DTEK Group Production Indicators for the first 6 Months of 2019

In 1HY 2019, DTEK Group produced 12.6M tonnes of coal (-2.5 % against 1HY 2018) and 817.4M m³ of natural gas (-0.1 % against 1HY 2018). The United Energy System of Ukraine was supplied with 16.4B kWh (-7.9 %) of electric energy, and customers were provided with electricity distribution services amounting to 20.4B kWh (-7.8 % against 1HY 2018). The supply of electricity for end consumers in the internal market amounted to 19.3B kWh.

‘Ukraine has made its call on the energy sector, going for reforms and the European market model. All the elements of the new liberalized energy market have been operating successfully since July 1. This means the industry is becoming more customer-oriented, more competitive and more favorable for investment. Since its operations began, DTEK has invested $9.2B in the industry’s development in order to achieve the maximum possible efficiency and secure the stability of the energy system. This year, we plan to switch power unit No. 1 at the Kryvorizka TPP to domestic coal and install 740 MW of green energy capacity,’ commented DTEK’s CEO Maxim Timchenko on the company’s 1HY 2019 operations. ‘Our new wind and solar farms will reduce CO₂ emissions by 2M tonnes annually. This is as important for the ecological state of large industrial regions of the country where these facilities are situated, as for Ukraine as a whole.’

DTEK Group’s Main Production Indicators

* Since September 1, 2016, the results  of Mine Office Obukhovskaya JSC have no longer been consolidated with those of DTEK Energy due to the enterprise’s transfer into management by DTEK B.V. strategic holding. The transaction was made in line with the restructuring of DTEK Energy’s credit portfolio and with the objective of balancing enterprise development opportunities with  debt servicing.

** The unbundling process was completed during the first stage of the energy reform. Companies separated power production, distribution and supply functions by establishing separate companies for each of them.

*** Including trading operations outside Ukraine.

DTEK Energy

Coal Production and Concentration

The 1HY results show that DTEK Energy mined 11.3M tonnes of G-grade coal, which is aligned with last year’s levels. The run-of-mine coal processing volume reached 7.7M tonnes, and  concentrate production reached 4.6M tonnes. Virtually all coal processing and concentration is covered by DTEK’s own concentrating mills. This was made possible by our capacities upgrade programme.

Major factors impacting production indicators

• High labor productivity at DTEK Pavlogradcoal PrJSC: 112.7 tonnes per person a month and the general increase in average labour productivity at DTEK Energy’s mines by 3.4 % to 97.4 tonnes per person a month. This allows DTEK to maintain high coal production rates.

Key projects of 1HY 2019

• Equipment upgrade: DTEK Pavlogradcoal PrJSC mines acquired 3 shearers and 2 tunnelling machines. DTEK Dobropolyeugol LLC added 2 tunnelling machines and 2 shearers to its mining equipment inventory. The new equipment has improved performance, ensuring stable coal production in deteriorating geological conditions.
• Concentrating mills upgrades: DTEK CCM Pavlohrads’ka LLC is completing the overhaul of its pulp hydraulic classification unit and waste screw separation unit. This will decrease the moisture content in waste and therefore waste accumulation rates, which will have a positive impact on the region’s ecosystem. In general, the project improves an enterprise’s closed water-and-pulp system, which means it will no longer need to use a sludge pit and can proactively reclaim land for coal concentration waste placement.

In line with the program of transition to a closed water-and-pulp system, CCM Kurahivs’ka LLC has begun to implement its first project by developing the project documentation for the introduction of a liquid waste processing and dehydration unit.

At DTEK Oktyabrs’ka CEP PJSC, equipment supplies have resumed for the transition to the concentration of run-of-mine coal of 1–13 mm class in heavy hydrocyclones. In 1HY 2019, the enterprise acquired a heavy hydrocyclone, a thickening cyclone, sieves, pump units, and power and automation equipment.

