DTEK's production indicators for 9 months of 2018

“We believe that with introduction of a competitive electricity market, Ukraine will move to qualitative transformations and come out of investment isolation. The need of power generation in capital investments is estimated at Euro 85-90 bln,” - said DTEK CEO Maxim Timchenko when commenting on the company's performance over 9 months of 2018. “It is important for us to strengthen the effectiveness of each Group company for successful work in a new market. We are investing in production of a new type of equipment for coal mining, transferring one more power unit at DTEK Prydniprovska TPP from anthracite to a gas grade of coal, building “green” power plants with a total capacity of 400 MW and worth more than Euro 500 mln. These projects provide a significant contribution to the energy independence of Ukraine. They support the growth of business efficiency, which ultimately is converted into an increase in tax deductions to the Ukrainian budget, an increase in the number of jobs and an increase in social investments in development of the cities where we work”.

Key production indicators of DTEK Group

*Since March 2017, indicators of the assets located on the territories of Donetsk and Luhansk regions temporarily uncontrolled by Ukrainian authorities have not been consolidated in the statements as the company has no control over the assets.

**Since 1 September 2016, DTEK Energy has not been consolidating the indicators of the Mine Office Obukhovskaya into its statements as management of the company was transferred to DTEK strategic holding company. This transaction was carried out as part of the restructuring of the DTEK Energy's loan portfolio aimed at balancing the asset development capacity with loan servicing capabilities.

***Including trading transactions outside Ukraine.

DTEK Energy

Coal production and processing

Over 9 months of 2018, the company's miners produced 17.7 million tonnes of coal, which is 5.9% or 1,107.6 thousand tonnes less than for the same period year-over-year. The total of 10.9 million tonnes of ROM coal were processed, 1.6 million tonnes of which were processed by external coal processing plants. Coal concentrate production amounted to 6.7 million tonnes, 0.9 million tonnes of which were produced by external coal processing plants.

Main factors influencing production indicators:

• an increase in high-volatile steam coal production by all enterprises in 3 quarter of 2018. 17,711.7 thousand tonnes of coal were produced in January-September, which is 4.6% or 771.6 thousand tonnes more than for the same period year-over-year. Breakage works are complicated by deterioration of geological conditions and breakdowns of the tunnelling equipment due to higher workload. However, DTEK Pavlohradcoal keeps on ensuring high performance indicators – 113.2 tonnes per person monthly. Bilozers`ka mine's productivity increased up to 84.3 tonnes per person.
• termination of anthracite production. Last year 1,879.2 million tonnes of coal were produced over the same period.

Key projects in progress during the reporting period:

• ensuring stable ventilation in the mine workings: in 4 quarter of 2018 it is planned to finish the first stage of main fan replacement project at Dniprovska mine. The Yuvileina mine continues the construction of the ventilation shaft which will  reduce the material supply time to the site;
• development of the equipment: we approved the concept of the new type roadheader with a roof-bolter, developed by Corum. The project is aimed at the increase in tunnelling rate from 5 to 10 metres per day. Test run of new equipment, RH-160, will be tested at the Stepova mine;
• renewal of equipment: over the reported period we installed 8 roadheaders and 8 shearers, and implemented the project on modernisation of 14 electric locomotives at DTEK Pavlohradcoal. 2 roadheaders and 1 shearer were installed at DTEK Dobropolyeugol. Modernisation of mining equipment is aimed at ensuring the stable mines operation. The new equipment has better operating characteristics which will reduce maintenance costs;
• coal processing plants modernisation: The rock dump at DTEK Dobropil`s`ka CPP is being dynamically constructed. The implementation of this project will decrease the environmental burden due to elimination of seats of fire and release of the coal processing waste to the environment. At the same time the water will be passed off to the pond and then reused in production. The construction envisages the coverage of every tier with clay, building the inner drainage system and creation of fire-protection layer It is planned to complete the works in 1 quarter of 2019.

Electricity generation

During the reporting period DTEK Energy's TPPs supplied 24.6 billion kWh to the United Energy System of Ukraine. The electricity generation level decreased by 6.7% or 1,766.2 million kWh year-over-year.

