Ukraine has made an important step towards the reform of the energy sector in line with European standards.
The National Commission for Energy, Housing and Utilities Services Regulation has for the first time introduced methods of forming a wholesale and retail price of electricity and the limit prices of the power grids, having thus fulfilled the requirements of the Antimonopoly Committee of Ukraine. The market-oriented procedure for determining energy prices allows for minimizing administrative interference in the energy sector and fully meets the European principles and international commitments of Ukraine. Work on the new approach lasted for more than a year and a large circle of participants were engaged, namely these were experts, representatives of power generating companies, the regulator itself and related ministries.
Since the creation of the current model of Ukraine’s electricity market, no document has been prepared before to regulate the formation of the wholesale market price: its components, criteria and the grounds for review. It resulted in the situation when power rates were set in far from the transparent way, assets between power generation companies were distributed in a manual mode, the market remained unpredictable, and there was no correlation between the prices of energy resources in the world and Ukraine.
Previously, the price of coal produced by state enterprises in Ukraine was set up by the regulators, and often did not cover production costs. Senior analyst at Dragon Capital Denys Sakva said that “the new approach will help break the vicious circle of mutual debts owed by thermal power plants, state-run enterprise Energomarket, and Ukrainian coal mines.”
Head of Ukraine’s National Commission for Energy, Housing and Utilities Services Regulation Dmytro Vovk sees two steps that one may take to resolve the situation. “The first one is to develop the guidelines for the formation of the wholesale and retail price while the old model of the market is in operation. And the other step is a new law on the electricity market, which would foresee a liberal pricing model for power generating companies with a fully competitive market, and the Commission will set prices for power rates. What is more, we think that several synchronized measures need to be taken to ensure a comprehensive approach,” Vovk said.
Amid the absence of the full-fledged coal market in Ukraine, global indices: API2 (Amsterdam, Rotterdam, Antwerp), API4 (Richards Bay, South Africa), Argus / McCloskey’s Newcastle were used as the benchmark for prices. Thus, the formation of prices of energy resources on the basis of prices in the international markets is already used in the gas sector of Ukraine.
“To form the prices of coal to set tariffs, we should consider the following parameters: API2, logistics and fixed costs. API2 is a key index for Europe, used for coal shipments to Europe. 90% of coal derivatives in the world are quoted on the basis of API2. Logistics is calculated in the following way: freight – delivery to Ukraine and rail transportation inside Ukraine. The reasons for this are the following: 40% of the coal that should be shipped to the Ukrainian thermal power plants in accordance with the Energy Ministry’s balance is A grade coal, which is not produced in Ukrainian-controlled territory. And the Commission takes measures to create conditions for regular and smooth coal supplies to the thermal power plants,” Dmytro Vovk said.
Denys Sakva adds that the formation of the wholesale and retail price based on the global indices makes pricing more transparent and minimizes the subjective factor of intervention by officials. “Pegging coal prices to international indices and avoiding forcible fixing of prices by the Fuel and Energy Ministry will remove the subjective component in setting tariffs. This is a more market-oriented method, which has not been used before at all,” Denys Sakva said.
Transparent pricing in the electricity sector is one of the basic conditions for the integration of the power grids of Ukraine and the EU (ENTSO-E). In 2011, Ukraine became a member of the Energy Community. One of the main objectives of the organization is to attract investments in power generation and boost competition. The transition to the unified principles of market pricing of electricity to stimulate its economy and transparency of energy markets is part of the coalition agreement.
“We believe that today we need to move the way as the Europeans did. [We need to] merge the markets to ensure that a larger number of players could come up with their bids. This requires technical measures and capital investment, but the Commission is ready to support these requests, allocate funds in the tariff for Ukrenergo, a backbone operator, in order to let the merger happen until the electricity market has been introduced. According to the draft law, which we have developed, the market will finally start operating from January 1, 2019.
Even if we move to market-oriented prices of coal, we still have the problem when Ukrainian thermal power plants are unable to compete. It could firstly be solved by replacing old facilities with newer ones. Because almost all of them are significantly worn out. They should be replaced with more efficient equipment that will meet international standards or at least the standards of the market which we are being merged with,” Vovk said.
