OREANDA-NEWS. Difficulties for thermal generation in Ukraine in the first half of the year affected DTEK’s production. The volume of coal mining and processing by the company effectively remained the same as last year.

 “The issue was that there was a surplus of coal because of the fire at the Uglegorskaya TPP,” said DTEK Chief Operating Officer Yuriy Ryzhenkov, of the company’s first half performance. “This resulted in a reduction in the sales market for state-owned mines that produce G grade coal. DTEK commited to buy more than 3 million tons of coal from state-owned mines this year to help mitigate the crisis. Obviously, this puts pressure on DTEK’s coal mining enterprises. Increasing coal exports will make it possible to balance coal mining and consumption by the company’s TPPs.”

 The difficult situation in the coal mining sector is being exacerbated by the overall decline in electricity consumption in Ukraine (down 4.1%), caused by slowed growth in key economic sectors.

 “A partial solution would be to significantly increase exports, noting that for us electricity export transactions are loss-making, but they make it possible to load our facilities to the maximum and consume coal,” said Ryzhenkov. “In the first half of the year, exports grew by 15.4%, but this still did not cover the decline in consumption in Ukraine. At the same time, the debts of water supply utilities and state-owned mines for consumed electricity, which has reached UAH 7 billion, remains a major problem for electricity distributors. We see that the crisis is not improving yet.”
Coal production and processing

 DTEK’s enterprises increased coal production by 0.2% year-on-year in the first half of 2013. The company continued increase occurred despite a decline in coal production in the second quarter by 1.2%.
DTEK’s coal processing plants also raised production in the first half of the year: ROM coal processing increased by 4.6% year-on-year and production of concentrate grew by 4%. The growth was due to the acquisition of Russian coal companies (three coal mines and one processing plant).

 Factors affecting the production performance:
•         surplus of coal remaining in the coal market, particularly G grade, caused by the reduction in the number of operating power units of thermal power plants;
•         decline in coal mining by DTEK Dobropolyeugol, DTEK Pavlogradugol, and DTEK Rovenkyanthracite;
•         inclusion of coal production and processing by Russian enterprises acquired in July 2013 into the data for the first half of 2013.

 Investments in production:

 DTEK directed UAH 627 million into the technical re-equipment of longwalls in the first half of 2013, UAH 240 million of which was invested into the renewal of the tunnelling equipment pool and modernization of the transport chain. In particular, the company spent UAH 128 million to purchase new coal mining equipment for the Obukhovskaya mine (Russian Federation).

 The replacement of outdated equipment makes it possible to improve working conditions for miners, while raising efficiency and productivity at the same time. DTEK's coal mining enterprises maintained high labour productivity rates: DTEK Mine Komsomolets Donbassa – 97.6 tons/human-month, DTEK Pavlogradugol – 86.1 tons/human-month, and DTEK Sverdlovanthracite - 68 tons/human-month.

 The company resumed construction of the air supply shaft at the Vakhrusheva mine of DTEK Rovenkyanthracite in the second quarter and started the project to increase the throughput capacity of the hoisting facility at the Geroiv Kosmosu mine of DTEK Pavlogradugol.

 In addition, construction of the following facilities continued:
•      air supply well at the Dobropilske mine of DTEK Dobropolyeugol (total budget of the project: UAH 75.6 million);
•      vertical air supply shaft at the Frunze mine of DTEK Rovenkyanthracite (total budget of the project: UAH 214.7 million);
•      ventilation shaft #3 at the Yuvileina mine of DTEK Pavlogradugol (total budget of the project: UAH 235 million).

 The construction of the wells and shafts will make it possible to ensure the ventilation of coal extraction sections in the mines. This will raise the safety level, maintain coal production at the current level, and further increase the latter by providing mines with the necessary amount of air. The modernization of the coal hoisting facility at the Geroiv Kosmosu mine will increase its capacity to 3 million tons per year starting from 2015 (total project budget of the project: UAH 117 million).

 Electricity generation

 DTEK’s electricity generation enterprises’ supplies grew 2.9% year-on-year in the second quarter of 2013. Yet, overall for the first half-year, the company reduced electricity supply by 5.2% due to the effect of the first quarter.