Main factors influencing production indicators:

• a decrease in production by DTEK Skhidenergo, DTEK Westenergy and Kyivenergo by 10.9% or 2,165.3 million  kWh. The change is due to loss of control of Zuyivs`ka TPP since March 2017, and expiration of the contract on operation of Kyiv CHPP 5 and CHPP 6 since July 31, 2018.
• an increase in production by DTEK Dniproenergo and DTEK Myronivka CHPP by 6.2% or 400.6 million kWh.

DTEK Energy implements the programme on increase of use of G-grade coal in the energy sector aimed at mitigation of anthracite deficit as it is not being produced on Ukraine's controlled territory. The company ramped up the G-grade coal-fired generation up to 20.1 billion kWh. This allowed to decrease anthracite-fired generation to 12.0% in the total scope of production.

Key projects in progress during the reporting period:

• DTEK Ladyzhyns`ka TPP: the construction of 0.5 MW solar power plant was completed. Ladyzhyns`ka SPP which is located on the TPPs dump, supplies electricity to the UES of Ukraine since 1 of July;
• DTEK Myronivka CHPP: made full transition to G-grade coal combustion. During the reporting period, the retrofit of boiler 9 was completed. Similar works with boiler 10 were completed in 2017.
• DTEK Zaporiz`ka TPP: the pilot project on development of monitoring, reporting and verification plan of GHG emissions was completed in July. It further allows to build a gas emission allowance trading scheme for the companies. The project was implemented in collaboration with the World Bank within the Partnership for Market Readiness programme;
• DTEK Prydniprovska TPP: the project on the transfer of Unit 9 to burn G-grade coal  completed (in November 2018), the re-equipment of Unit 10 is in progress. Heat machinery equipment is being supplied to the site and the installation activities are underway. Within the framework of the project, the new gas treatment equipment will be installed at Unit 10, the main activities are planned to be completed till the end of the year.

Starting from 2012, as a part of Units modernisation and retrofit, the company upgrades units' electrostatic precipitators to achieve the dust emission targets set forth in Directive 2001/80/EC.

Commercial activities

Coal supplies

We export coal produced the Mine Office Obukhovskaya. In January to September 2018, we supplied 344.5 thousand tonnes of coal to external markets, which is 40.8% down y-o-y. A decrease in the exports is conditioned by the necessity to ramp up the domestic supplies to 1.2 million tonnes (+0.5 million year-over-year) to reduce the anthracite shortage resulting from no production of A grade coal. In the reporting period, 1.9 million tonnes of coal was imported to satisfy the demand of DTEK Energy's thermal generation. The company was also importing coal from the Republic of South Africa and the USA.

Coal supplies to Ukrainian industrial consumers decreased by 14.0 % to 1,320 thousand tonnes.

Electricity exports

In January to September 2018, the company supplied 4.3 billion kWh under international contracts, which is 6.7% up year-over-year. Electricity was exported to Hungary, Moldova, and Poland.

Gas imports and domestic supplies

The company sold 1.4 billion cubic metres of natural gas in the domestic market. The trading transaction volumes did not change year-over-year, as the company increased gas sales to the steel producing companies.

DTEK Grids

In the reporting period, DTEK Grids distributed 32.2 billion kWh of electricity. This is up 1.4%, or 438.3 million kWh, year-over-year.

Main factors influencing production indicators:

• DTEK Dnipro Grids and DTEK Kyivs’ki Elektromerezhi increased electricity distribution by 3.9%, or 913.0 million kWh, due to higher demand by residential consumers, as well as small and medium-sized enterprises;
• DTEK Donetsk Grids, DTEK Energougol ENE and DTEK Power Grid reduced electricity distribution by 5.4%, or 474.7 million kWh. Since March 2017, the company no longer manages the networks located in the areas of Donetsk region temporarily not controlled by the Ukrainian Government.

Pursuant to the Law of Ukraine "On Electricity Market", the companies have to separate the distribution business from the electricity generation, transmission and supply businesses by establishing the respective business entities. Such transformations are an integral part of the energy reform aimed at introduction of the European market model.  DTEK Group is transforming its operations. Kyivenergo, DTEK Dniprooblenergo and DTEK Donetskoblenergo have already split up. DTEK Kyivs’ki Elektromerezhi, DTEK Dnipro Grids and DTEK Donetsk Grids will be responsible for electricity distribution and network management. Kyiv Energy Services, Dnipro Energy Services and Donetsk Energy Services will focus on electricity supply to consumers in Kyiv, Dnipropetrovsk and Donetsk regions. The transition to the new distribution business model is going to be completed by the end of 2018.

