DTEK Zakhidenerho : 29/11 DTEK DTEK's production indicators for 9 months of 2017

In January to September 2017, DTEK Group companies produced 21 mln tonnes of coal (out of which high-volatile steam coal grades accounted for 16.9 mln tonnes, +10.5 y-o-y; anthracite and lean coal accounted for 4.1 mln tonnes, -41.7% y-o-y), supplied 26.9 bln kWh of electricity (-6.1%), transmitted 31.8 bln kWh of electricity via networks (-5.3%), and produced 1.2 bln of natural gas (+2.9%).

'Ukraine will become energy independent,' says DTEK CEO Maxim Timchenko when commenting on the company's performance over 9 months of 2017. 'Reforming the electricity market and creating a competitive pricing environment will allow us to achieve this goal in the shortest time possible. We are scaling up investments in G grade coal production to make sure that as much of fossil-fuel generation as possible can switch to domestic coal and that imports can go down. The output of high-volatile steam coal grades has been up by 10.5% since the beginning of the year, which allowed us to generate additional 14.3% of electricity out of this coal. In parallel, we are switching the generating units from the scarce anthracite to G grade coal. Our stimulation efforts to boost natural gas production and our new renewable projects will also contribute to the energy independence of Ukraine. Thus, for example, DTEK's first project in the solar energy segment-the Tryfanovka SPP-went online in 2017. In 2018 we are going to build another 200 MW solar power plant.'

Key production indicators of DTEK Group

*Since March 2017, indicators of the assets located on the territories of Donetsk and Luhansk regions temporarily uncontrolled by Ukrainian authorities 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 into its statements as management of the company was transferred to 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 asset development capacity with loan servicing capabilities.

DTEK Energy

Coal production and processing

Over nine months of 2017, the company's miners produced 18.8 mln tonnes of coal, which is 8.7%, or 1.8 mln tonnes down y-o-y. The company's coal processing plants (CPPs) processed 12.8 mln tonnes of ROM coal; coal concentrate production amounted to 8.1 mln tonnes. Furthermore, third-party CPPs processed 2 mln tonnes, and concentrate production amounted to 1.1 mln tonnes.

Main factors influencing the production indicators:

• growth of high-volatile steam coal production by 10.5%, or 1,615 thousand tonnes. The companies produced 16.9 mln tonnes of G grade coal, which is the company's historic record for nine months. The record was achieved thanks to the efforts of DTEK Pavlogradugol's miners, who increased productivity by 13.8% to 110.7 tonnes per miner per month.

Development of mine workings is complicated due to the breakdown rate of tunnelling equipment and in-mine transportation caused by increased output and deteriorated mining and geological conditions within the development area.

• a decrease in production of anthracite coal grades. Since March 2017, DTEK has had no control over DTEK Sverdlovanthracite LLC, DTEK Rovenkyanthracite LLC, DTEK Mine Komsomolets Donbassa PJSC and Mospino Coal Preparing Enterprise LLC as it considers the demand to re-register those companies on the temporarily uncontrolled territory of Donetsk and Luhansk regions unacceptable.

Key projects in progress during the reporting period:

• supplying the required volume of fresh air to the mines to secure stable ventilation in the mine workings. The Dniprovska Mine is conducting construction and erection of the mechanical part of the main fans. The Yuvileina Mine continues the construction of a return air shaft: an underground power supply substation has been commissioned, and the construction of auxiliary structures for in-mine transportation is in progress;
• we are completing the construction and installation of the filter-press section at the Dobropilska CPP. In global coal-processing practice, belt filter-presses are one of the most widely applied solutions, as it allows reducing environmental footprint by switching the plant to a fully closed water-slurry cycle, which eliminates the storage of liquid wastes.

Electricity generation

DTEK Energy's plants supplied 26.4 bln kWh of electricity to the United Energy System of Ukraine in January to September 2017. The supply dropped by 6.4%, or 1.8 bln kWh y-o-y.

Main factors influencing the production indicators:

• increased output by nuclear power plants (NPPs) and hydro power plants (HPPs) by 11.6%, or 7.5 bln kWh, due to the emergency situation in the energy sector, which was effective till mid-July;
• growth of electricity consumption slowing down to 1.3%, or 1.4 bln kWh;
• decreased electricity supply by 20.3%, or 3.4blnkWh by DTEK Skhidenergo and DTEK Dniproenergo. The cause of the above is loss of control over the Zuivska TPP, and outage of the Prydniprovska TPP and Kryvorizka TPP in April to July to get prepared to bear load during summer peak consumption;
• increased electricity supply by 14%, or 1.6 bln kWh by DTEK Zakhidenergo and Kyivenergo.

Units of DTEK Energy TPPs fired by G grade coal and controlled by the company increased their electricity output to the United Energy System by 14.3% or 2.5 bln kWh. DTEK's TPPs supplied a total of 19.8 bln kWh of electricity for the reporting period.

As of 1 October 2017, the company's power plants accumulated 763 thousand tonnes of coal, which represents a 7% growth year-over-year. The stocks of G grade coal were 543 thousand tonnes, whereas the A grade stocks totalled 221 thousand tonnes.

