Antimonopoly body suspects DTEK firms abused their market power

Two subsidiaries of DTEK Group abused their market power
to boost the price for their electricity, according to the preliminary
conclusions announced on June 2 of an investigation by Ukraine’s Antimonopoly
Committee. The committee initiated the investigation in October 2019,
suspecting the two companies of abuse of their market power in July-October
2019 at the so-called Burshtyn Energy Island, where DTEK’s Burshtyn power plant
is the dominant producer of electricity.

Based on the committee’s preliminary conclusions, DTEK
Zakhidenergo (operator of Burshtyn TPP, part of DTEK Energy, DTEKUA)
deliberately reduced the supply of power to the island in the day-ahead and
intraday market segments, which forced consumers to buy electricity at the balancing
market, where prices are higher. Also, the committee suspects the company
offered unjustifiably high prices on the island’s day-ahead segment in
July-October. In turn, DTEK’s intermediary, D.Trading, purchased most of the
import capacity to the island, thus limiting alternative sources of electricity
for consumers.

The collected evidence and conclusions have been
submitted to the lawyers for DTEK Zakhidenergo and D.Trading to prepare their
legal positions in the case, which will be heard by the committee. The
committee stated that in case it recognizes the abuses, the defendants will
face a penalty of up to 10% of their revenue for the last reporting year.

Responding to the announcement, DTEK Group called the
committee’s preliminary conclusions as “unfounded and baseless” and “public
administrative pressure on a domestic electricity producer.” The company
claimed it is operating in harshly regulated environment and acts in full
accordance with the rules of the market. It also highlighted that a power
sector regulator has no complains against DTEK’s operations on the market.

Alexander Paraschiy: As before,
we see DTEK’s ability to withstand the committee’s pressure in this case as the
more likely outcome of this conflict. But we do not rule out the adverse
outcome, which might result in up to an USD 85 mln penalty
for DTEK Energy. The risk of such a penalty may add more arguments for the
company in its ongoing talks with creditors on new debt conditions.