It should be noted that the Commission on March 3, 2016, issued resolution No.289, which endorsed the procedure for forming the target wholesale and retail price of electricity.
KYIV. May4 (Interfax-Ukraine) – Exporter of sunflower oil Kernel-Trade, part of Kernel Group, has raised a $5 million credit line from Pravex-Bank (Kyiv).
“The general credit agreement with a limit of $5 million was signed for three years. A credit was issued for 12 months to finance current operations,” the bank said in a press release.
The bank said that there are prospects to credit agro-industrial complex – both producers and processing companies.
Pravex-Bank was founded in 1992. Its only shareholder as of October 2015 was Intesa Sanpaolo S.p.A.
Kernel is a vertically integrated company which has been operating in the Ukrainian agribusiness sector since 1994. The group produces sugar and sunflower oil, distributes bottled oil under the brand names Schedry Dar, Stozhar and Chumak Zolota, exports oil and grain, and provides elevator storage services for grain and oilseeds.
KYIV. May 4 (Interfax-Ukraine) – Zaporizhia Titanium and Magnesium Combine LLC has become a supplier of titanium sponge to Italy’s TiFast S.r.l., a titanium products manufacturer.
The Ukrainian enterprise said in a press release on Thursday that TiFast specialists performed an audit of the combine and the enterprise also obtained the EN 9100 aerospace industry standard certificate.
TiFast has been operating on the market for over 10 years and it is a large player on the European titanium market. The company’s core business is production of ingots, slabs and bars made of titanium and its alloys. TiFast is a member of the International Titanium Association. The Italian manufacture has the UNI EN ISO 9001 certificate permitting supply of products for bio-medical and aerospace industries.
“TiFast for Zaporizhia Titanium and Magnesium Combine is a second global company after China’s BaoTi that confirmed that the quality of titanium sponge of the enterprise fully meets international requirements. This means that the Zaporizhia enterprise’s products could be used without restrictions in production of any goods, including bio-medical and aerospace products,” Zaporizhia Titanium and Magnesium Combine Director Volodymyr Sivak said.
Zaporizhia Titanium and Magnesium Combine in August 2015 received an EN 9100:2009 standard certificate from Bureau Veritas. This helped the enterprise to register its products in the Online Aerospace Supplier Information System (OASIS). The enterprise started performing audits by global titanium goods manufacturers.
Denmark is interested in investment in the Ukrainian agricultural sector and energy saving technology. Currently more than 300 companies from that partner country work on the Ukrainian market, and dozens of new companies are willing to enter this market with investment and cooperation proposals. The bilateral economic relations suggest a huge reserve of untapped potential, this is what partners will be working on. These issues were on the agenda of the Danish-Ukrainian Business Forum in Kyiv, which was attended by Prime Minister of Denmark Lars Lokke Rasmussen.
“Ukraine has great potential, and now it’s time for a strong partnership between the two countries. We are ready to assist in developing economy, innovation. Thus, Danish companies have ready-made solutions used in the food industry, renewable energy, energy saving technologies. Ukraine must be a strong partner,” Rasmussen said.
President of the Ukrainian League of Industrialists and Entrepreneurs (ULIE) Anatoliy Kinakh shares this opinion. During his speech addressing participants in the event, he said trade turnover estimated at $400 million did not correspond to the scale of the cooperation partners were engaged in. He also urged his colleagues from Denmark not to focus on two areas alone – agriculture and energy saving – despite their high priority and active implementation of related projects.
“Our country has great intellectual potential – this is the same IT sector where we are in the lead in Europe in terms of provided services, as well as engineering industry and the aerospace sector. I am confident this is a very interesting and promising area of cooperation for the countries that choose to develop in the innovative way,” the ULIE leader said.
Kinakh thus told the heads of the Confederation of Danish Industry, who were also present at the Forum, that he proposes facilitating bilateral communication and increasing the number of joint projects in the framework of a document on cooperation signed in 2007. He also expressed hope that business-related issues would be included in the agenda of the European Business Summit in Brussels, scheduled for June 1.
