Energy Giant DTEK Faces $40 million Loss After Russia’s Attacks on Power Grid

In January-October 2022, DTEK’s thermal power plants saw UAH 17.6 billion in losses, more than one third of which were in the third quarter, the latest Russian shelling aggravated the situation even more and necessitates support for the company on a par with the entire industry, DTEK CEO Maksym Timchenko has said.

“For eight months [of the war], our thermal power plants saw UAH 17.6 billion in losses, and this is when calculating the cost of coal, which is artificial, UAH 4,200 per tonne. But we can no longer survive in such conditions. We cannot count that losses of UAH 17.6 billion are something we can somehow cope with,” he told Interfax-Ukraine on the sidelines of the Ukrainian-German Economic Forum in Berlin on Tuesday, Oct. 25.

Timchenko said that for comparison, the price of coal in Poland is already UAH 8,400 per tonne, and import of coal will cost UAH 12,500-12,600 per tonne.

According to the data provided by him, the losses of DTEK’s TPPs in the first quarter of 2022 amounted to UAH 3.6 billion, in the second they were UAH 4.9 billion, in the third UAH 6.36 billion, and in Oct. already UAH 2.74 billion.

In addition, Timchenko said that the damage suffered by the company since Oct. 10, after massive strikes by Russian troops on Ukrainian energy facilities, amounted to approximately $40 million.

“This is the damage that we suffered in a week. This figure does not reflect the entire scale of destruction that was before and which we have already financed from our sources. The total amount is estimated at billions of hryvnias,” he said.

The CEO of the company also reported nine wounded and one death of the company’s power engineers due to the latest attacks, calling it the biggest payoff in this war.

Timchenko called the situation in the company “without exaggeration catastrophic both in terms of destruction and in terms of the efforts needed to restore it.”

In this regard, the chief of DTEK expressed confidence that in such a situation the state needs to provide support to private business, especially considering that it does this in relation to state-owned companies.

As an example, he cited the provision of EBRD loans to NPC Ukrenergo for the restoration of networks under government guarantees, which is not available to private businesses, as well as support for public thermal generation represented by PJSC Centrenergo, noting that DTEK, in particular, as promised, supplied 100,000 tonnes of coal at its TPP.

“Our vision is that the energy sector should work as a whole. Today, Ukrenergo is on the front line first of all, but, of course, thermal generation is there. We are also a target – out of seven operating plants, six are ours. If you support the public sector, then you need to support the private sector. It is necessary to understand that it is also difficult for us, we do not receive any external assistance for recovery,” Timchenko said.

He called the price of electricity, which does not correspond to the real state of affairs and is limited by price caps one of the most important problems of the market, which significantly affects the financial position of electricity producers (in the day-ahead market, the maximum price cap for lowest consumption hours is UAH 2,000 per MWh, for peak consumption hours it is UAH 4,000 per MWh).

“One cannot artificially keep the price and believe that we can economically survive in this situation. This cost should be close to reality. It should not cost, for example, EUR 300-350 per MWh (as in Europe), but the system will remain financially unbalanced if we leave the level of EUR 80-85 per MWh,” DTEK’s CEO said.

According to his data, if price caps remain at the current level, the additional loss of DTEK’s TPPs in November-December will amount to UAH 5.3 billion.

At the same time, Timchenko said that it is not about the need to increase electricity tariffs for the population, the fixing of which is declared at the highest state level.

“We are talking about the market price, which is significantly lower than it should be,” the CEO of the energy holding said.

According to him, there is every reason to talk about the need to increase the price of electricity on the market, given, in particular, the increased cost of equipment, metal, and inflation.

“Artificial lowering of price caps deprives the entire industry of oxygen. We have calculations. We have shown our vision and hope that everything will be balanced by the NEURC regulator, we appeal to its understanding,” he said.

Timchenko added that understanding the problems of domestic electricity producers and their support will make it possible to minimize significantly more expensive imports of energy coal, electricity, gas.

He cited data according to which, in October, the spot price of basic electricity in Ukraine was EUR 92, in Poland it was EUR 136 and over EUR 200 in Hungary, Slovakia, Romania, while by the end of the year it has a significant upward trend.

According to him, there are other mechanisms to support private generation, they only need to be activated.

“For example, there are UAH 6.5 billion of old market debts. They could also be paid and give us the opportunity to finance repair work,” Timchenko said, voicing one of the proposals.

As for the availability of equipment for restoring damage from missile strikes, he said the company has been creating its reserves since the beginning of the war.

“We started work in March, but it was aimed at distribution companies. During this time, we received humanitarian equipment worth $12 million. We used it to restore networks after the de-occupation of Kyiv region, and now we are working with it in Donetsk region, Odesa, Dnipro where strikes are being made,” Timchenko said.

At the same time, Timchenko explained that there is equipment that is needed immediately, but the company also needs to place orders for new equipment now, the production of which takes from nine to 17 months.

“We contacted all our equipment suppliers, colleagues who manage coal-burning plants in the EU, with a request to share, sell, lend, or deliver as humanitarian aid. We are using all options,” the CEO of the company said, describing the algorithm of actions, adding that “colleagues from the United States, the European Commission, also hear us and help us.”

At the same time, he said that the company is also counting on support from the Ministry of Energy, although this does not cover all needs.

“We have good, operational contact with the Ministry of Energy, every hour we are in touch with them about what is needed, what equipment, but the creation of orders is only the first step. Then we need support,” the DTEK CEO said.

At the same time, he expressed confidence that without the support of private business, without private capital, Ukraine would not be able to quickly recover.

“But if we talk about the global recovery after the victory, then now we are talking about the situation over the past two weeks, about the prompt recovery now,” he said.