The prospects of coal supplies from the breakaway DPR and LPR are becoming more realistic

Photo: Reuters

The prospects of resolving the issue of coal shortage through supplies from the territory of the self-proclaimed Donetsk and Luhansk people’s republics are becoming more realistic. The government banned the purchase of coal from the occupied territories of the Donetsk and Luhansk oblasts, but the leadership of the regions controlled by Ukraine is complaining that the problem of shortage cannot be resolved otherwise. The newly appointed acting general director of Centrenergo may be able to resolve this conflict thanks to his personal connections in the Donbas region.

Not at all

Yesterday it was reported that the state-owned foreign trade company Ukrinterenergo canceled the tender for the provision of freight forwarding services of imported coal in the volume of up to 1 mn t. Representatives of Ukrinterenergo explained that choosing the freight forwarder is more of a technical issue and does not affect coal supplies. Head of the Legal Department of Ukrinterenergo Denys Vasylyev told Capital that the freight forwarding services of the local company MTA Service Ltd. were paid by Steel Mont Trading, the supplier of African coal. Ukrinterenergo additionally paid the transporter to cover the costs of freight forwarding services.
The state-owned company had sufficient funds to pay for the delivery of only half of the South African coal as the end consumer Centrenergo is not willing to take the risk of purchasing it. “Centrenergo refuses to sign the additional agreement for the purchase of this coal. Between the prospect of suspension of production and the pressure of criminal prosecution of the company’s senior management, the company chooses the latter,” reads an open letter of Ukrinterenergo, which it sent yesterday to President Petro Poroshenko, Premier Arseniy Yatsenyuk, VR Speaker Volodymyr Groysman and Minister of Energy and Coal Industry Volodymyr Demchyshyn.

Vasylyev also told Capital that earlier the Ministry of Energy and Coal Industry gave a task to Ukrinterenergo to diversify coal supplies, in particular to do everything possible to purchase the resource of “non-Russian origin”. He said that these days the company receives dozens of offers on coal imports, in particular from the U.S., Columbia and Australia, but the company is not considering them, since it does not have the financial wherewithal to pay for the product.

Coal demand

Former Minister of Energy and Coal Industry Yuriy Prodan told Capital that Ukraine needs to import at least 1 mn t of anthracite every month. He says that only Russia, which is protracting the issue of supplies, is capable of fully satisfying this demand. There are not many alternatives to these supplies, says Prodan. “South Africa and Australia can partially cover coal shortage, but approval of the conditions of supply and settling the formalities requires time,” he added. Furthermore, the capacities of Ukrainian ports can only receive 420,000 t of coal per month, which means that the rest must be delivered by rail, according to one player on the energy market. Meanwhile, supplies by railway are possible only from Russia and the Donbas.

Noteworthy, the Ministry of Energy and Coal Industry is putting its stakes on the new head of Centrenergo, who allegedly has close connections in the Donbas and can in some way, though nobody knows how, resolve the coal problem. First Deputy Minister of Energy and Coal Industry Yuriy Zyukov told Capital that all questions about coal supplies (from where it will be supplied and the volumes of supplies) should be addressed to Centrenergo, which will independently approve the decisions with its new head, hold tenders and purchase coal “of higher quality and for cheaper”.

Meanwhile, the demands of the officials to legalize the supplies of coal from the occupied territories have become more frequent. Yesterday Head of the Donetsk Oblast State Administration Oleksandr Kykhtenko said he sees no other solution but to hold talks and purchase coal on the territories controlled by illegally armed groups. “Negotiations on supplies are currently under way. We are only pretending that we don’t see this. There are also contraband supplies,” admitted Kykhtenko.

While the officials cannot seem to come up with a solution, coal supplies are running out. A representative of Donbasenergo told Capital yesterday that as of December 9 coal reserves at the Starobeshevo Power Plant were 151,300 t with an average daily consumption of fuel this month at 7,600 t. This means the reserves will last for only 20 days. In order to survive the winter, this power plant alone will need another 350,000 t of coal.