DTEK Zakhidenerho : 01/08 DTEK DTEK's production indicators for 6 months of 2017

In January to June 2017, DTEK Group companies produced 14.8 mln tonnes of coal (+6.6% yoy), generated 17.1 bln kWh of electricity (-4.2%), transmitted 21.8 bln kWh of electricity via networks (-4.6%), and produced 834.6 mcm of natural gas (+7.5%).

'The Ukrainian energy sector is yet again being tested to its limits,' said Maxim Timchenko, CEO of DTEK, commenting on the company's performance for 6 months of 2017. 'In the shortest time possible, DTEK's miners have increased G grade coal production by 18.9%, which enabled the power sector to increase workload on the units fired by G grade coal by 12.3%. The sector has gained certain experience of fighting crisis, but the need for sector modernisation has become even more acute. Ukraine needs to accumulate all available resources to carry out reforms and deploy new technologies to secure the required efficiency and security of power supply. DTEK is ready to use this opportunity to build a new Ukrainian energy sector: clean, efficient, and competitive.'

Key production indicators of DTEK Group

*Since March 2017, the indicators of the assets located in the temporarily uncontrolled territories of Donetsk and Luhansk regions have not been consolidated in the statements as the company has no control over the assets.

***Including trading transactions outside Ukraine.

**Including the Mine Office Obukhovskaya

Since 1 September 2016, DTEK Energy has not been consolidating the indicators of the Mine Office Obukhovskaya as the company is directly managed by DTEK strategic holding company. This transaction was carried out as part of the restructuring of the DTEK Energy's loan portfolio aimed at balancing the possibilities for the development of the enterprises and servicing of the loans.

DTEK Energy

Coal production and processing

In January-June 2017, DTEK's miners produced 13.4 mln tonnes of coal, which is by 4.6%, or 592.0 ths tonnes more yoy. ROM coal processing and concentrate production at DTEK Energy's coal processing plants amounted to 9.2 mln tonnes and 5.8 mln tonnes, respectively. Furthermore, third-party coal processing plants (CPPs) processed 1.6 mln tonnes, and concentrate production amounted to 0.9 mln tonnes.

Main factors influencing the production performance:

• higher production of G grade coal by DTEK Pavlogradugol, DTEK Dobropolyeugol and the Bilozerska mine in the reporting period-by 18.9%, or 1, 835.3 ths tonnes. The companies produced 11.6 mln tonnes of G grade coal, which is the highest output the company has ever reached in the first half-year. At the same time, preparation of new breakage faces is being complicated by deteriorating mining and geological conditions and equipment failures caused by the higher workload.

Since March 2017, DTEK does not control DTEK Sverdlovanthracite LLC, DTEK Rovenkyanthracite LLC, DTEK Komsomolets Donbassa Mine PrJSC and Mospino Coal Preparing Enterprise LLC, as it considers the demand to re-register those companies in the temporarily uncontrolled territory of Donetsk and Luhansk regions unacceptable. At the time the loss of control over the companies, the stocks of coal and coal products amounted to 655 ths tonnes. In case the products are used or sold illegally, the company will initiate measures to be taken against a guilty party in accordance with Ukrainian and international legislation.

Key projects in progress in the reporting period:

• supplying the required volume of fresh air to the mines to secure stable ventilation in the mine workings. At the Dniprovska mine, we continue the main fan replacement project. At the Yuvileina mine, we continue the construction of a fresh air shaft: in HY1, a bulk material gantry was mounted; narrow-gauge tracks were assembled; 1 MW of power supply for underground works was provided, and the construction of a charging room and emergency equipment warehouse started;
• we continue the construction of a filter-press department at the Dobropilska CPP. Globally, the practice of using belt filter presses is one of the most common ones, as it allows not storing liquid waste and switching to a full closed cycle of the water-slurry circuit of the company. Filter presses generate two products: clean water and solid waste.

Electricity generation

In HY1 2017, DTEK Energy's power plants supplied 16.8 bln kWh to the United Energy System of Ukraine, which is by 4.2%, or 0.7 bln kWh, less yoy.

Main factors influencing the production performance:

• nuclear and hydro power plants increased their power generation by 13.6%, or 6.2 bln kWh;
• DTEK Zakhidenergo and Kyivenergo increased their power generation by 8.6%, or 675.6 mln kWh;
• DTEK Skhidenergo reduced its electricity generation by 10.3%, or 511.8 mln kWh as DTEK has no control over the Zuivska TPP. At the same time, if disregarding the DTEK Zuivska TPP, the company increased its output by 6.9%, or 238.5 mln kWh;
• DTEK Dniproenergo's power generation dropped by 18.1%, or 835.5 mln kWh as the Prydniprovska and Kryvorizka TPPs had to be stopped in April to accumulate sufficient coal stocks to run during the summer peak consumption.

At the end of January 2017, railway traffic with the temporarily uncontrolled territories of Donetsk and Luhansk regions was blocked, which resulted in terminated coal supplies to the DTEK Prydniprovska, DTEK Kryvorizka and DTEK Luganska TPPs. Since March, DTEK does not control the assets located in the anti-terrorist operation (ATO) zone. To cover the power plants' demand we are importing anthracite.

In January-June 2017, the G grade coal-fired units of DTEK Energy's TPPs controlled by the company increased their electricity output by 12.3%, or 1,290.4 mln kWh. The total supply for the reporting period amounted to 11.8 bln kWh.

As of 1 July 2017, coal stocks at DTEK Energy TPPs amounted to 1,914 ths tonnes, which is 150% above the 2016 level. G grade coal accounted for 1,556 ths tonnes and anthracite for 358 ths tonnes.

