DTEK plans to import coal from South Africa, Poland

Ukraine’s leading coal & utility holding DTEK (DTEKUA) announced in a Sept. 8 press release it’s purchasing coal from Poland and South African Republic to create a reserve. It will import anthracite coal (burned by three DTEK power plants) from South Africa and hard steam coal (burned by six other plants) from Poland. DTEK expects deliveries of 50 kt of hard steam coal in the coming weeks and 70 kt of anthracite from South Africa in late October or early November, according to DTEK Commercial Director Vitaliy Butenko.

Alexander Paraschiy: Importing anthracite coal is a logical step as DTEK can only gain it from its mines in occupied Donbas and Russia, with uncertain prospects to deliver it to its power plants in central Ukraine. On the other hand, importing hard steam coal is a puzzling option, given that DTEK has an ability to mine this coal in Ukraine, outside the occupied territory. But, in 7M16, DTEK reduced its mining of hard steam coal by 12%, with output declining at each of its three mining assets.

It seems like with such imports (including the scarce anthracite coal and readily available hard steam coal), DTEK is trying to advance its political agenda of proving that Ukraine has a deficit of all types of steam coal, and therefore coal in Ukraine should be priced based on international benchmarks plus delivery costs from abroad. Recall, such a pricing approach was proposed by Ukraine’s power sector regulator in April 2016 (after years of lobbying by DTEK), and it was widely criticized by experts and by Cabinet members. A number of Ukrainian anti-corruption activists, including former Concorde Capital CIO Andriy Gerus, reported this week they have appealed to local courts demanding the cancellation of such a coal-pricing approach.