Key projects in progress during the reporting period:

• DTEK Donetsk Grids: the company opened online access to the GIS data on the electricity networks thus enhancing the transparency of the company's operations. With this service, customers will be able to plan their connections to the company's networks;

we continue retrofit of the 35 kV Selidovo substation to ensure stable and reliable power supply to the town and adjacent villages;

we have launched the project on setting up a new Central Dispatch Centre that is going to be implemented in 2018. The project will facilitate the electricity infrastructure management and improve the power supply quality.

• DTEK Dnipro Grids: the company opened online access to the GIS data on the electricity networks. It will be easier for customers to connect new facilities, as now they will have information about the location, length and voltage of overhead distribution lines; addresses and names of transformer substations; capacity of distribution substations; distance from a land plot to the connection point and cost of connection;

construction of the 150/10/6 kV Naddniprianska substation in Dnipro continues; it is going to be completed in December 2018. It will create additional capacity for connection of new consumers and improve reliability of power supply to the current and planned substations powering an underground railway system.

• DTEK Kyivs’ki Elektromerezhi: construction of the 110 kV Arkada substation is in progress. The project aims at improving the reliability of power supply to residential areas and increasing the networks' transmission capacity for connection of new consumers;

we have commenced construction of the Novokyivska-Moskovska high-voltage line; it will ensure reliable power supply to the Holosiivskyi and Pecherskyi districts.

• DTEK Power Grid: the company has started retrofit of the 110 kV Uhledar substation to ensure reliable and stable power supply to the town, as well as transit of electricity through the substation.

Company's retail consumers in Kyiv, Dnipropetrovsk and Donetsk regions can buy energy-efficient kits under SMART WATT brand complete with turnkey installation services. It is Ukraine's first all-in-one solution for improving energy efficiency in the residential sector.

DTEK Renewables

The company sent a total of 477.3 million kWh of green electricity into Ukraine's power grid, which is up by 7.0% or 31.2 million kWh year-over-year.

Main factors influencing production indicators:

• Botievo Wind Park output grew by 5.1% or 22.7 million kWh. The output growth was facilitated by favourable weather conditions and an optimum maintenance campaign on the power plant equipment. The availability factors of the wind turbines and plant infrastructure remain stably high: 98.49% and 99.16%;
• Tryfanovka SPP generated a total of 10.9 million kWh. The availability factor of the solar farm equipment amounted to 99.88%.

Key projects in progress during the reporting period:

• Prymorsk Wind Park: Foundations for 26 wind turbines were built and construction of the central collector substation was completed. We are also completing construction of internal roads and laying of power cable lines. The basic sections for all towers of Phase I wind turbines and six sets of towers and blades were delivered to the construction site. The construction of the new Ukrainian wind park involved 250 people;
• Nikopol Solar Farm: We completed preparatory works on the construction site and started installation of the equipment. The first batch of inverter stations, solar panels and module mounting structures has already been delivered. The selected suppliers are Seraphim Solar and Trina Solar for solar panels, Shenzhen KSTAR Science and Technology for inverter substations, and Xian Electric Engineering for transformers (all China-based companies). Civil works engaged more than 400 people;
• new projects: new solar and wind projects are being developed in line with the company's strategy to reach 1,000 MW of installed capacity by 2020.

DTEK Oil&Gas

In line with the production plan, Naftogazvydobuvannya PrJSC produced 1,244.4 million cubic meters of natural gas and 38.1 thousand tonnes of gas condensate in the reporting period. Gas production increased by 4.6 million cubic meters, while condensate production fell down by 3.3 thousand tonnes year-over-year.

Main factors influencing production indicators:

• completed drilling of well No. 25 (5,652 m deep, with a vertical deviation of 700 m) in the Semyrenkivske field;
• major overhaul of high-yield condensate wells No. 23, 68, 70 in the Semyrenkivske field;
• stimulation of flow rates in the producing wells.

Key projects in progress during the reporting period:

• drilling of wells No. 43 and61 in the Semyrenkivske gas and condensate field;
• construction of a propane cooling plant at the Olefirivka preliminary gas processing facility;
• commissioning of the compressor booster stations of condensate stabilization that are used to boost pressure and return condensate stabilization gas to the gas processing system.