Risks emerge that DTEK won’t secure higher electricity prices in 1Q18

Ukraine's president has yet to appoint commissioners to the NERC, Ukraine's power sector regulator, which raises the risk that higher power prices for thermal power plants (TPPs) for 1Q18 won’t be approved on time. Based on the current legislation, the forecasted wholesale electricity price (which determines prices for TPPs) should be approved no later than ten days in advance, meaning that today is the deadline for setting prices for 1Q18.



The forecasted wholesale price for 2018, as drafted in November, should lead to an 18%-20% hike in TPPs’ achieved power price from current levels. If that happens, the biggest operator of TPPs in Ukraine, DTEK Energy (DTEKUA), could generate about USD 100 mln in additional revenue in 1Q18.



The next NERC meeting is scheduled for Dec. 27 with the agenda containing no scheduled approval of the forecasted wholesale power price for 2018.



Recall, the NERC has not been able to approve any regulation since mid-November due to lack of quorum, as some of the commissioners did not sign up for the NERC meetings, and later some were fired.



Meanwhile, the appointment of new ones require a long procedure lasting about three months. To resolve the issue, parliament amended legislation on Dec. 7 to allow the president to appoint interim commissioners for three months.



Alexander Paraschiy: We had expected that the regulation enabling TPPs to achieve higher electricity prices would have been granted smoothly by now by the NERC, which should have been replenished by the president. But despite getting authorization from parliament, his surprising lack of action has cast doubt upon our expectations.



This means risks have significantly increased that DTEK Energy won’t enjoy better prices and higher revenue in 1Q18 than it has now. It’s still possible that the regulator will find some legal solution to raise electricity prices as of January. But the current situation may lead to selling pressure on DTEK Energy’s Eurobonds.

Источник: Конкорд Капитал