Key projects in progress during the reporting period:

• increased consumption of G grade coal by the energy sector. DTEK Prydniprovska TPP converted its Unit 7 to burn high-volatile steam coal instead of anthracite, and similar work is underway on Unit 8. DTEK Myronivska TPP refurbished Boiler 10. Transfer to G grade coal will enable the company to cut down on its anthracite imports, thus, increasing consumption of domestic coal;
• DTEK Kryvorizka TPP completed the second stage of the retrofit of Unit 1. The retrofit will help expand the unit's installed capacity from 282 to 315 MW and increase its flexibility range by 58 MW to 158 MW, while reducing its specific fuel consumption;
• we completed the first stage of construction of a condensing economizer on the water boilers of Kyivenergo CHPP-6. The project is aimed to enhance the efficiency of natural gas combustion, while allowing for annual gas savings of up to 10.7 million cubic metres. The new equipment will also improve the plant's environmental performance. The construction, installation and testing of the equipment have already been completed;
• we continue the retrofit of Unit 10 at the Burshtynska TPP. The project is aiming to increase the unit's installed capacity by 15 MW to 210 MW, expand its flexibility range by 30 MW to 105 MW, raise the boiler efficiency to 90% and enhance the reliability of the unit during peak hours. We will replace the main unit equipment, including the boiler drum and heating surfaces, turbine, generator rotor, transformer and electrical equipment. Before installation of the new boiler drum, the old drum was dismantled with its integrity preserved, to be able to use it for any other power unit in case of emergency.

While retrofitting each unit, we upgrade electrostatic precipitators to achieve the dust emission targets set forth in Directive 2001/80/EC.

Electricity transmission by networks

In January-June 2017, DTEK's distribution companies transmitted 31.8 bln kWh of electricity to their consumers, which is down 5.3%, or 1.8 bln kWh, y-o-y.

Main factors influencing the production indicators:

• DTEK Dniprooblenergo and Kyivenergo increased electricity transmission by 162.3 mln kWh;
• DTEK Donetskoblenergo, DTEK Power Grid and DTEK Energougol ENE reduced electricity transmission by 18%, or 1.9 bln kWh. Since March 2017, the company has no longer controlled the networks of DTEK Energougol ENE, DTEK Power Grid and DTEK Donetskoblenergo located in the areas of Donetsk region temporarily not controlled by the Ukrainian government.

Key projects in progress during the reporting period:

• DTEK Donetskoblenergo: We have completed the technical re-equipment of Gorod-5 substation in the town of Mariupol. During the upgrade, we replaced the equipment of the 35 kV switchgear and erected a modern 6kV electrical module with vacuum circuit breakers. It helped to enhance the reliability of power supply to consumers, reduce transmission losses and improve working conditions;
• we opened a modern Customer Service Centre in Mariupol. The centre provides more than 100 services, advises on electricity supply issues and performs the whole range of tasks: from reconciliation of meter readings to issuance of technical specifications for grid connection.
• DTEK Power Grid: The company completed an upgrade of two substations in the town of Kramatorsk to improve the reliability of electricity supply to consumers. It installed an automated substation control system integrated into the common information system of the high-voltage electric network dispatch centre. It will allow remote equipment control and fault identification.
• DTEK Donetskoblenergo: The construction of the 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 existing and planned substations powering the underground railway system;
• the Company's customers living in the Dnipropetrovsk region can now use Payhub payment gateway.
• Kyivenergo: continues a technical re-equipment of the 110/35/10 kV Solomenska substation. The project aims at ensuring power supply reliability and increasing the networks' transmission capacity.

Commercial activity

Coal supplies

Over 9 months of 2017, we supplied 582 thousand tonnes of coal products to external markets, which is 49% down y-o-y. We are exporting coal from the Mine Office Obukhovskaya. A decrease in the exports is conditioned by the scale-up of supplies to the Ukrainian market: among others, we supplied 533 thousand tonnes of coal to meet the demand of DTEK's TPPs running on anthracite. In the reporting period, the company imported coal from the Republic of South Africa and Poland. DTEK Energy's overall imports totalled 1,335 thousand tonnes of coal.

Supplies of in-house coal to Ukrainian industrial consumers decreased by 19% to 1.5 mln tonnes, which is related to the loss of control over the assets in the anti-terrorist operation (ATO) zone.

Electricity supplies

In January to September 2017, the company supplied 4 bln kWh under international contracts, which is 45% up y-o-y. We supplied electricity to Hungary, Moldova, and Poland.

DTEK RENEWABLES

In January to September 2017, the Botievo Wind Farm supplied 443.7 mln kWh of green energy, which is 10.3% higher than in the same period of last year. The key growth factor is the increased wind speed on the farm's site. The availability factors of the wind turbines and the plant infrastructure remain sustainably high: 98.62% and 99.28%, respectively.

The Company continues to expand its wind energy segment. In August, communities of the town of Prymorsk and the village of Borysivka and the Botievo Integrated Territorial Community approved the 200 MW Primorskaya WEP Construction Project. In 2018-2019, fifty two General Electric wind turbines will be installed. The Company started construction of an administrative building for the wind farm and preparation of the site for the construction camp.

The second promising area the company is developing in the renewable energy segment is solar power generation. In August, we commissioned the 10 MW Tryfanovka Solar Power Plant in Kherson Region. In the reporting period, the plant generated 2.4 mln kWh. The Company has started development of new solar projects and considers the construction of a 200 MW solar power plant in Dnipropetrovsk region in 2018. In general, the development strategy of DTEK Renewables envisages that the portfolio of the implemented solar projects shall reach 800 MW in 2021.

DTEK Oil&Gas

Over nine months of 2017, Naftogazvydobuvannya increased the production of natural gas by 3% y-o-y to 1.2 bln cubic metres; gas condensate production amounted by 41.4 ths tonnes, which is in line with the production for 9 months of 2016.

Main factors influencing the production indicators:

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

Key projects in progress during the reporting period:

• drilling of 5,578 metres deep well No. 34 and start of drilling of 5,714 m deep well No. 25 in the Semyrenkivske gas condensate field;
• upgrade of the gas processing facility in the Machukhske field.