Billionaire Rinat Akhmetov’s energy holding estimates the nation is short of 8.5 million tons of coal. If left uncovered, it could lead to a drop in power generation by as much as 15 percent, said DTEK chief executive officer Maksym Tymchenko at a news conference on Oct. 10, whose company generates 30 percent of locally-produced electricity.
Coal accounts for 42 percent of the electricity that is
produced at 14 thermal electricity stations and for almost all of heat. Spurred
by Kremlin-backed regular Russian troops and proxies, the
armed conflict in Luhansk and Donetsk oblasts where 70 percent of the nation’s
coal is produced has put the area’s capacity to generate electricity at risk.
Half the Donbas region’s 115 coal have closed, leaving only 35 of the remaining working,
Independent Union of Miners head Maksym Volynets told the Kyiv Post in
September. Central in the region is DTEK.
Purchasing coal
from South Africa and Russia could help, thinks Tymchenko. The average price
for South African coal stands at $95 per ton, according to Evgen Dubogryz,
analyst at Case Ukraine, a research center. Russian coal is slightly cheaper
and costs $85 per ton.
Imported coal is of
higher quality as well, said Dubogryz. While Ukrainian coal has an average ash
rate of 26 percent, which means that only 74 percent of the substance burns and
produces heat, South African coal has a 20 percent ash rate.
Meanwhile, DTEK
sells coal on the domestic market for $110 per ton. Regarding state-owned
mines, production cost alone stands at $115 per ton, said the analyst.
Energorynok, the state-run
electricity trader, owes DTEK $140 million and another $77 million of debt is
likely to arise by the year’s end. This is why the company is experiencing a $116
million negative cash flow, said Tymchenko.
Energorynok needs $285
million to cover winter-time expenditures, while currently it has only $131 million
for these needs, he estimates.
“Current coal
leftovers will allow us to work 10 to 20 days depending on the type of (power)
station,” Tymchenko said. DTEK’s electricity production stations have only
some 0.37 million tons of black fuel, while last year at this date there were
1.5 million tons in storage.
Should supplies
become critically low, DTEK might purchase the needed electric power from
Russia, said Ivan Plachkov, head of supervisory board at DTEK’s Kyivenergo, a
Kyiv-based electricity maker. Household consumers aren’t conserving and
continue using the usual amount of electricity, he added.
Komsomolets of
Donbas, a major publicly-traded coal mine controlled by DTEK, has lost 15
percent of its value since July. It has been cut off from the railroad which is
the usual way of product delivery to clients. Valentyn Zemlyansky, an energy
analyst, estimates it’ll take up to two months to restore the infrastructure
around Komsomolets of Donbas.
Yuriy Korolchuk of the
Institute for Energy Strategies, a think tank, says this year’s coal shortage
doesn’t exceed 8 million tons. However, the first three months of 2015 see a deficit
of 6 million tons. He believes Ukraine will have to spend up to $1.5 billion to
cover the deficit with imported coal.
Production costs
are higher in Ukraine’s mines because miners have to dig deeper for coal that is of
lesser quality than in Russia or South Africa. It is estimated that every
taxpayer pays nearly $50 a year to subsidize unprofitable state-run mines,
according to Case Ukraine. Overall this equals $926 million, or 41 percent of
the nation’s military budget.
Kyiv Post associate business editor Ivan Verstyuk can
be reached at [email protected].
