Naftogaz of Ukraine at the level of "CCC"