OREANDA-NEWS. In 2013, DTEK’s companies produced 41.4 million tons of coal (+4.3% YoY), its thermal power plants supplied 53 bln kWh (+3.1% YoY), and its distribution companies purchased 59.7 bln kWh of electricity from the wholesale market (+10.8% YoY).

2013 was a challenging year for the electricity sector of Ukraine. Industrial production declined by 4.7% YoY. This resulted in industry's demand for electricity decreasing by 4.4 billion kWh. Total electricity consumption in Ukraine went down by 3.4 bln kWh, leaving the coal market with a surplus of coal.

“DTEK did everything possible to maintain a normal mode of operations. In 2013, DTEK concentrated on improving the efficiency of production, investments, and governance. The 2103 results showed an improvement in performance through vertical integration and the inclusion of the indicators from new assets acquired in 2Q and 3Q 2012. The increase in electricity generation and coal mining contributed to the increase in export sales. We invested more than UAH 10 billion to update production facilities, which also helped us to keep them efficient in the difficult market conditions,” said Maxim Timchenko, DTEK's CEO, commenting on the company’s performance in 2013.

In 2013, DTEK launched the Novator project, a continuous improvement system that will help increase efficiency by continuously streamlining processes, reducing losses, and improving the quality of products. Last year, the financial effect of the Novator project amounted to UAH 120 million, and we expect it to increase to UAH 400 million in 2014.
Mining and processing

In 2013, DTEK's coal mining companies increased production by 4.3% YoY. The coal processing plants followed suit: ROM coal processing grew by 5.9% and concentrate output by 4.8%. The performance improvement is attributable to the consolidation of the results of the companies acquired in 2012.

Factors influencing the production performance:
•         total electricity consumption in Ukraine dropped by 2.3% or 3.5 billion kWh YoY in 2013;
•        consolidation of coal production and processing by our Russian assets (three mines and one processing plant) and the Bilozerska mine acquired in March and July 2012;
•        decrease of coal production by the majority of our Ukrainian mine groups in 2013 due to changes in coal market demand and complex mining and geological conditions.

Investment in operations:

DTEK invested UAH 4,197.4 million in the development of its coal mining companies in 2013. We allocated UAH 1,199.4 million to buy equipment for breakage faces and UAH 517.1 million to replenish roadheading machinery and upgrade the transportation chain. The large-scale implementation of advanced equipment improves working conditions for miners and at the same time enhances the efficiency of underground mining. DTEK's coal mining companies demonstrated sustainable efficiency throughout the year. Average annual labour productivity: DTEK Komsomolets Donbassa – 93.8 tons per person per month, DTEK Pavlogradugol – 92.5 tons per person per month, DTEK Sverdlovanthracite – 73.5 tons per person per month.

The Company continues to implement the following projects:
•        refurbishment of headgear at the Dobropilska mine (total project budget – UAH 60 million), to increase its capacity to 2.2 million tons per year;
•        a project to increase the conveying capacity of the winder set at the Geroiv Kosmosu mine (total project budget – UAH 153.5 million), which will increase winder productivity to three million tons per year starting from 2015;
•        replacement of the main fan at the Komsomolets Donbassa mine (total project budget - UAH 63.8 million); construction of fresh air shafts at the Vakhrusheva mine and Frunze mine (total project budgets of UAH 127.7 million and UAH 214.7 million, respectively); construction of return air shafts at the Yuvileina and Dobropilska mines (total project budgets of UAH 235 million and UAH 74.7 million, respectively). The implementation of the projects will enhance the safety of miners' work, help maintain current coal output and further increase production by securing sufficient air supply to the mines;
•        technical re-equipment of the second section at the Pavlogradska coal concentrating mill (total project budget – UAH 122.2 million) to increase run-of-mine coal processing capacity by one million tons and produce export quality coal.

Electricity generation


In 2013, DTEK increased electricity generation by 3.1% YoY.
 
Factors influencing the production performance:
•         decreased electricity consumption by industrial consumers by 6.3% or 4.4 billion kWh YoY in 2013;
•         YoY increase in electricity supply by hydro power plants and pumped storage power plants by 31.2% or 4.2 bln kWh, which resulted in lower supply by other generators;
•         reduced number of coal-fired electricity generation units in service in 2013 conditioned by human-triggered events (the high availability of DTEK's units enabled the company to temporarily take up the increased share of thermal generation);
•         decreased electricity generation by Kyivenergo by 31% to reduce natural gas consumption;
•         supplying electricity generated by the Botievo Wind Farm to the energy market since January 1, 2013.

