Great East Energy, Inc. (GASE), which controls over 160 square miles of producing, clean energy, natural gas holdings through two local operating companies, has signed a letter of intent (LOI) to joint venture (JV) with a leading compressed natural gas (CNG) distributor and retailer in Ukraine, GASE’s home market. The JV is expected to be formally agreed for launch in June 2014.
“Few investors in GASE realize that the Ukraine is the 8th largest natural gas vehicle (NGV) market in the world and the 2nd in Europe behind Italy,” began Timur Kkromaev, CEO of GASE. “As we continue our natural gas exploration and expand production, entering the CNG distribution and sales segment is a logical step to diversify our customer base, increase our revenues, boost our margins and increase returns to our shareholders.”
According to GASE statistics, the vast majority of the Ukraine NGV fleet is composed of retrofitted CNG-powered vehicles. Since there remains a low percentage of factory-built models distributed by major automotive brands in Ukraine, most retrofitted NGVs in Ukraine are fleet and heavy duty vehicles such as buses and trucks. Interest in CNG-fuelled vehicles is prevalent in large cities in Ukraine, where station and filling infrastructure is quickly developing and where there is strong municipal support. Ukraine now counts 332 CNG filling stations nationwide and is considered an important component of the country’s fuel market. In 2013 the consumption of CNG in Ukraine was approximately 6.4 billion cubic feet, an increase of 15% year over year. The cost advantage for fuelling NGVs compared to traditional diesel or gasoline-fueled models is the market driver behind wider use of natural gas as a transportation fuel in the country.
GASE’s intended JV is with a renowned CNG station operator with currently 10 stations in major cities in Ukraine. In 2013, the private company sold approximately USD $6.8 million of CNG, which equated to approximately 307 million cubic feet of gas. After the successful completion of addition operational and financial due diligence by GASE, Great East Energy and the private company are expected to cooperate on a project to expand CNG distribution and filling stations in Ukraine and penetrate high-volume cities with growing fleets of buses, municipal vehicles and transportation companies converting gas and diesel vehicles to clean and efficient natural gas-powered engines.
“Though our core business will remain the exploration and distribution of natural gas, CNG distribution and retail sales has been a focal point of our long-term strategy. We believe we have found an excellent partner in this regard. We look forward to the development of our plan with our partner, refining the economics and financial model of our JV and adding CNG sales to our revenue and earnings streams beginning in 2014,” CEO Timur Khromaev concluded.