Nowadays, the electricity market has long been operating in a crisis mode and, as a consequence, has experienced an acute shortage of working capital required to prepare for the heating season. These are the resources critically needed to repair and maintain equipment in proper technical condition, purchase coal to create its reserves in warehouses, etc.
The critical situation has been caused by a number of factors including unreasonably low prices on the electricity market (day-ahead market), multi-billion debts on the balancing market, instability, and imbalances caused by price manipulations of speculative traders.
Due to unreasonably low prices, thermal generation companies have continued to operate at a loss. This year alone, TPPs operating in the Ukrainian UES suffered a loss of UAH 5.1 billion. In the first five months of 2021, DTEK ENERGY’s TPPs have already lost UAH 1.2 billion in electricity production. Generating companies have outstanding debts of UAH 12.4 billion owed to suppliers of coal, owe UAH 1.4 billion to suppliers of inventories and services, and accrued UAH 185 million in tax debts.
This financial situation of thermal generation companies prevents them from purchasing fuel to create the reserves of coal required for the heating season, makes it impossible to finance current activities of companies, carry out current repairs and overhauls, and also leads to the accumulation of debts owed to coal producers. By the end of the year, thermal generating companies have to repair 17 power units (of which four are currently under repair, and repairs to further 13 power units have been scheduled), and the cost of these repairs will reach almost UAH 1.5 billion. In total, the company has planned to invest UAH 2.4 billion in the repairs during this year.
All this is happening amid the debts accumulated by NPC ‘Ukrenergo’ on the balancing market that remain outstanding. Out of more than UAH 11.5 billion-worth debts owed to electricity producers, UAH 2.2 billion are the debts owed to DTEK ENERGY’s generating companies.
Furthermore, the debts of UAH 6.8 billion owed by Energorynok to DTEK ENERGY’s thermal generation companies have not been paid off so far.
DTEK ENERGY’s production companies are also in a critical situation. There are plans to commission 14 longwalls between August and December of this year, which requires financing of UAH 430 million. But there are risks that the commissioning of these longwalls will not be completed as scheduled due to debts owed to suppliers (amounting to UAH 1.15 billion) and shortage of funds required to purchase inventories. If these risks materialize, the loss of coal production may amount to 0.6 million tonnes for the future longwalls and 0.8 million tonnes for the operating longwalls due to their critical condition.
The current tax debts owed by coal mining companies amount to UAH 173 million, which threatens the financing of all social programs from local budgets.
DTEK ENERGY’s enterprises also have unpaid bills for coal transportation services amounting to UAH 140 million. If Ukrainian Railways raise its coal transportation tariff rates, which is scheduled for 1 September of this year, the debts and risks of coal transportation will increase. This initiative will also lead to the further growth of the costs of thermal generation up to UAH 2 billion per year.
Such a critical situation and the chronic shortage of funds experienced by the thermal generation and coal-mining enterprises jeopardize the production of domestic coal needed to pass the autumn and winter season. At the same time, the market price of coal on the foreign markets has exceeded USD 100/ton, and the price of gas exceeded USD 430/thousand m3.
All these factors jeopardize the timely and adequate preparation for the autumn and winter season, put at risk scheduled repairs and the formation of the necessary stock of coal.
In the midst of this crisis situation in the energy sector, we urge the National Security and Defence Council of Ukraine (NSDC) to urgently intervene in the situation and eliminate imbalances and factors that threaten the energy security of the country and also jeopardize the timely and adequate preparation for the autumn and winter season.