Ukraine PM, president express “concerns” about coal pricing
29 June 2016
Ukrainian Prime Minister Volodymyr Groysman ordered his ministers on June 24 to prepare a study analyzing the new methodology of steam coal pricing designed by the National Electricity and Utility Regulation Commission (NEURC), Interfax-Ukraine reported the same day. Following the study, the Cabinet should develop within a week recommendations to the commission on coal pricing, he said. Recall, the commission approved in March and April a new approach to calculate Ukraine’s wholesale electricity price, which involves calculating the coal price based on the API2 Index (CIF Amsterdam-Rotterdam-Antwerp), plus delivery costs from Rotterdam to Ukraine. “I think there are lot of unknowns in the so-called formula ‘Rotterdam plus’,” Groysman said. “I had a conversation with the president on this issue, and the president is also concerned about it.”
Alexander Paraschiy: The commission’s arguments in favor of the new pricing approach is that Ukraine may face a need to import some coal for its thermal power plants (TPPs). However, Ukraine’s mines are producing enough hard steam coal to satisfy the needs of the seven TPPs that are burning it. The risk of an emerging deficit exists for anthracite coal, which is the fuel for seven other TPPs, as anthracite is mined in Ukraine only on the occupied territory.
The concerns of the president, who appoints the NEURC commissioners, is a signal that the newly adopted methodology of coal pricing (that makes Ukrainian coal among the most expensive globally) is under risk. This is a negative development for DTEK (DTEKUA), the key beneficiary of the new coal pricing. However, a high probability remains that no changes in coal pricing approach will happen, primarily because right now Ukraine suffers from a deficit of anthracite (its stockpiles at TPPs have more than halved since June 1), which puts under risk the stability of Ukraine’s entire energy system. In such circumstances, the government will likely postpone any revision of its coal pricing methodology.
