Heat generation requires money for the purchase of coal

Photo: Ukrinform

Coal reserves at thermal power plants (TPPs) in Ukraine are dwindling with every passing day. For the second month in a row nuclear power units have to work in an enhanced mode in order to cover the shortage of electricity due to the limited supplies of coal and subsequent reduction of power generation by thermal power plants. Private power companies are already sounding the alarm as they have run out of money for the purchase of fuel. Their last ray of hope is that the government will provide them additional resources for the purchase of coal.

Give us money!

The Council of the Electric Power Wholesale Market (EPWM) appealed to the government to find money for the purchase of coal by heat generating companies, according to the address of the council issued after an extraordinary meeting on October 9–10 published yesterday. The appeal was sent to the president, the premier and Chairman of the National Commission for State Energy and Public Utilities Regulation (NCSEPUR).

The council notes that due to hostilities in the eastern region of the country and a sharp reduction in coal mining fuel and energy companies are faced with a critical situation. In particular, in August–September the reserves of A (anthracite) and L (lean) coals in the warehouses of TPPs decreased fourfold down to 440,000 t. This led to the shutdown of units with a total capacity of 3690 MW and another 3815 MW of capacities will be able to run on coal reserves for seven days at most.

At the same time, the council notes that the Energorynok state-owned enterprise, which settles accounts for electricity, accumulated substantial debts to TPPs for the purchased electricity – as of October 1 these debts amounted to UAH 15.6 bn. They have arisen due to non-payment by regional power distribution companies that buy electricity from Energorynok, which in turn was provoked by indebtedness of consumers to the regional power distribution companies to the tune of approximately UAH 17 bn. The principal debtors for electricity are the coal mines financed from the state budget (they owe UAH 6.6 bn) and enterprises in the housing and utilities sector (they owe UAH 5.5 bn).

The council says the shortage of funds on the market is measured in billions of hryvnia. “The anticipated financial imbalance by the end of 2014 will amount to UAH 4–5 bn, according to expert estimates of the TPPs’ generation companies. This means generating companies do not have sufficient funds for meeting their current financial obligations, including those to the state enterprise Vuhillya Ukrainy (Coal of Ukraine) for already supplied coal,” say representatives of the council.

What shall they do?

The council suggests that the NCSEPUR sets a level of prices in compliance with the rules of the EPWM in order to cover the full cost of production of electricity taking into account the increase in the fuel component. The council also requests that the NBU allow Oschadny Bank to increase the limit of the loan portfolio for Energorynok, which, in turn, credits thermal generation with this money.

The council also suggests that the companies and organizations financed from the state budget pay off their debts for electricity immediately. Finally, the target markup to the tariff for electricity from the general fund of the state budget should be redirected to a special fund so the money is used to purchase fuel and repair power facilities affected by the military actions.

Deficit test

The appeal of the council proceeds from the difficult situation in the thermal power industry: the closer the heating season, the more miserable are the coal stocks in warehouses of Ukrainian TPPs. In particular, according to the Ministry of Energy and Coal Industry in September the coal reserves at TPPs decreased by nearly 10% - as of October 1 there were 1.93 mn t of coal. This is nearly 56% less than of the same date last year, when plants produced 4.38 mn t of coal.

Yet in October the coal reserves in the thermal generation warehouses were still diminishing – as of October 6 they dropped by almost 2% - to 1.91 mn t, reported Ukrenergo.

Scraping the corners

Only five TPPs in Ukraine have enough coal, said Chief Dispatcher at Ukrenergo Vitaliy Zaychenko at a meeting of the Council of the EPWM at the end of last week. Those are the Burshtyn, Dobrotvor, Ladyzhyn, Zaporizhzhia and Kurakhov TPPs, which belong to DTEK Energy Holding.