Deputy Director General of the Confederation of Danish Industry Thomas Bustrup thanked the ULIE for assistance in arranging the Business Forum in the Ukrainian capital and noted that Denmark is interested not only in the agricultural sector but also in information technology and innovation.
“We see the reserve for greater cooperation. We will be developing our relations, as even the offices of the Confederation and the ULIE are in the same building,” he said.
Danish national leading companies together with financial institutions came to Kyiv to attend the Forum. In particular, representatives of the Confederation of Danish Industry, Denmark’s Heat Supply Council, the Agricultural Council of Denmark and others took part in the event.
Ukrainian businessmen who attended the Forum were able to learn about technologies that help Denmark to achieve the highest productivity in animal and crop production, occupy a leading position in quality and safety of food, and optimization of production facilities.
The sides also signed a number of business deals in the presence of the Prime Ministers of Denmark and Ukraine.
Business organizations, companies and experts have actively been involving the newly formed Ukrainian government in dialogue with the public on problems of overcoming the crisis and creating conditions for sustainable economic development. Representatives of the real sector of the economy insist on a high-level dialogue with the government and constant, effective communication with the business community. A public technocratic government – a non-governmental intellectual platform – is proposed to be formed to systematically analyze the current state of the economy, suggest a bailout plan and facilitate further sustainable development. This decision was supported at an enlarged meeting of the Anti-Crisis Council of NGOs and the Ukrainian League of Industrialists and Entrepreneurs (ULIE).
“The public technocratic government is not an opposition-minded structure, it is an intellectual alternative to the Cabinet of Ministers of Ukraine. Its activity will be split according to the areas of work, professionals and experts will be engaged. It is expected to be constantly monitoring the situation and generate as many as possible projects for management solutions and proposals. It will also work to establish channels of communication between the government, businesses and the public,” Chairman of the Anti-Crisis Council of NGOs and UILE President Anatoliy Kinakh said.
This platform designed for expert and public control of the executive branch (primarily in the economic sphere) will be formed as early as in May.
The business community suggests focusing on halting processes of de-industrialization, increasing the production of knowledge-intensive, technically complex products, boosting investment in the science and innovation sector, and on developing the domestic market.
Participants in the Anti-Crisis Council meeting emphasize that the business sector in Ukraine is still able to develop despite the crisis.
Business associations and companies have articulated their vision of solving the most pressing economic problems in their new version of the anti-crisis program of joint actions by the government and businesses. The fight against corruption, stabilization of Ukraine’s financial system, the implementation of modern industrial policy, effective support for self-employment, small- and medium-sized businesses remain priority steps in the economic sphere.
The current wording of the anti-crisis program is based on the proposals and recommendations by national professional associations, NGOs, businesses, expert institutions, representatives of different industries, who insist on the urgent need to jointly find effective ways to improve the economic situation in the country.
KHERSON REGION. April 29 (Interfax-Ukraine) – Ukrainian President Petro Poroshenko during his visit to Kherson region visited state-run Pallada Plant.
He said that the enterprise was among the leaders of world-famous companies-constructors of floating docks.
“You show the best qualities of Ukrainian producers. Every Ukrainian should work like that – efficiently and in a timely manner,” Poroshenko said, addressing the plant’s employees.
An Interfax-Ukraine correspondent reported that in the presence of the Ukrainian president, Director of Pallada Valeriy Maloman and Managing Director of Southey Holdings PTY Ltd Christopher Sparg signed the protocol of technical readiness of the composite reinforced concrete floating dock ordered by this company. Upon completion of the ceremony, the national flag of the South African Republic was hoisted on the dock.
“I am sure that our partners will praise the quality of Kherson workers. I am also confident that today’s event will become an impetus for intensification of economic contacts between Ukraine and the South African Republic. I have instructed to expand our cooperation with the African continent. You are pioneers at this important market,” Poroshenko said.
He said that this floating dock is a first new product of this class imported to South Africa.
The president expressed hope that Pallada plant will take part in a tender on building floating piers, workshops and barracks for installing wave protection facilities for the domestic fleet.