DTEK Dobropolyeugol LLC has completed the second stage of the rock dump construction. This will enable the allocation of coal concentration waste for the next 10 years and was constructed using innovative ‘green dump’ technology. Each dump’s level has been bunded with clay and provided with an internal drainage system and fire-protection layer. This will reduce the environmental load by eliminating the occurrence of fires and preventing contact of coal concentration waste with the environment. The internal drainage system diverts the water to the pond, from which it is then returned to the production cycle.

Electric Energy Generation

For the reporting period, DTEK Energy supplied 15.8B kWh of energy to the United Energy System of Ukraine (UES). This is 9.3%, or 1.6B kWh less than in the same period of last year.

Major factors impacting production indicators

• Expiry of the contract with Kyivenergo PJSC for the management of CHPP-5 and CHPP-6. The enterprise’s electricity generation indicators have not been consolidated since July 31, 2018 (1,536.6M kWh of power output in the 6 months of 2018).

DTEK Energy has been introducing a comprehensive program to increase the amount of domestic G‑grade coal it uses in its power plants, thus minimizing the consumption of imported anthracite. The 1HY results show that the production of electricity from domestic coal amounted to 14,108.2B kWh, which exceeds the indicator for the same period of last year by 2.8 %. This allowed DTEK Energy to cut the share of electricity produced from imported coal across the company  to as little as 10.8 % (it was 12.5 % for six months of 2018).

Key projects of 1HY 2019

• DTEK Prydniprovs’ka TPP: power unit No. 10 has been re-equipped for the production of electric energy from domestic G-grade coal. It is the plant’s fourth power unit that does not use anthracite. The power unit is equipped with an electrostatic filter to reduce dust emissions in line with European requirements, which is no more than 50 mg/m³.
• DTEK Kryvoriz’ka TPP: the Impulse project to switch power unit No. 1 from anthracite to G‑grade coal burning has started. The re-equipped power unit will be connected to the grid before the end of 2019.

Since 2008, the company has been retrofitting or installing electrostatic filters when upgrading or retrofitting power units to achieve dust emissions levels set-out in Directive 2001/80/EC.

• DTEK Kryvoriz’ka TPP, DTEK Zaporiz’ka TPP and DTEK Burshtyns’ka TPP: tests for compliance with the ENTSO-E requirements were conducted. The tests confirmed that №3 DTEK Kryvoriz’ka TPP; №1 DTEK Zaporiz’ka TPP; №5, 7, 10 DTEK Burshtyns’ka TPP and other similar power units, are capable of operating as part of the UES of Ukraine and in parallel with the European energy system.
• DTEK Luhanska TPP and DTEK Kryvoriz’ka TPP have successfully passed environmental management system compliance audits of compliance of the with ISO; 14001:2015.

DTEK RES: Renewable Energy

The Company supplied 553.9M kWh to the UES of Ukraine in 1HY 2019. This exceeds last year’s result by 64.3 %, or 216.8M kWh.

Major factors impacting production indicators

• Start of operations at new renewable-energy power plants. Since March 1, Nikopols’ka SPP has been feeding electricity to the UES of Ukraine, producing 136.4M kWh in this reporting period. The first stage of Prymors’ka WPP was commissioned in full, and its 26 wind turbines generated 89.8M kWh.
• Tryfonivs’ka SPP has increased its power output by 1.7 %, or 108K kWh. The equipment availability was 99.98 %.
• Botievo WF decreased its output by 2.9 %, or 9.5M kWh, due to a decline in wind speed at the site. The wind turbines and the plant’s infrastructure availability have remained high and consistent with the performance of the world’s best wind parks – 98.14 % and 99.90 %, respectively.

Key projects in 1HY 2019

• Nikopols’ka SPP construction was completed (installed invertor capacity 200 MW). The annual green power output of Nikopols’ka SPP will be 290M kWh. This will allow CO₂ emissions to be reduced by 300K tonnes annually, which is crucial for the Dnipro Region, Ukraine’s largest industrial centre.
  • The construction of Prymors’ka WPP is still in progress (installed capacity 200 MW). The project implementation is split into two stages, each assuming the installation of 26 wind turbines with 3.8 MW units manufactured by GE.

