Page 78 - UKRRptSept19

9.2.9 Utilities corporate news
DTEK Energy power generation falls 15% in 5M19. Ukraine’s leading coal and power holding DTEK Energy (DTEKUA) generated 14.25 TWh of electricity in 5M19, Concorde Capital calculated based on information provided by Energobiznes. This is a 15.3% y/y drop and a 5.9% y/y decline on a like-to- like basis (excluding data from Kyiv-based heat and power plants that DTEK has not operated since August 2018). In May alone, DTEK Energy generated 2.48 TWh of electricity, which is 11.5% less y/y and 5.9% less y/y on a like-to- like basis. One of DTEK’s thermal power plants, Kryvorizka, was idle in May.
DTEK managers, state regulators named suspects in Rotterdam Plus pricing conspiracy. The National Anti-Corruption Bureau of Ukraine announced on August 8 six suspects in a criminal case of abuse of authority in designing and implementing the Rotterdam Plus electricity pricing formula, the bureau’s press service reported. The suspects are two former commissioners of the electricity regulation commission, two middle managers of the commission, and two middle managers of a “private group” that was later confirmed to be DTEK Group (DTEKUA), Ukraine’s biggest electricity producer controlled by Rinat Akhmetov. These company employees are suspected of “pressuring” the regulator. Later that day, DTEK’s press service confirmed the two suspects are its employees. The anti-corruption bureau estimated the Rotterdam Plus formula inflicted UAH18.9bn in losses to Ukrainian consumers of electricity in 2016-2017, of, which DTEK gained UAH14.3bn. DTEK said in response that this claim is groundless, stressing that Rotterdam Plus brought more transparency to Ukraine’s electricity market. The formula was also endorsed by “multiple international experts,” the press service said, adding that DTEK promised it will use all legal means at its disposal to protect its employees. DTEKUA bond price dropped 3.4% to 100.8 of par during trading on August 8, but rebounded and finished at 102.3 of par, down 2% on the day. Recall, the Rotterdam Plus formula, introduced in March 2016, based the wholesale price of electricity produced by Ukrainian thermal power plants on coal prices set in the Rotterdam port plus delivery costs to Ukraine. Beforehand, the prices of power produced by TPPs were set by the state regulator and based on domestic coal prices. The Rotterdam Plus approach has not been applied since July 1 when Ukraine’s free electricity market was launched.
DTEK Luhanska plant won’t get cheap gas from Naftogaz, Cabinet decides. The Cabinet of Ministers of Ukraine decided on Augugst 15 to cancel its decision from the prior day to allow Naftogaz (NAFTO) to offer natural gas to DTEK's Luhanska Thermal Power Plant at a deep discount to the market, Interfax-Ukraine reported on Aug. 15, citing a government press release. The talks were initiated by PM Volodymyr Groysman to avoid losses to Naftogaz, the state natural gas transit and production monopoly. The Cabinet did not specify an alternative way to secure uninterrupted power supply to the Luhansk region, only stating that the Cabinet will adopt a respective resolution at its meeting next week.
State-controlled power generation company Centrenergo (CEEN UK) posted 1H19 net revenue of UAH7,259mn, or 9% less y/y, according to its financial report. Its gross profit was negative at UAH201mn in 1H19 (down from positive number of UAH635mn a year ago). The company reported UAH1,150mn of “other operating losses” in 1H19 (up 9x y/y, most likely due to one-off costs, e.g., writing off or the provisioning of some receivables) which resulted in a huge reported 1H19 operating loss (UAH1,390mn, vs. profit of
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