New electricity market launches in Ukraine

Ukraine’s new electricity market was launched on
schedule on July 1, Energy Ministry reported the same day. The new model allows
power producers to sell electricity by bilateral contracts with consumers, as
well as on a day-ahead market, intraday market and balancing market. It
replaced the old model, in which all power producers were selling their
electricity to a single buyer. The first trading of electricity by bilateral
contracts and on the day-ahead market was successfully convened on June 30,
Interfax-Ukraine reported. Some technical issues were reported during the
launch of the intra-day market on June 30, but they were reportedly resolved
early today.

The new market operator also published price caps (for
day-ahead and intra-day markets) that were introduced by the government to
prevent sharp hikes in electricity prices: UAH 959/MWh in the night time and UAH
2,048/MWh in the day time.

Alexander Paraschiy: So far, it
looks like the new model of the electricity market is working, but it will take
some more time to confirm whether all its segments are fully functioning. If
there won’t be any failure in the near term, the new model will prove its
sustainability and talks about the need to delay the market launch will fade
away.

The new market is positive for DTEK Energy
(DTEKUA), which otherwise would have faced a plunge in its electricity price
(based on the so-called Rotterdam Plus approach) no later than starting 2020.
The new market means DTEK will likely enjoy non-declining prices next year. We
remain bullish on DTEKUA bonds.