The construction of the first stage was completed in this reporting period. The basic infrastructure facilities have already been built during the second stage, and erection of the wind turbines is underway. The second stage is scheduled to finish in November 2019.

• The Orlivs’ka WPP construction is also in progress (installed capacity 100 MW). The construction of high-voltage power lines and intra-site roads is complete. The construction of wind turbine foundations and cable lines are being finalized.

The major components of the wind turbines, manufactured by Vestas (Denmark), and two power transformers manufactured by Zaporizhtransformator (Ukraine), have been delivered to the site. Turbines installation and energization is planned to be completed in September, allowing the plant to start green power generation in October. The annual power output of Orlivs’ka WPP will reach 380M kWh, cutting greenhouse gases emissions by more than 400K tonnes per year.

• The Pokrovs’ka SPP construction is in progress (installed invertor capacity 240 MW). The construction, undertaken mainly by Ukrainian contractors, has progressed well in the first half of the year. 1,200 people are working on-site every day. The power plant commissioning and the start of green power generation are planned for early autumn 2019.

The solar power plant, which will be made up of 874K panels manufactured by Risen Energy (PRC), will be built on the reclaimed land (it was a former manganese mining pit). Pokrovs’ka SPP will produce 390M kWh of green power annually.

• In line with DTEK Energy’s long-term development strategy, the plan is for Tylihul’s’ka WPP to have a capacity of 500 MW, which can be raised to 565 MW. The plant will be situated on the shore of the Tylihul estuary in the Mykolaiv Region and will produce around 2B kWh annually. This will allow CO₂ emissions to be cut by more than 2M tonnes annually. Wind monitoring and environmental impact assessments are currently being undertaken.

The company is also actively developing three solar power projects with a total capacity of 390 MW: the Vasyl’kivs’ka, Pavlohrads’ka and Troits’ka solar power plants. The implementation of these projects in the Dnipro Region is planned for 2020.

DTEK Oil&Gas: Natural Gas and Gas Condensate Extraction

In 1HY, natural gas extraction amounted to 817.4M m³, which is aligned with the results for the same period last year. Gas condensate extraction increased by 20.6 % to 30.4K tonnes.

Major factors impacting production indicators

• The completion of drilling at three wells at the Semyrenkivs’ke field: No. 61 with a depth of 5,456 metres and horizontal displacement of 380 metres; No. 43 with a depth of 5,605 metres and horizontal displacement of 370 metres; and No. 72 with a depth of 5,420 metres.
• The overhaul of wells and operations to increase well yields across the operational well stock.

Key projects in 1HY 2019

• Machukhs’ke field: drilling of well No. 53 with a design depth of 5,850 metres.
• Semyrenkivs’ke field: drilling of well No. 75 with a design depth of 5,520 metres.
• Acquisition of a license for subsurface use of the Svitankovo-Lohivs’ka area (Kharkiv Region). The company won the license at an open online auction held by the Public Service of Geology and Subsoil of Ukraine.
• The successful sale and signing of a product sharing agreement for the Zin’kivs’ka oil and gas field (Sumy and Poltava Regions).

DTEK Grids: Electric Energy Distribution and Grids Operation

In 1HY 2019, the distribution systems operators delivered 20.4B kWh of electricity to their customers. This is 7.8%, or 1.7B kWh, less than in the same period of last year.

Major factors impacting production indicators

• Reduction in the amount of electricity distributed by DTEK Dnipro Grids and DTEK Power Grid by 21.9 %, or 3,381.2M kWh. The territories for the licensed operation of these enterprises were revised in connection with the completion of the first stage of the energy reform, which reduced the number of customers serviced.
  • Completion of the acquisition of 68.2949 % of shares of Odesaoblenergo JSC and 93.9978 % of shares of Kyivoblenergo PrJSC. Their production indicators have been consolidated into DTEK Grids reporting since May 2019. The enterprises distributed 1,710.1M kWh in May and June.

