Misen Enterprises AB and LLC Karpatygaz Received a Second Partial Final Award

On 17 June 2020, Misen Enterprises AB and LLC Karpatygaz received a second final partial award rendered by the Arbitral Tribunal in arbitration proceeding commenced under the JAA No.3 dated 10 June 2002 (as amended and restated, further called as the “JAA”) in accordance to the Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce. This award is a final award on those issues that were decided at this stage of the proceedings. In sum, the Arbitral Tribunal decided that JSC Ukrgasvydobuvannya should get title to the joint property only on payment in full of compensation to Misen Enterprises AB and LLC Karpatygaz. The Arbitral Tribunal fully rejected the overwhelming majority of JSC Ukrgasvydobuvannya’s arguments concerning valuation of the joint property. The Arbitral Tribunal decided that:

1. Joint property should be valued solely by reference to the Depreciated Replacement Cost (“DRC”) methodology. In a nutshell, DRC methodology derives the replacement cost of the asset by looking at current costs of a similar property or the costs of reproducing a replica and depreciates that cost based on physical deterioration and economic obsolescence. The Arbitral Tribunal decided that in many respects (including but not limited to allocation of fuel gas costs, application of the economic obsolesence test) the DRC method should be applicable as suggested by the quantum experts of Misen Enterprises AB and LLC Karpatygaz.
2. Value of the joint property shall not be reduced by the costs allegegly necessary to repair the Chervonodonetska BCS and amount for alleged penalties for maintainance of the Yulyivska BCS.

The Arbitral Tribunal decided that JSC Ukrgasvydobuvannya has not established any loss it allegedly suffered due to a failure of LLC Karpatygaz to engage a contractor to design and develop metering stations at certain wells under JAA. The Arbitral Tribunal also decided that JSC Ukrgasvydobuvannya should not be entitled to any damages for a failure of Misen Enterprises AB to make a full contribution under JAA. However, in light of this, the Arbitral Tribunal reduced the share of Misen Enterprises AB to 23.9% (as opposed to 50% under JAA) and the share of LLC Karpatygaz to 0.015% (as opposed to 0.01% under JAA) in the joint property.

As a result, the Arbitral Tribunal directed JSC Ukrgasvydobuvannya, Misen Enterprises AB and LLC Karpatygaz within 60 days of the date of the second partial award to agree on the net value of the joint property in Ukrainian Hryvnia as of 11 July 2018, based on the above determinations. If the parties fail to agree, the Arbitral Tribunal will determine the net value of the joint property in the final award.

Finally, the Arbitral Tribunal ordered JSC Ukrgasvydobuvannya to pay to Misen Enterprises AB and LLC Karpatygaz the majority of the legal and arbitration costs that Misen Enterprises AB and LLC Karpatygaz incurred in this arbitration.
 

For further information, please contact:

Raimonda Kundrotaite, CLO    

Mobile:        +46 70 877 67 75
E-mail:        info@misenenergy.se
 

Misen Energy AB (publ) (formerly Svenska Capital Oil AB (publ)) is a Swedish upstream oil and gas company with operations in Ukraine. The company was founded in 2004 and its shares are traded on Nasdaq First North Growth Market since 12 June 2007.In 2011, Misen Energy AB (publ) acquired Misen Enterprises AB and its Ukrainian subsidiary, LLC Karpatygaz, including the rights to 50.01% of the revenue and profit from a gas production project in Ukraine. Under IFRS rules, this transaction is classified as a reverse takeover. In consideration of the acquisition, a new share issue was carried out. The gas producing assets were acquired by production cooperation via a joint activity project governed by a Joint Activity Agreement between at that time the wholly-owned direct and indirect subsidiaries of Misen Energy AB (publ), i.e. Misen Enterprises AB and LLC Karpatygaz (together 50.01%) and JSC Ukrgasvydobuvannya (49.99%), a subsidiary of the National Joint Stock Company Naftogaz of Ukraine. JSC Ukrgasvydobuvannya is the largest producer of natural gas in Ukraine. The purpose of the Joint Activity Agreement is to significantly increase production of gas and oil by providing modern technologies via a large-scale investment program for the purposes of attainment of profits.
In June 2016 and in July 2017 Misen Energy AB (publ) sold respectively 37.5% and 10% of Misen Enterprises AB shares to the Hong Kong based company Powerful United Limited. In March 2018, Misen Energy AB (publ) sold 2% of Misen Enterprises AB shares to Mr. Konstantin Guenevski. Owning (the remaining) 50.5% of Misen Enterprises AB shares, Misen Energy AB (publ) maintains full control of the company and preserves a right to obtain 50.5% of the future dividends from the operations in Ukraine.
The registered office of Misen Energy AB (publ) is in Stockholm and the shares are traded on First North Growth Market under identification ticker MISE. The Certified Adviser of the company at Nasdaq First North Growth Market is Erik Penser Bank AB, tel.: +46 8 463 80 00, e-mail: certifiedadviser@penser.se.
For further information, please visit our website www.misenenergy.se.

This information is information that Misen Energy AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 08:00 CEST on 19 June 2020.