F.A.Q.

In accordance with the Energy Strategy of Ukraine until 2030 – the integration of the United Power Grid into the European one has been given top priority. What is your attitude to this?

In your opinion, which problems of utility companies require special attention?

What are the company’s plans in respect to the reconstruction of power units?

What are the prerequisites and targets of establishing Donbass Fuel-Energy Company?

The presence of fuel and energy assets in the structure of the SCM Group and their integration was the key premise for establishing DTEK. The creation of the management company was the most attractive option for solving the issues of improving the management, economic efficiency and complete utilization of intra-branch synergy.

The strategic goals of the company are to provide a dynamic growth of the business, to create and maintain conditions for the efficient development and use of HR potential, to ensure utilization of advanced operational, management and information technologies.

What is the structure of DTEK Management Company?

The principal scheme of the management company structure is subdivided into two main blocks – operational and functional. The first block represented by the Operations Directorate, coordinates the work of operational assets in each of the key businesses: coal production, enrichment, electric power generation and distribution. Another block, represented by the Strategy and Corporate Development Directorates, HR and Corporate Communications Directorate, and Finance Directorate, is aimed at the implementation of centralized management functions. Of course, these two blocks are not completely separated as they work in close co-operation, since the effective joint work of the management and operational teams is one of the key factors of success.

Management functions are concentrated in one center. At the same time, managers of the assets are responsible for the execution of production programmes.

What are the relations between DTEK and SCM?

The format of relations with the SCM Company is determined primarily by the functions entrusted to DTEK as a management company. The issues of elaboration and implementation of a business-development strategy, optimization of key business processes, procurement functions, HRM and finance management fall within the competence of DTEK at the present moment. The powers of SCM, as a member of the energy holding, are executed through representation and work in the Supervisory Board. Supervisory Board meetings are held for discussing strategic initiatives and decisions, control of the business plan and execution of the investment programme as well as an assessment of the efficiency of top management.

What qualities of personnel are brought to the forefront at the recruitment stage?

Our task is to create a team of professionals in the management company. The key value of our employees is their willingness to improve themselves and bring our company to perfection.

Are there plans for DTEK participation in the privatization of energy assets? What’s your attitude to coal industry privatization?

Coal assets are considered as a part of the fully integrated ‘coal-electricity’ chain. So far, our coal assets fully cover the demand of Vostokenergo Ltd. in fuel. However, one can’t exclude our future participation in the privatization process of coal and energy assets.

Our attitude to privatization as a process aimed at acquiring an efficient owner who is ready to take responsibility for solving part of the state’s problems in the coal sector is positive. But in our country, the privatization of coal enterprises can’t be considered a profitable business for the owners due to no additional state support. Ukraine will not find any efficient and socially responsible investors.

What factors influence the achievement of DTEK strategic goals?

The company’s success greatly depends on the level of liberalization and development of the energy market in Ukraine. The creation of the environment and incentives for implementation of competitive benefits for each player in the electric power market is one of the key tasks for the state. Transparent rules of operation in the industry, an increase in the share of private capital participation, a competitive environment - are the main factors in developing the energy sector and thus the development of our company as a part of this sector.

Is the company considering participation in electricity export supplies?

The company will consider participation in export supplies if the mechanism of their liberalization will be clear and transparent. This may be considered as one more business line for gaining profit using our international relations.

Did the State Property Fund have any complaints to Pavlogradugol OJSC regarding fulfilling investment commitments?

Based on the results of all SPF inspections with the participation of the trade unions of Pavlogradugol OJSC – not a single violation has been revealed. The owners have fulfilled their commitments in full.

What sense does the utility companies’ business have? At the end of the day, their tariffs do not include dividends for the owners.

Indeed, at present no dividends are included in the utility companies’ tariffs on transmission and supply, at least with regard to private businesses. We hope that the situation will change. The fact that private companies can be effective is proven by domestic statistics as well as international practice. Just the right mechanisms are required, so that the interests of a company’s owner will correspond with state interests.

What kind of innovative technology has been introduced at Vostokenergo TPPs?

Presently, traditional flaring is used for coal combustion in the furnaces of the power-generating boilers at the TPPs of Vostokenergo Ltd. The matter of switching to new coal burning technologies, specifically coal combustion in a circulating air-fluidized bed, will be considered when reconstruction takes place at power units of Luganskaya and Kurakhovskaya TPPs.

What is your attitude towards the government-developed energy strategy until 2030?

The fact of its formation deserves approval – state strategy is necessary for the effective operation of F&E complex enterprises, metallurgical complex, etc. nevertheless, a number of regulations to have reached us need to be revised or reconsidered (the volumes of coal production, for example). Furthermore, the strategy implementation mechanisms have not been specified and the sources of financing are not clear, in fact, it will require a great investment resource.

What is your attitude to state support of private coal businesses?

In the mining and geological conditions of Ukraine, the mines are unprofitable enterprises that have always been funded by the state. When private enterprises can implement capital construction independently, then, it will definitely be reflected in coal production cost, which will automatically cause an increase in the cost of metal, electricity and so on, i.e. will generate inflation Presently, the commissioning of one mine costs approximately USD1 bln, which is difficult for any investor to cover.

The coal industry is the basis of all Ukrainian industry. Coal is the raw material of strategic importance for the country, thus, the issues of industrial development and capital construction should be resolved together with the state, without dividing enterprises by ownership patterns.

In accordance with the Energy Strategy of Ukraine until 2030 – the integration of the United Power Grid into the European one has been given top priority. What is your attitude to this?

Our attitude is positive, because such an integration will expand the capabilities of the Ukrainian energy market. In its turn, it will positively impact our operation, because DTEK is a company with European ambitions, justified by the company’s experience and its growth potential available.

In your opinion, which problems of utility companies require special attention?

For increased attractiveness of energy companies – it is necessary to settle primarily the debt problem and to fully exercise the possibilities of the law ‘On measures aimed at securing the stable operation of F&E complex’ enterprises. In our opinion, it is also necessary to reform the tariff policy, in respect of utility companies' tariffs in particular. The tariffs should provide possibilities for the shareholders’ to receive dividends, as well as the state, and encourage an increase in the effectiveness of the companies’ operational and investment areas.

What are the company’s plans in respect to the reconstruction of power units?

According to the mid-term concept of technological development of Vostokenergo Ltd. until 2010, DTEK intends to initiate reconstruction of the 200MW power units at Kurakhovskaya TPP and, the 300MW power units at Zuyevskaya TPP. It is planned to win the following key objectives as a result of the reconstruction:

- to become more competitive in the Ukrainian Energy market by means of increasing economical performance of the power unit, its improved maneuverability characteristics and the unit’s ability to take part in the power grid load-frequency control;

- by lowering the specific reference fuel consumption down to 345.0 g/kWh, renewal of rated indicators of turbine equipment;

- by raising the installed capacity up to 221-225 MW (by 11-15 MW);

- by increasing the operational life of the equipment by no less than 15 years.

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