DTEK renews anthracite supply to Luhanska Power Plant

Supplies of anthracite coal to the Luhanska Power
Plant of DTEK Energy (DTEKUA) have been partially restored, the epravda.com.ua
reported on Nov. 12, referring to DTEK’s press service. These anthracite
supplies from DTEK-related mines located in Russia have enabled the power plant
to reduce its natural gas use by 30%, the press service said, after halted
supplies required the plant to resort to the expensive
fuel. However, the supplies are not enough to fully switch the plant’s power
units back to burning anthracite, its designed fuel, the holding said.

During the last heating season, Luhanska Power Plant
was burning 3.1-3.2 kt of coal each day, according to Concorde Capital
calculations. The plant received 2.36 kt of coal on Nov. 11, which was the
first delivery since Oct. 11, according to the Energy Ministry data.

In a Nov. 12 newsletter, DTEK reported it had called
upon Ukrainian authorities to initiate construction of a railway connection
between Ukraine’s railway system and the Luhanska Power Plant (currently, such
a connection exists only with Russia’s railway system). The new railway
connection will take 1.5 years to construct, according to DTEK estimates, while
it says Ukrainian Railway’s estimate is for five years.

Alexander Paraschiy: There is no
economic justification behind Russia blocking coal supplies between DTEK’s
Russian mines and the Luhanska Power Plant, as we highlighted before. However, we
do not rule out that such a blockade could have some political motivation.
Specifically, Russia could be pressuring Rinat Akhmetov – the owner of DTEK and
controller of half of the MPs of the Opposition Bloc faction in Ukraine’s
parliament – to support the newly launched, Russian-oriented political party,
Opposition Platform For Life.

Meanwhile, we continue to expect the blockade will
be short-lived, and anthracite supplies from DTEK’s mines will be restored in
full. Therefore, the negative economic effect of burning expensive natural gas
will be short-lived for DTEK.