Power regulator penalizes DTEK, threatens sharing data with other state bodies

The National Energy Regulation Commission penalized
three power generating companies controlled by DTEK Energy (DTEKUA) for total
UAH 5.1 mln, the regulator reported on March 10. The three penalized companies
operate all eight thermal power plants of DTEK Energy. The penalty, which was a
result of inspections of the power plants, was levied for their breach of
license conditions, namely by their failure to maintain coal stockpiles above
the required minimum level. According to the commission’s press-release, such
breaches have put under risk the stability of Ukraine’s energy system.

The regulator also warned that the results of
inspections of power plants will be filed to the Antimonopoly Committee, the
Energy Ministry and even to the Defense and Security Council of Ukraine. On top
of that, the regulator is going to initiate legislative changes to increase
penalties for similar breaches, stating that it has imposed the maximum
possible penalties in this case.

Commenting on the issue, DTEK Energy stated that its
coal stockpiles at the start of heating season were in line with the
electricity production plan for the season, approved by the state last autumn.
The company met the unusual demand for its power since November, which forced
its power plants to burn 1 mmt of coal in excess of the plan in
November-December 2020. It was impossible to replenish such extra burn of
stockpiles quickly, the company stated. In its turn, DTEK Energy also promised
to ask the Antimonopoly Committee and the Defense and Security Council to
assess the poor performance of the energy sector regulator that allegedly led
to the risk of the energy system’s collapse.

Alexander Paraschiy: The amount
of the penalty is not very painful for DTEK Energy, but the further
consequences of the regulator’s investigation might be more severe, if the
Antimonopoly Committee or other state bodies will find wrongdoings in DTEK’s
recent actions.

On the one hand, the company indeed could have
accumulated more coal for the heating season, as well as could have mined more
coal (as its 4Q20 coal mining was 20% lower yoy).

On the other hand, the company should not have
expected that demand for its electricity would skyrocket due to the failure of
other generation sources (including the biggest power producers, nuclear power
plants) to supply power in line with the plan. In November 2020 – February 2021
DTEK’s power plants burned 5.9 mmt of coal, which is 52% more (or 2 mmt more)
yoy, we calculate. This does not fully exculpate DTEK for its power plants’
coal stockpiles falling below the allowed minimum, but this at least explains
it.

All in all, we believe the company will be able to
explain the conditions that led to its breach and avoid any stricter
punishment.