Zelensky draft bill proposes delaying new electricity market by one year

Ukrainian President Volodymyr Zelenskiy registered
with parliament on June 10 a draft of legislative amendments to the law “On the
Electric Energy Market,” according to the parliament’s website. The text of the
bill is not available at the moment, but Presidential Representative to the
Cabinet of Ministers Andriy Gerus commented in his blog the same day that the
bill foresees the postponement of launching of a new electricity market by one
year.

Recall, the original law, adopted in April 2017, calls
for launching a new electricity market on July 1, 2019. The new market should
replace the existing wholesale electricity market, in which all producers are
selling electricity to a single state-controlled buyer at mostly predetermined
prices. The new market allows most producers to sell electricity under
bilateral contracts with consumers, as well as on a day-ahead market, an
intraday market and a balancing market. Over the last couple of months, various
international organizations
and state bodies called for
postponing the new market, referring to lack of readiness of its legal framework
and infrastructure for a July 1 launch.

Alexander Paraschiy: As we
highlighted before, the launch of the new electricity market is beneficial for
DTEK Energy (DTEKUA), which will face no regulatory limits to pricing its
produced electricity. The postponement of the market launch for about three
months, as suggested by Ukraine’s Western partners, is also advantageous for
DTEK Energy, since such a delay would allow for addressing all the regulatory
inefficiencies, at the same causing no harm to the current pricing approach of
electricity for DTEK Energy (the so-called Rotterdam Plus approach).

At the same time, a 12-month delay looks much more
risky for DTEK fundamentals as it provides much more time for regulators to cancel
the Rotterdam Plus approach before the new market starts functioning, without
knowing what pricing method will be adopted in the interim period. Such a delay
would give new power brokers more time to radically change the existing law to
DTEK’s disadvantage. However, this won’t necessarily occur, given that the
current parliament contains enough lobbyists of the early launch of the new
market. Keeping in mind these increased risks, we are sticking to our bullish
view on DTEKUA bonds.