DTEK bought all capacities for export of electricity to Europe

If one sat on the wire, the other fly beside

Photo: PHL

DTEK Trading, which is controlled by Rinat Akhmetov’s DTEK, bought all lots put up on yesterday’s auction for the sale of capacities for raw export of electricity to Slovakia, Hungary and Romania in 2015. DTEK Trading paid UAH 17.4 mn for the right to sell electricity to the most liquid market. 

Takeaway electricity

At yesterday’s auction Ukrenergo put up for sale 2,150 MW of capacity of interstate networks in four directions: 100 MW – from the Burshtyn energy island in the direction of Slovakia, Hungary and Romania, 500 MW – to Belarus, 350 MW – to Moldova and 1,200 MW - to Russia (when the publication went to press the results of the auction for the Belarus, Moldova and Russia directions were not announced). Noteworthy due to the acute shortage of electricity in the country compared with the previous year Ukrenergo significantly reduced the volume of export capacity, which was put up on the annual auction (5,880 MW was put up for export in 2014).

In addition to the annual auction, Ukrenergo also holds monthly auctions on which the company puts up for sale residual capacities. After the situation in the Ukrainian energy sector stabilizes and there will be no power shortages, it is likely that the capacities “saved” at the annual auction will be put up for sale on monthly auctions. 

French connection

Five companies submitted bids. Among them were those traditionally involved in electricity exports – DTEK Vostokenergo and DTEK Trading, belonging to DTEK and Ihor Humenyuk’s Energy Generating Company Donbasenergo, Trading Electric Company (both taking part in the annual auction for the second time and connected with each other, according to market players). The Kharkiv company Energosvit Plus, which is a subsidiary of Energy Resources of Ukraine belonging to DTEK’s ex-manager Andriy Favorov, was a newcomer on the auction.

The press service of Energy Resources of Ukraine reported that Energosvit Plus participated in the auction together with the European energy company Gas de France SUEZ (GDF SUEZ), which will be the exclusive buyer of Ukrainian electricity. 

Heated grapple

The starting price of all four lots amounted to UAH 680,000, according to Ukrenergo, which organized the auction. However, in the course of the auction the price of the first lot has increased from UAH 200,000 to UAH 5.3 mn, the price of the second – from UAH 200,000 to UAH 6.06 mn, the price of the third – from UAH 140,000 to UAH 3.5 mn and the price of the fourth – from UAH 140,000 to UAH 2.5 mn. As a result, the total price increased by more than 25 times compared to the starting price. All four lots were bought by DTEK Trading.

After the auction Director of Energy Resources of Ukraine Andriy Favorov said that during the auction his company was raising the price to a comfortable level limited by a budget of UAH 16.5 mn. Apparently, this level was also comfortable for the French partners. “Energy is expensive – we could not bring such amounts on our own without participation of a major foreign partner,” said Favorov.

He explained that the company decided not to raise the price even higher, because today it is still unclear whether next year the wholesale price of electricity purchased for export will include subsidy certificates through which cheap electricity is supplied to households. “When you do not know the prime cost of electricity, it is difficult to bargain. If the government decides to return subsidy certificates (into the wholesale price of electricity purchased for export – Ed.), exports would be impractical. Now, neither our company, nor our western partner GDF SUEZ has a clear understanding of the regulatory decision that will be made,” he said.

At the same time, Favorov said that his company is not interested in participation in the auction for the purchase of export capacities for Moldova and Belarus. He explained that electricity from the United Energy System of Ukraine is exported in those directions, while Slovakia, Hungary and Romania receive power from the Burshtyn energy island, running in parallel with the European power grid, but separated from the Ukrainian power system. The stations of the Burshtyn energy island consume gas coal, which Ukraine has sufficient amount of, while the plants producing electricity for the Ukrainian energy system are experiencing an acute shortage of anthracite coal. “When the country suffers from rolling blackouts, it would be incorrect to export electricity to Belarus and Moldova,” he said.

Growing interest

The interest in the possibility of exporting electricity to Europe in 2015 is significantly higher than at a similar auction held in 2014. Then Ukrenergo put up for auction 650 MW of power, which DTEK Trading bought for a miserly sum of UAH 202,000. Favorov noted that the devaluation of the hryvnia has increased interest in the export of electricity. “Now the exchange rate is UAH 17/USD, while at the annual auction last year it was UAH 8/USD. With the current exchange rate there are many companies willing to export. This is quite obvious,” he noted.

Minister of the Energy and Coal Industry Volodymyr Demchyshyn said that the increased interest in the auction was because this year “it was transparent and open”. “There are major external players hoping that in the new conditions they will be able to import electricity from Ukraine,” he said, adding that around 10 companies expressed their desire to take part in the auction. “I think this shows that there is an opportunity to work on the market,” he concluded.