Ferrexpo launches pilot solar power plant

Ukraine’s largest iron ore pellet exporter Ferrexpo
(FXPO LN) launched a pilot 5MW solar power plant, according to
Interfax-Ukraine’s report that cited a July 16 press release by the company.

Ferrexpo’s investments amounted to several million
dollars, and the plant’s yearly production will amount to 6.5-7 GWh. The
company plans not to sell the electricity produced into the market but instead
consume it for pellet production. Ferrexpo’s midterm plans include constructing
a renewable energy power plant with a capacity of 250-1000 MW, the release
said.

Dmytro Khoroshun: The planned
250-1000 MW power plant will be a significant project for Ferrexpo. The total
investments will amount to up to USD 0.25-1 bln, we estimate. This is 2.4-9.7x
Ferrexpo’s 2020 development CapEx (USD 103 mln) and 1.3-5.1x the amount of
dividends it paid in 2020 (USD 195 mln).

Nevertheless, this project might be easily spread over
several years, limiting the redirection of cash from dividends. Furthermore,
Ferrexpo might attract external green financing for the plant’s construction,
which will minimize the project’s effect on the company’s dividend payouts.

The planned solar plant will cover 18-70% of Ferrexpo’s
electricity needs. Producing this much solar electricity might require either
storing it or selling it into the market.

The 5MW pilot plant’s electricity production will
amount to only 0.4% of Ferrexpo’s electricity consumption on an average yearly
basis.

The above estimates use production volumes of 12 mmt
of pellets per year with a consumption coefficient of 160 kWh per ton of
pellets. We assume the larger plant Ferrexpo intends to build will also be a
solar power plant that would cost about USD 1,000 per kW to construct and would
produce electricity at full capacity for about 3.7 hours on an average calendar
day, similar to what we estimate for the pilot plant.