Investment in operations:

In 2013, DTEK allocated UAH 2,528.6 million to reconstruct and re-equip power units at TPPs. Upgrading the power units will help extend their service life by 10 to 15 years, increase capacity and improve their flexible range while reducing specific fuel consumption. Since 2012, DTEK has reconstructed electrostatic precipitators as part of power unit upgrades to comply with the emissions level stipulated by Directive 2001/80/ЕС.

After reconstruction in 2013, the installed capacity of power unit #6 at DTEK Kurakhovska TPP and unit #5 at DTEK Burshtynska TPP increased by 15 MW and 40 MW. Their flexibility was extended by 40 and 30 MW, respectively.
In 2013, we also completed the reconstruction of power unit #5 at Myronivska TPP. We increased its operating capacity to the installed capacity level of 115 MW. The reconstruction allowed for significantly reducing costs for auxiliary energy from 18.2% to 9.9%.

At the end of 2013 upgrading power unit #3 at DTEK Zaporizka TPP was started and continued to reconstruct power unit #1 at DTEK Kryvorizka TPP, #13 at DTEK Luganska TPP and #8 at DTEK Dobrotvirska TPP. We plan to allocate UAH 2 billion for these upgrades.

Export and import operations

In 2013, DTEK increased international electricity supplies by 1.2% to 9 828.3 mln kWh resulting from positive indicators in the first half of the year. Electricity prices continue to decrease in Europe. The positive effect results from the company's vertical integration that allows to support of the coal industry, which experienced a lack of demand and decline in electricity consumption in Ukraine. Exports of 9.8 billion KWh ensured sales of 7.5 - 8 million tons of ROM coal.

In 2013, DTEK's exports to external markets increased by 72.7% to 4,739.9 mln tons. DTEK increased exports by entering new coal markets in Asia and Morocco, and extending cooperation with iron and steel works in China and South Korea, thus confirming the efficiency of using anthracite as a coke substitute in blast furnaces. In 2013, DTEK resumed supplies of G and GD grade thermal coal to Mediterranean countries. Export growth resulted from contracts concluded with international energy companies (EDF and E.ON) for coal supply to thermal power plants in Europe.

In 2013, DTEK became an active player in the natural gas market in Eastern Europe by importing 628.3 million cubic metres at yearend. DTEK continues to diversify its businesses in order to ensure that its own generation capacities and SCM group companies have enough resources, which total about 6 billion cubic meters per year.

Electricity distribution

In 2013, DTEK's distribution companies bought more electricity by 10.8% YoY because of consolidation of DTEK Dniprooblenergo and DTEK Krymenergo in 2012.

Factors influencing the production performance:
•         reduced electricity consumption caused by the change in the average temperature in 2013: +4°С in winter and -1.3°С in summer compared to the temperatures of 2012;
•       increased output and a resulting 4.5% increase in supply from municipal CHPPs and isolated generation plants causing a reduction in supply from other generators;
•       DTEK Power Grid LLC and DTEK Donetskoblenergo purchased less electricity by 5.1% and 3.3% respectively because of reduced demand from industrial consumers.

Investment in operations:

In order to ensure efficient and reliable electricity supply, DTEK's distribution companies in 2013 invested UAH 1,243 million to upgrade their substations and transmission lines. Throughout the year, they built, reconstructed and repaired almost 9,000 kilometres of transmission lines and about 6,500 substations.

The most considerable 2013 investment projects on substations’ reconstruction and modernization:
•       reconstruction of the Rodniki substation (DTEK Dniprooblenergo) that improved the reliability of electricity supply in Novomoskovsk and created reserve capacity that can be used for the connection of new consumers;
•       upgrade of the Gorod 11 substation (DTEK Donetskoblenergo) that created additional capacity for electricity supply to the central districts of Mariupol and contributes to the development of the municipal infrastructure;
•       reconstruction of the Pecherska substation (Kyivenergo) to eliminate the shortage of capacity in the centre of Kyiv and meet growing demand for electricity;
•       reconstruction of 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;
•         modernization of the YuGOK-150kW and Severnaya 150/35/6 kW (DTEK Dniprooblenergo) substations that supply electricity to metals & mining enterprises in Dnipropetrovsk oblast and sections of the residential areas of the cities Kryviy Rih and Zheltye Vodi.
•         reconstruction of the Chasov Yar substation (DTEK Power Grid LLC) to improve the reliability of electricity supply to the pumping stations of the Voda Donbassa water supply company, a fire equipment factory in Chasovoy Yar and residents of the Artyomovsk district of Donetsk oblast.