Maxim Timchenko, CEO of DTEK
Introduction
Dear colleagues and partners!
I’d like to share some of DTEK Group’s major achievements from last year. 2018 was a year of major transformation: we brought new resources online, made structural changes, and set new directions for the organization.
DTEK Group develops business in the energy sector. Our enterprises mine coal and extract natural gas, generate electricity at thermal and RES power plants, distribute and supply electricity to end consumers, develop a network of fast-charging stations, and provide energy services.
UAH 19.9 bln was invested in production development across DTEK Group. The amount of capital investment almost doubled year-on-year, laying the foundations for improved performance statistics across all activity areas in the future. This will contribute to achieving Ukraine's strategic goal of energy independence.
DTEK Group develops business in the energy sector. Our enterprises mine coal and extract natural gas, generate electricity at thermal and RES power plants, distribute and supply electricity to end consumers, develop a network of fast-charging stations, and provide energy services.
UAH 19.9 bln was invested in production development across DTEK Group. The amount of capital investment almost doubled year-on-year, laying the foundations for improved performance statistics across all activity areas in the future. This will contribute to achieving Ukraine's strategic goal of energy independence.
Coal production and processing
Mining machinery manufacturing
Gas production
Thermal power
Wind power
Solar power
Electricity distribution
Electricity supply
Under construction
Production enterprises are integrated into operating holdings with separate companies managing day-today activities in each of DTEK Group’s business streams.
Ukraine is reforming its energy sector to create an electricity market in line with the European model. Transition to new rules will give state, businesses, and consumers an incentive to implement structural changes. It’s all about creating a new clean, efficient, and competitive industry which makes the consumer an equal market player.
DTEK Energy: coal production, electricity generation and mining machinery manufacturing
DTEK Energy has created a full cycle of electricity production from coal — it mines coal and generates electricity. The company has increased the share of domestic coal used in the fuel mix of its power plants by converting energy generating units to run on G-grade coal instead of anthracite. These efforts promote Ukraine’s energy resilience and independence.
DTEK Energy operates mines that mainly produce G-grade coal. The company processes coal at its own and third-party CCMs. The production cycle includes close integration with manufacturers of mining machinery, which ensures efficient and immediate response to production demands ranging from the design of new machinery to the supply of spare parts.
The company generates electricity at its eight thermal power plants and one combined heat and power plant.
DTEK Renewables: renewable energy
DTEK Renewables is the largest investor in the Ukrainian renewable energy sector. The company invested 287.1 mln euros in the construction of wind farms and solar power plants in 2018, which accounted for a third of the total financial investment in the sector. The company will continue its development in the green energy sector, with expectations of commissioning new wind and photovoltaic capacities in 2019.
DTEK Renewables develops two energy sources: wind and solar. The 200 MW Botievo Wind Farm is one of company’s projects in the wind energy sector, with another two wind facilities currently under construction: the 200 MW Prymors`k WPP and the 100 MW Orlivs`ka WPP are expected to be commissioned in 2019. A pilot solar project was implemented back in 2017. The construction of 10 MW Tryfonivs`ka SPP demonstrated the considerable potential of the sector. In January 2019, Nikopol SPP was commissioned, and the Pokrovs`k SPP construction project was launched. Together, their aggregate inverter capacity will reach 440 MW. The environmental impact will be significant when they’re in operation, with the reduction of CO2 emissions set to be 2.6 mln tonnes per year.
* As of May 30, 2019.
DTEK Oil & Gas: gas production
Significant gas production in Ukraine is only possible through intensive development at depths of 5-6 km. DTEK Oil & Gas drills very deep wells efficiently, thanks to investments made in the latest equipment and innovative technologies. Our expertise even gives the opportunity to consider drilling at the depth exceeding 7 km.
The main operating asset is Naftogazvydobuvannya. The company produces gas and gas condensate at the licensed sites of Semyrenkivs'ke and Machukhs'ke fields, both at a depth exceeding 5 km. The extracted gas is processed and brought in line with the standard requirements at the Olefirivka PGTU, the Semyrenky CGTU and the Machukhy GTU. Naftogazrozrobka was established to explore and develop new sites. The company specialises in geological exploration and is developing the Khoroshivs'ka site in the Kharkiv region.
DTEK Oil & Gas also explores other opportunities for business expansion. Its development strategy envisages both increased participation in sub-soil use auctions and the acquisition of assets already in operation. DTEK Oil & Gas is also ready to extend its experience and expertise to manage projects undertaken by other companies.
DTEK Grids: electricity distribution and grid operation
In the new electricity market model, distribution system operators have been converted into independent companies. As a result, all electricity suppliers receive equal access to power grids, which ensures all clients can choose their own suppliers. Distribution system operators are also responsible for the operation of power grids, ensuring reliable electricity supply and infrastructure development.
