OREANDA-NEWS. July 21, 2010. In July 2010, DTEK, the leader of the fuel and power sector of Ukraine, will celebrate its fifth anniversary. During its first five years, DTEK has established a vertically integrated group  with a strategy to bring together the Russian, Ukrainian and European electricity generation and supply markets.

The key achievements of the Company in 2005-2009 are as follows:

Invested about UAH6bln. (net of VAT) during 2005-2009;

Increased coal output by 17.3% to 17.64 m tonnes in 2009, and lifted market share to 24.4%;

Vostokenergo (DTEK) supplied 14.5 TWh to the market last year, which is 15% more than in 2005. The Company’s share in the thermal generation market of Ukraine was 45.8% in 2009 (including Dneproenergo OJSC);

Transmitted 12 TWh of electricity via DTEK’s networks in 2009 (16.2% more vs. 2005). It ensured that in 2009 the Company’s share was 7.7%;

Started developing its wind power business and held a large-scale wind monitoring campaign;

Entered the electricity exports market in December 2009, having won the auctions;

Actively cooperated with Ukrainian and foreign  banks. As of 31 December  2009, DTEK’s credit portfolio was USD555.92m with USD36.33m on available credit lines;

Closed a five-year USD500 million Eurobond issue in April 2010. The Offering was the largest non-sovereign debut issue from Ukraine and the first corporate issue since 2007;

Launched the DTEK Academy, which unites all development and training programmes for employees, both for workers and top-managers. Cooperation Agreement signed with London Business School, the leading European school of business education;

Implemented unique CSR programmes, signing Social Partnership Agreements with eleven towns and two districts of Ukraine;

Joined the UN Global Compact and became a member of international professional associations, including EURACOAL, EURELECTRIC, ACC and EBA.

Coal Mining and Enrichment

In 2009, the Company’s coal mining enterprises — Pavlogradugol and Komsomolets Donbassa Mine — produced 17.6m tonnes of coal, which is 17.3% above the output of 2005.

DTEK’s coal mining enterprises have been implementing a large scale investment programme. In 2008-09, four mines of Pavlogradugol commissioned new breakage faces equipped with mining equipment from  Czech companies Ostroj and TMachinery. Investment in the projects amounted to about UAH651.5m. As a result, the average output per longwall equipped with the new machinery is 45% above the average coal output at Pavlogradugol and has reached 4 thousand tonnes of coal per day. Stepnaya mine is introducing a UAH351.5m plough from Bucyrus DBT Europe GmbH, the first plough in the Western Donbass region. The plough is expected to achieve an output of about 3.5 thousand tonnes per day, while the shearer’s daily output is 1-1.5 thousand tonnes.

Having implemented a large scale methane drainage and utilization project in 2007-2009, the Komsomolets Donbassa Mine has not only launched utilization plants, but also sold 300,000 Emission Reduction Units (ERU) within the framework of the Kyoto Protocol.

In October 2007, DTEK acquired two coal processing plants: Dobropolskaya CEP and Oktyabrskaya CEP.  In 2005-2009, volumes of run-of-mine coal processing doubled (+105.8%) to reach 11.6m tonnes, while coal concentrate output increased by 89.4% to 7.9m tonnes in 2009.

Electricity Generation

DTEK’s generation business is represented by Vostokenergo and associate company Dneproenergo*. Vostokenergo LLC (DTEK) remains the thermal generating company with the highest demand in the domestic market due to its low production cost. Vostokenergo’s installed capacity utilization rate (ICUR) is, without fail, the highest among Ukrainian thermal power plants (TPPs) (45% in 2009, with a record of 56% in 2007). The 2009 results show Vostokenergo keeping its leadership in the fossil-fuelled generation sector with a market share of 25.3%. In 2009, Vostokenergo supplied 14.5 TWh to its consumers, which is 15% above the level of 2005.

In 2007, Vostokenergo started a full-scale reconstruction of its TPPs. Three units have already been modernized – units 1 and 2 of Zuevskaya TPP and unit 5 of Kurahovskaya TPP. This year Vostokenergo also plans to finish the reconstruction of unit 7 at Kurahovskaya TPP. The reconstruction of the first three units has increased capacity by 52 MW, decreased specific fuel consumption of the units by 3-7%, and reduced dust emissions by 50%. In 2007-2009, Vostokenergo invested UAH719m in the reconstruction of equipment (UAH935m as of 1.07.10).

In 2007, the coal enterprises of DTEK became shareholders of Dneproenergo OJSC by discharging the company’s debt of UAH0.9bn. The companies have concluded an investment agreement on additional financing of industrial and social programs for not less than UAH 1 billion. Thanks to the cooperation between private shareholders and the state, corporate governance was reestablished. In 2009 after the general meeting of shareholders, Dneproenergo paid UAH60.969m of dividends for the first time since 1998. In 2008 after 12 years of being mothballed, unit 10 of Kryvorozhskaya TPP was recommissioned. Currently the reconstruction programs of unit 3 of Kryvorozhskaya TPP and unit 9 Pridneprovskaya TPP are in progress and works are being conducted to increase the operating life of the worn out generating equipment.

Electricity Distribution

In 2009, the share of DTEK's energy supply companies (Service-Invest and Energougol ENE) on the Wholesale Electricity Market (WEM) reached 7.7% of the total marketable electricity supply in Ukraine. Transmission volume totaled 12 bn kWh, which is 16.2% more than in 2005.

The energy supply companies of DTEK have implemented a set of large scale investment projects, including the construction of Budenovskaya substation in Donetsk (Energougol ENE), recalibration of Rutchenkovo substation (Vozrozhdeniye) to 110 kV voltage and HSKPZ-1 substation reconstruction (Service-Invest). The major investment projects of the distribution companies are the reconstructions of Yenakievo 100 kV and Konstantinovka 100 kV substations, which included the replacement of power equipment, relay protection and automation systems to increase the stability of power supply. The Service-Invest company has extended the sphere of its licensed activities in the Dnepropetrovsk region and started supplying energy to Pavlogradugol, Northern GOK and Central GOK.

The automatic system for commercial accounting of power consumption and automatic dispatcher control system, which reduced the commercial loss of electricity, facilitated the high quality and prompt provision of information and the proper level of operational control of transmission lines have been introduced at Service-Invest and Energougol ENE

Corporate social responsibility

In 2007, DTEK started implementing its social partnership programme, focusing on the regions where the company has a presence. The project is second to none in Ukraine in terms of its scale and contents.

The company, in partnership with local communities, outlined targets for social investment: up-to -date education, healthcare, cultural heritage and development, energy efficiency, and development of the local business environment.

The DTEK Social Partnership Agreement has already been joined by 11 towns (Pavlograd, Ternovka, Pershotravensk, Kirovskoye, Zugres, Schastye, Kurakhovo, Mospino, Dobropolye, Rovenki, Sverdlovsk) and two districts of the Dnepropetrovsk region (Pavlogradskiy and Petropavlovskiy). Relying on the methodology from DTEK and USAID, the participants in the programme have drawn up social and economic development plans, which made it possible to determine the priority areas for local development and define the social investment priorities of DTEK. In 2007-2009, the company invested UAH15 million in the development of the regions where it operates.

Other priorities for DTEK in the field of the CSR are labor safety, HR development, environmental care, corporate governance and business ethics.