Key projects in 1HY 2019

• DTEK Dnipro Grids: the Naddniprians’ka Substation was built and commissioned in Dnipro, and is one of the most advanced power facilities in Ukraine. It is entirely automated, guaranteeing a consistent energy supply to customers thanks to the speed at which changes can be made in response to varying grid conditions. The new facility will provide power to 300 thousand inhabitants of the city’s central districts and two new subway stations.

Three Customer Service Centers opened in Kryvyi Rih, Dnipro and Pavlohrad. Call center capacity was also increased, with a resulting improvement in access to the company and convenience for customers.

The procedure for the connection of facilities to the grids was streamlined and automated. Customers can now submit all the relevant documentation online. As a result, the number of standard connections established in the Dnipro Region increased by 41 % as compared to the previous year.

• DTEK Donetsk Grids: the new Central dispatch node project is in progress. It will improve the power infrastructure management of the Donetsk Region.

Technical re-equipment is underway at the Misto 2 – 35 kV and Dobropillia – 35 kV substations to improve the quality of power supply to Mariupol and Dobropillia.

The range of customer options has been expanded. The procedure for connecting new facilities to the grids was streamlined and automated, which has enabled the number of connections made to be increased by 81 %. The call centre’s inquiry processing capacity has also been increased by up to 29K per month.

• DTEK Kyiv Grids: a large-scale retrofitting of the Bortnychi Substation has been started. This will enable the connection of new facilities and will create a foundation for the aeration station overhaul.
• DTEK Power Grid: retrofitting of Novoraiska – a 110 kV substation to provide a secure power supply for the Slovians’k District of the Donets’k Region is underway.

Ukraine has completed the first stage of the energy reform which is aimed at transitioning to the European electricity energy market model. The companies have completed the unbundling process. This allowed the opening of the retail electricity market from January 1, 2019, which means that consumers are now supplied with electricity by providers at a non-regulated tariff and universal service providers. Therefore, all customers are now free to buy electricity from any provider. This has created a competitive market; one where companies are incentivized to improve service quality and introduce new services.

DTEK Group was one of the first companies in Ukraine to carry out a fundamental restructuring of its business in line with the liberalization reform agenda by separating the distribution and supply of electric energy. The D.Solutions and D.Tradings holdings were created to focus on   customers. While D.Solutions’ primary task is the development of the electricity energy retail business, D.Trading will conduct wholesale trading in coal, electricity, gas and petrol products on the internal and external markets.

D.Trading

Coal supplies

All export operations are performed by Mine Office Obukhovskaya JSC. Based on the results of 1HY 2019, the enterprise increased its sales to 219.1K tonnes (+6.3 %, or 12.9K tonnes YoY). The Ukrainian market was supplied with 716.8K tonnes (-0.5 %, or 4K tonnes). This decrease was caused by the absence of a quota for coal exports and shipping termination from June 1.

To secure the operation of thermal power plants and industrial consumers, DTEK Energy imported 991.3K tonnes of coal resources (-33.6 %, or 501.4K tonnes) in the first half of 2019.

Ukraine’s industrial consumers were supplied with 610K tonnes in total from domestic sources and imports.

Supply of Electricity to External and Internal Markets

3.0B kWh of energy was supplied under foreign contracts, the same as in the previous year. Electricity was exported to Hungary, Poland and Moldova.

Industrial consumers on the Ukrainian market were supplied with 9.4B kWh of energy. This was supplied at a non-regulated tariff, mainly to metallurgical enterprises.

Import and Supplies of Natural Gas on the Internal Market

The company increased its natural gas sales on the internal market to 967.7M m³ (+2.5 %, or 23.7M m³) through increased sales to businesses in the industrial and energy sectors.

D.Solutions: Electricity Supplies

In 1HY 2019, D.Solutions supplied 9,936.9M kWh of electricity.

It coordinates the operations of three electric energy suppliers: Kyiv Electric Services, Dnipro Electric Services and Donetsk Electric Services. Established as a result of the unbundling of Kyivenergo, Dniprooblenergo and Donetskoblenergo, they became universal service providers.