Key projects in progress in the reporting period:

• we continue the retrofit of generating unit 10, DTEK Burshtynska TPP. Expected outcomes are an increase in the unit's installed capacity by 15 MW to 210 MW, in the flexibility range -by 30 MW to 105 MW, in the boiler efficiency-up to 90, and higher equipment reliability during peaks. The main equipment of the generating unit - drum, boiler heating surfaces, turbine, generator rotor, transformer and electrical equipment - will be replaced. A new boiler drum has already been installed.
• The second stage of the retrofit of unit 1 at DTEK Kryvorizka TPP continues. We plan to expand the unit's capacity from 282 MW to 315 MW and increase the load range by 25 MW to 125 MW.
• A design documentation is being prepared to transfer generating units 7 and 8 of DTEK Prydniprovska TPP from anthracite to high-volatile steam coal grades. Switching the units to run on G grade coal will minimise the procurement of anthracite, thus, increasing the utilisation of Ukrainian coal.

Since 2012, as part of the modernisation programme, electrostatic precipitators at all DTEK's generating units have been retrofitted to comply with the dust emission level stipulated by Directive 2001/80/ЕС.

Electricity transmission by networks

Our distribution companies have transmitted 21.8 bln kWh of electricity in January to June 2017, which is by 4.6%, or 1 mln kWh, less yoy.

Main factors influencing the production performance:

• increased electricity transmission by DTEK Dniprooblenergo and Kyivenergo by 0.9%, or 143.9 mln kWh, yoy;
• decreased electricity transmission by DTEK Donetskoblenergo, DTEK Power Grid and DTEK Energougol ENE by 16.3%, or 1,190.6 mln kWh. Since March 2017, the company no longer controls the networks of DTEK Energougol ENE, DTEK Power Grid and DTEK Donetskoblenergo located in the territories temporarily not controlled by the Ukrainian authorities in Donetsk region.

Key projects in progress in the reporting period:

• DTEK Donetskoblenergo: the refurbishment of Misto-5 substation continues in the city of Mariupol. It is planned to install a modern electric module based on D-12P cells with 10 kV vacuum circuit-breakers.
• DTEK Dniprooblenergo: the construction of 150/10/6 kV Naddniprianska substation continues in the city of Dnipro. The substation will provide an additional capacity for connecting new consumers and improve reliability of power supply to the current and planned substations powering the underground railway system.
• In Nikopol, we have opened a new Client Service Centre, which provides a full range of core services: from reconciliation of meter readings to obtaining technical specifications for grid connection.
• Company's clients (individuals) can now use an Android and IOS based mobile application - Energy24 ('Personal Account' service). Through the application, clients can report meter readings and pay for consumed electricity.
• DTEK Power Grid: completed the construction of the Ocheretyne Spur Line-Avdiivka Coke Plant double-circuit line. The new lines will secure uninterrupted power supply to the town of Avdiivka and coke plant by supplying electricity from the territory controlled by the Ukrainian authorities.
• Kyivenergo: continues a technical re-equipment of the 110/35/10 kV Solomenska substation. The project is aimed at securing power supply and increasing the network transmission capacities.
• We continue retrofitting the utilities for the new terminal of the Zhuliany airport, Kyiv. As part of the project, we have already built 35 kV Mukilsko-Harnizonna and 10 kV Harnizonna-RP 267 cable lines and plan to technically upgrade the Mukilska and Harnizonna substations.

Commercial activities

Coal supplies

In the first half 2017, we have supplied 456 ths tonnes of coal to external markets, which is 43.4% less compared with HY1 2016. We are exporting coal from the Mine Office Obukhovskaya.

A decrease in the exports is conditioned by the necessity to supply more to Ukraine, including to DTEK Energy's TPPs, to stock enough coal at the power plants for summer peak energy consumption. The Company has supplied 469 ths tonnes of coal products to Ukrainian consumers. Furthermore, DTEK Energy has imported 186 ths tonnes of coal from other sources to supply its thermal power plants.

Coal in-house supplies to Ukrainian industrial consumers have decreased by 28% to 981 ths tonnes, which is related to the loss of control over the assets in the ATO zone.

Electricity supplies

In January to June 2017, the company supplied 3.1 bln kWh under international contracts, which is 40% up yoy.

DTEK RENEWABLES

In January-June 2017, the Botievo Wind Farm supplied 284 mln kWh of green energy, which is 6.9% less than in the same period of the last year. A decrease in the generation is conditioned by the weaker wind. The infrastructure availability factor and wind turbine availability factor remain sustainably high: 99.75% and 98.76%, respectively.

The Company continues to expand its wind energy segment. As part of the project on the construction of the 200 MW Primorskaya WEP in Zaporizhzhia region, a complex environmental impact assessment has been conducted for the future wind park. In August, project public hearings are scheduled to take place.

The second promising area the company is developing in the renewable energy segment is solar power generation. In March, we started the construction of a power plant in the village of Tryfonivka, Kherson region. The plant's design capacity is 10 MW. The Tryfanovka SPP comprises 37 ths of solar panels from JA Solar (China) and АВВ's inverters manufactured in Italy. The construction is expected to be completed and first power to be supplied in the third quarter of 2017.

DTEK Oil&Gas

In HY1 2017, Naftogazvydobuvannya increased the production of natural gas by 7.5% yoy to 834.6 mln cubic metres and of gas condensate by 5.4% to 28.3 ths t.

Main factors influencing the production performance:

• refurbishment and upgrade of the surface infrastructure to ensure uninterrupted and safe operation of the gas processing facilities;
• stimulation of flow rates in the operating wells.

Key projects in progress in the reporting period:

• drilling well No. 34 of 5,628 m deep in the Semyrenkivske gas condensate field;
• upgrading the gas processing facility in the Machukhske field.