DTEK Grids focuses on electricity distribution. Distribution system operators serve 5.6* mln clients: companies, steelworks and machine-building plants, mines and factories, as well as social facilities and households.
* As of May 30, 2019.
D.Trading: trading in coal, electricity, gas and oil products
The new market model includes segments of organized and non-organized electricity trade. A market of bilateral agreements made directly between market participants falls within the non-organized segment. On the other hand, the organized segment is comprised of day-ahead, intra-day, and balancing markets, all governed by rules established by the Regulator.
D.Trading will be responsible for wholesale trade in coal, electricity, gas and oil products on the domestic and foreign markets for energy resources
On the bilateral contracts market, D.Trading will specialize in the supply of electricity to big industrial consumers and universal service suppliers. The company will also be responsible for export operations. In addition, D.Trading will be an active player on the balancing and day-ahead markets.
D.Trading will be in charge of SCM’s energy portfolio, within the markets of natural gas and coal, ensuring a balance between production and consumption.
Therefore, the main tasks assigned to D.Trading include the sale of electricity with a focus on boosting sales on the market of bilateral contracts, the sale of natural gas produced by the undertakings of DTEK Oil & Gas with a focus on increasing the amount supplied to industrial consumers.
D.Solutions: electricity supply and energy efficiency services
In the new market model, electricity suppliers carry out the function of universal service supplier for two years. A universal service includes guaranteed electricity supply to state-financed organizations, residential and small non-residential consumers with agreed capacity below 150 kW. These consumers are charged at a tariff established by the Regulator.
D.Solutions’ main role is to provide all-embracing solutions for the electricity retail market
Consumers in Kyiv, Dnipropetrovs'k and Donets'k regions are supplied with electricity by Kyiv Energy Services, Dnipro Energy Services, and Donetsk Energy Services, respectively.
DTEK ESCO focuses on the provision of integrated energy efficiency and energy saving services. The company implements projects at industrial, residential, administrative, and social facilities. The company also offers a set of energy efficient products and services under the Smart WATT brand to residential consumers.
In 2018, the company extended its operations by establishing a STRUM fast-charging stations network for electric vehicles, and pilot stations were opened in Kyiv.
The long-term corporate strategy determines key areas of business development, management projects and technologies.
Stages and priorities of DTEK Group’s development strategy
DTEK Group is the largest private national investor. We invest in the Ukrainian energy sector through production upgrades, introduction of innovative technologies, by building capacities and creating modern businesses.
DTEK Energy: coal mining and electricity generation
Ukraine has sufficient reserves of G-grade coal to become energy independent. The company invests in the industrial development of enterprises and the new-generation of equipment for the maximum conversion of thermal generation to domestic coal.
In 2018, production of G-grade coal amounted to 24.1 mln tonnes, which is the highest annual figure in the company's history.
*The data are given for mining of D, DG-grade coal
DTEK Energy: coal mining and electricity generation
Reduction of the share of imported energy resources in the country's fuel balance and integration with the European energy system ENTSO-E remain the key tasks of the energy sector. The сompany actively supports these processes to strengthen the energy security of Ukraine.
In 2018, DTEK Energy continued converting its TPPs to run on domestic coal, and production of electricity on G-grade coal increased to 28.3 bln kWh. This allowed reducing the share of electricity generation of anthracite to 12% in the total production volume of the company.
from G-grade coal, bln kWh
DTEK Energy: coal mining and electricity generation
*Overhaul with an increase in installed capacity.DTEK Renewables: renewable energy
1 GW of installed capacity of DTEK Renewables will reduce 2,600 ths tonnes on CO2 emissions' equivalent per year
677.0 mln kWh of green electricity was produced by the Botievo wind farm and Tryfanovka solar plant. This is 6.1% higher than in 2017.
According to the Energy Strategy of Ukraine, annual generation by wind and solar power plants should reach 25 bln kWh by 2035. To help achieve this goal, the сompany plans to increase its portfolio of completed projects to 1,000 MW by 2020.
DTEK Oil & Gas: gas production
The company is the largest private gas producer in Ukraine. In 2018, natural gas production amounted to 1,648.5 mln cubic meters, which exceeded targets by 50 mln cubic meters.
As a leader we feel responsibility to introduce new solutions and technologies, and share the accumulated experience in order to contribute to the development of the industry. Technological progress expedites achieving the goals of the Energy Strategy of Ukraine — to fully meet the country's need for natural gas from its own production.
DTEK Grids: electricity distribution and grid operation
The сompany intends to develop the concept of a Smart Grid, which will require a system upgrade of the electricity networks. This will allow cities to meet demand for automated management of their power grids to increase the comfort level for residents.
Also, modernization provides for the elimination of power shortages, which arise during the development of cities, and to reduce the frequency of outages in electricity transmission. In 2018, the company reduced the amount of actual electricity losses to 5.46% (the average for Ukraine was 11.82%). 43.7 bln kWh — the volume of electricity distribution in 2018, which is 1.2% higher than the previous year.
