energy market

Under pressure

19.12.2014 | By Dmytro Ryasniy

Ukraine was struck by the wave of information panic. It was provoked by the only state-owned heat generating company Centrenergo, whose representatives in informal comments predicted a near shutdown of their TPPs. The reason for this was the shortage of coal, which particularly deteriorated after the SBU blocked the supply of low-quality raw materials from the Republic of South Africa


From the outside, the initiative of Valentyn Nalyvaichenkos agency seemed to be very untimely. Now all TPPs in the country have only 1.3 mn t of coal, which at the current rate of burning (more than 30,000 t / day) will be enough at best until the end of January.

But in the near future the SBUs claims to Centrenergo will be lifted. A few days ago the main objective of the coal scandal has been achieved in fact, against its background the Ministry of Energy and Coal Industry received a new chief Volodymyr Demchyshyn who replace Yuriy Prodan, which led to redistribution of spheres of influence in the industry. Symbolically, the first personnel purges affected the same Centrenergo. Ihor Zhebskiy was dismissed and Ihor Balabanov, business partner of the Chief of the Presidential Administration Borys Lozhkin, was appointed to his office on December 5.

But despite the fact that the conflict over Centrenergo is virtually exhausted, the subject of the coal shortage is still discussed. For example, Chief of the Russian Railways company Vladimir Yakunin has recently ordered cessation of transportation of the Russian power generating coal to Ukrainian power stations. Thus, Kyiv has to solve problems on its own, that is, to agree on the supply of raw materials with Ukrainian mines, located in the territories beyond the control of the central government.

Recently Chief of the Donetsk Oblast State Administration Oleksandr Kikhtenko said that he saw no alternative to negotiations on purchase of coal with the newfangled Donbas leaders. There are companies registered in our territory, which can directly negotiate with the leadership of the DPR and LPR. Let them do the talking, said the official.

It is quite easy to explain such stand: 5 of 14 Ukrainian TPPs run exclusively on rate anthracite coal anthracite, mined in eastern Ukraine. Such coal is also produced in the Republic of South Africa, Korea, Vietnam and the United States, but it is unprofitable for our country to establish longterm cooperation with those countries because of the long transportation leg, which dramatically increases the final cost of the product.


Thus, there is a strong opinion that there is no alternative for the Donbas coal. But we must understand that only a wan shadow remained from the prewar capacity of the Donbass coal. Suffice it to say that of 53 mines located in the territories uncontrolled by Kyiv only a few retained their usable condition: 20% of them were destroyed (or seriously damaged) during the fighting, and approximately 60% of mines are flooded. Most of these companies have no chance of revival of production even in case the Donbass returns under the control of the central government.

As a reminder, back in 2010 the Ministry of Energy made a list of 26 operating unpromising mines, which were subject to liquidation, 19 of them are currently located in the ATO zone, and at the moment the list may easily become twice longer. The reason lack of economic viability. Even before the conflict the subsidies for compensation of the difference between the selling price of coal and the cost of its production was close to UAH 500 / t, and taking into account the necessary multibillion costs for restoration of mines, this amount will increase significantly.

But the most important thing is that the current situation means that now Ukraine is interested in the Donbas only because of its coal reserves, accumulated prior to the conflict (up to 4 mn t). And even then, the value of this product falls every day, because during storage in the open air coal, for example from the socalled gas group, loses its properties, turning in waste rock.

This fact means that it will be extremely difficult for Ukraine to balance the demand and the consumption of electricity only by the end of the heating season. Because by the beginning of the next period the country has all chances to complete the projects on construction of additional interconnection lines with the nuclear power plants. Due to that the potential output of power by the nuclear plants will increase to the current level of imbalance of power 3,000 MW.

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