However, the overall situation at the company is not too optimistic. Last week DTEK’s CEO Maksym Tymchenko said all of its TPPs had residuals of 370,000 t of anthracite coal, compared to 1.5 mn t a year ago. “This amount of coal is sufficient for operation during 10–20 days depending on the type of station,” he said.

Thermal power plants belonging to other generating companies also have nothing to boast of. In particular, back on September 11 due to inadequate reserves of coal the Zmiyiv TPP owned by the Centerenergo State Company was shut down for two weeks. Last week head of DTEK’s Anti-Crisis Headquarters Dmytro Sakharuk noted that at the second station of the state-owned company the situation was no better. He said coal reserves at the Trypillya TPP were sufficient for it to operate for three days. In this case, the manager predicted that if anthracite was not delivered to the TPP the production of electricity would drop and it would be impossible to avoid rolling blackouts. However, it was impossible to obtain information on stocks at Centerenergo stations – the press service of the company said that until the situation with fuel is stabilized no comments will be made. The Ministry of Energy and Coal Industry also has not replied to the request regarding the availability of coal at the storehouses of the Centernergo. However, according to the ministry, a month ago the amounts of fuel at Centernergo were far below the desired level. In particular, in August, the stocks were reduced by 3.4 times – down to 205,000 t: the Zmiyiv TPP had only 55,500 t of coal, the Trypillya TPP - only 51,3000 t and the Vuhlehirska TPP – only 98,100 t.

Another heat generating company – DonbasEnergo – has 5 times less coal than last year. As of October 13 the Slovyansk TPP accumulated 46,000 t of coal, according to the press service of DonbasEnergo. This is sufficient only to provide heat for the adjacent village of Mykolayivka, but for production of electricity the plant should accumulate 100,000 t of coal. Last year the stocks at the Slovyansk TPP were much higher: as of October 1 – 120,000 t, and as of December 1 – 200,000 t. At the storehouses of DonbasEnergo’s second plant – the Starobeshevo TPP – only 42,000 t of coal have been accumulated as of October 13, while as of October 1, 2013 the reserves totaled to 300,000 t and as of December 1, 2013 – 400,000 t.

Taking refuge in silence

Power companies have already mentioned the lack of funds for the purchase of fuel for thermal power plants. Last week Tymchenko said DTEK has already exhausted its financial safety margin: the company could not supply electricity for free because it did not have the funds for the purchase of coal. The company warned that it could produce and supply electricity only to the extent to which it would be paid. According to Tymchenko, in January–June 2014 alone Energorynok owed DTEK UAH 1.8 bn for electricity supplies and by the end of the year the debt could grow by another UAH 1 bn. As of today the imbalance in DTEK’s financial flows was approximately UAH 1.5 bn, he said.

Tymchenko added that DTEK appealed to the NCSEPUR requesting funds for the purchase of coal, but the commission allocated only UAH 100 mn. “But this is not the solution we expected. It is an important but not all-encompassing solution. It does not solve the problem,” said General Director of DTEK commenting of the NCSEPUR’s decision.

He said in order to survive the winter the company needs approximately UAH 3.7 bn, while there was only approximately UAH 1.7 bn at the disposal of Energorynok. 8.5 mn t of coal should be delivered to the power stations over three months. Otherwise there will be no fuel for the power units with a capacity of 4 GW, which accounts for 15% of the total amount, added the source.
At the moment, Ukrainian consumers are using 22 GW of the capacity, while in cold weather power companies have to increase their capacity to 27–28 GW and in extremely cold temperatures – up to 29 GW.

Minister of Energy and Coal Industry Yuriy Prodan also expected that the NCSEPUR would find some solutions for financial problems of power companies. On the eve of the meeting of the NCSEPUR he said the department would not be proposed a positive solution from the commission for a month. Prodan fears that in case a decision is made, the delivery of coal to power stations could be suspended. Due to the shortage of Ukrainian coal the government decided to import more expensive fuel. The minister estimated that at least UAH 1.5 bn is needed to cover the difference in coal prices.