D.Solutions: electricity supply and energy efficiency services
It is important to tell consumers what effect can be achieved thanks to energy efficiency and energy saving, and teach them to select tools. This will help create a culture of energy consumption Ukraine.
The company's portfolio includes 37 completed projects, for which annual savings are estimated at 40.2 mln kWh and 1.6 mln cubic meters of natural gas. This is equivalent to reducing CO2 emissions by 38.4 ths tonnes.
STRUM, fast-charging stations network for electric vehicles, is also supporting the reduction of CO2 emissions. In future, the environmental impact will be enhanced by the organic growth of using electricity as fuel and the development of the network.
Innovation DTEK: integration of innovative solutions
Further development of the Ukrainian energy sector is impossible without the integrated introduction of innovation. This is the only way to become part of the modern economy and global trends. DTEK Group integrates new approaches into the business ecosystem in order to find solutions and technologies for the transformation of industrial enterprises and the development of customer service.To select and implement advanced technologies and solutions, DTEK has created the Innovation management function, in 2018. The function selected three projects for commercial implementation.
eVRscan 3D laser scanning systems, which, using a scanning lidar and drone, allow for determining the amount of coal reserves currently in warehouses and obtaining digitized data.
QRSmarty The startup's solution enables increased control over accounting and movement of inventory items.
Railtex The platform developers plan to create a Ukrainian wagon exchange, that helps to find the most advantageous offer for both car owners and shippers.
DTEK Group is focused on long-term sustainable development and considers ESG criteria (Environmental, Social, and Corporate Governance) for all its activities.
DTEK Group follows the principles of social responsibility and sustainable development, implementing projects to achieve the goals of the UN Global Compact.
DTEK Group pays great attention to the issue of health care, ensuring employees of its enterprises and local residents can all receive quality medical care on time.
DTEK Group supports various projects aimed at improving access to education and leisure. Educational programs have been implemented for external and internal stakeholders. The programs for external stakeholders have been created on an open platform to provide wider access. Employees, under the development of professional competencies, are given free education opportunities in the corporate university — Academy DTEK.
DTEK Group provides equal conditions for all employees to unlock their full potential and promotes career development regardless of gender. DTEK Group’s human resources work — including headhunting and personnel recruitment, and staff administration — is in line with the relevant Ukrainian laws and internal regulatory documents, with zero restrictions relating to gender.
DTEK Group focuses its water resource management efforts around economic and efficient use at all its production facilities. To ensure optimum water consumption, the enterprises use both circulating water supply systems and reuse of water.
In order to keep the environmental balance, DTEK Group systematically upgrades its facilities, ensuring production reliability and compliance with the European environmental standards, as well as developing new business lines to decrease environmental impact and combat climate change.
DTEK Group’s enterprises primarily work in single-industry towns. To foster the development of more economically self-sufficient communities, DTEK Group supports small and medium businesses which can stimulate job creation and attract investors to the regions. This also contributes to the growth of tax revenues for local budgets.
DTEK Group works hard to ensure it has stable social partnerships with the communities and local governing bodies of the regions in which it operates, to make those towns more comfortable to live in. To this end, the enterprises implement social partnership programs every year aimed at ensuring sustainable development. The programs cover five key areas: energy efficiency in the utilities sector, health care, developing socially important infrastructure, supporting business environment and increasing local communities’ activity.
DTEK Group works hard to ensure it has stable social partnerships with the communities and local governing bodies of the regions in which it operates, to make those towns more comfortable to live in. To this end, the enterprises implement social partnership programs every year aimed at ensuring sustainable development. The programs cover five key areas: energy efficiency in the utilities sector, health care, developing socially important infrastructure, supporting business environment and increasing local communities’ activity.
The DTEK Group strategy is aimed not only at reducing costs but also focuses on maximizing output from existing resources. The enterprises use innovative technologies to reduce fixed unit costs and increase product competitiveness. The second line of operation focuses on energy awareness and fostering responsible consumption by organizations and citizens.
In order to keep the environmental balance, DTEK Group systematically upgrades its facilities, ensuring production reliability and compliance with the European environmental standards, as well as developing new business lines to decrease environmental impact and combat climate change.
DTEK Group’s environmental efforts all revolve around prevention and minimizing the organization’s negative impact on biodiversity and the wider environment.
DTEK Group develops partnership relations with international donor organizations, state funds for the implementation of joint sustainable development projects in the areas where the company operates.
Introduction
DTEK Group at a glance
DTEK Group’s 2030 Development Strategy
Review of industries and Ukraine’s macroeconomic indicators
Operating Performance
Analysis of Financial Performance
Corporate governance
Corporate governance structure
Compliance and corporate ethics