Ukraine switches anthracite sources after Russia halts supplies

State-run power generation company Centrenergo (CEEN UK) is awaiting shipment of 168 kt of anthracite coal from the Republic of South Africa on Dec. 4, the company reported in its Dec. 2 press release. In addition, the company ordered a second shipment from South Africa, in about the same amount, expecting delivery in January. Centrenergo reported its total coal stockpiles were 486 kt as of end-November, which is 4x more yoy.

Seven out of 14 thermal power plants in Ukraine were designed to burn anthracite coal, which is mined in Ukraine only on the occupied territory. Out of Centrenergo’s three power plants, two were designed to burn anthracite.

Anthracite coal deliveries from Russia and the occupied territories of Donbas ceased as of Nov. 20, and have not resumed as of Dec. 1, energy holding DTEK (DTEKUA) reported. Coal stockpiles at the power plants of DTEK were 1,527 kt as of end-November, or 39% more yoy. Three out of DTEK’s nine power plants were designed to burn anthracite coal.

Alexander Paraschiy: Stockpiles of anthracite coal at Ukrainian power plants started shrinking fast after deliveries from occupied Donbas were halted on Nov. 20. In the ten days leading up to Dec. 2, total stockpiles of anthracite fell 16% to 820 kt. Such stockpiles, including the announced shipment of coal from South Africa, will be enough for Ukrainian anthracite-burning power plants to operate in the current mode for 4-6 weeks, depending on the severity of frosts. If deliveries of foreign coal do not increase in January-February and Russia continues to block its supplies from its territory or the territory of Ukraine it has occupied, Ukraine may face a deficit of anthracite coal by the end of January, we estimate.

The deliveries of coal from overseas, which will cost not less than UAH 1600/t (compared to no more than UAH 1200/t for domestic coal), will increase the fuel costs of Ukrainian power plants. That might provide the pretext for power generating companies to start talking with the sector regulator on higher electricity rates, as well as higher price of local coal. Recall, DTEK has been asking for higher electricity rates for its power plants since spring 2015, without success so far.