 Factors affecting the production performance:
•         increase in electricity supply by HPPs by 42.9%, which resulted in a reduction in electricity generation by other types of producers;
•         electricity generation by Kyivenergo fell by 32% to cut its consumption of natural gas;
•         electricity consumption by industrial consumers decreased by 7.6% and by household consumers by 0.9%
•         electricity sales by the Botievo Wind Farm to the energy market started on 1 January 2013.

 Investments in production:

 The company began to retrofit power unit #1 of the Kryvorizka TPP in the second quarter of 2013, which will ensure reliable performance and extend its service life by 15-20 years. In addition, the capacity of the power unit will be increased to 33 MW, its manoeuvrability range will grow from 100 MW to 215 MW, and specific fuel consumption will decline by 7.5%. Since 2012, as part of TPP power unit modernizations, DTEK has been retrofitting electrical precipitators to achieve dust emission levels in accordance with Directive 2001/80/EC.

 The company is also continuing the technical re-equipment of power units #13 at Luganska TPP, #5 at Burshtynska TPP and #8 at Dobrotvirska TPP, all of which are scheduled for completion before the end of the year.
DTEK will invest a total of UAH 1,998 million into these projects, of which UAH 360.3 million will be used to retrofit the electrical precipitators.

 Electricity distribution

 DTEK’s electricity distribution companies increased electricity purchased from the Wholesale Electricity Market (WEM) by 29% year-on-year in the first half of 2013. This growth was the result of the acquisition of DTEK Dniprooblenergo and DTEK Krymenergo, which joined the Group in spring 2012. That said, in the second quarter of 2013, DTEK’s distribution companies reduced their electricity purchases by 1.3% due to lower demand from industrial enterprises.

 Factors affecting the production performance:
•         acquisition of DTEK Dniprooblenergo and DTEK Krymenergo electricity distribution companies in April and May 2012;
•         lower electricity sales by Service-Invest due to reduced demand from iron and steel companies (which account for 80% of Service-Invest’s total electricity supplied);
•         lower electricity consumption DTEK Donetskoblenergo’s household customers (which accounts for about 40% of DTEK Donetskoblenergo’s total electricity supplied).

 Investments in production:

 DTEK’s distribution companies completed projects to retrofit and construct new substations in the first half of 2013. All of the projects were designed to improve the reliability of electricity supply to industrial and household consumers and adjacent licensees. To improve the quality of its service, the company is developing online services for electricity payments and opening modern Customer Service Centres (CSCs) that will operate on a ‘single-window’ basis.

 Retrofits of the following substations were completed:
•         Zhavoronki substation (DTEK Krymenergo), which supplies electricity to the pump stations of Mezhgornyi Water Supply Centre and Saki Irrigation System Centre that supply water to household consumers in Simferopol, Yevpatoria, Saki and some districts of Sevastopol;
•         Mayak substation (DTEK Krymenergo), which supplies electricity to the resort area near Yevpatoria;
•         Moskovskaya substation (Kyivenergo), which supplies electricity to the capital’s five power centres, has reached its design capacity.
The following projects are underway:
•         construction of the Gorod11 substation (DTEK Donetskoblenergo) to improve the reliability of power supply to the central districts of Mariupol and ensure the needs for infrastructure being developed in Oktyabrskiy, Primorskiy, Zelenyi, and Krasnoflotskiy districts (total product budget: UAH 46.5 million);
•         technical re-equipment of the Novotroitskaya substation (Service-Invest), which feeds the Water of Donbass utility, JSC Novotroitskoe Rudoupravlenie, and the Donetsk Western Electric Networks sub-division of DTEK Donetskoblenergo (total project budget: UAH 51 million);
•         retrofit of the Yelenovskaya substation (Kyivenergo) to ensure the connection of new consumers in the central part of the city of Kyiv and Podol district (total project budget“ UAH 130.2 million);
•         upgrade of outdoor switchgears at CHPP-5 (Kyivenergo) to cover the electricity consumption deficit in the city of Kyiv’s central districts and improve operational reliability during hot weather (total project budget: UAH 385.4 million).

 Export and import operations

 The company increased electricity exports by 655.6 million kWh year-on-year in the first half of 2013. Exports to all countries grew: Moldova, Slovakia, Hungary, Romania, Poland, and Belarus.

 The 43.2% increase in coal exports in the first half of 2013 was the result of growing supplies to the Russian Federation, Moldova, China, Belgium, and Turkey, among others.

 The lack of coal imports was due to the fact that domestic coal resources were sufficient for the needs of the Company’s generation facilities.