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  • Lack of PSO funding sources is the root cause of Ukrenergo’s financial losses

    Based on 9 months of 2020, NPC Ukrenergo’s negative financial result is UAH 28.6 billion. About 86% of this amount (UAH 24.7 billion) is the compensation of costs incurred on public service obligations (PSO), in particular, for the population and the “feed-in” tariff of the State Enterprise “Guaranteed Buyer”.

    The main reason why the Company’s financial losses have accumulated is that the tariff for electricity transmission services, which finances PSO, includes only a quarter of the required amount — UAH 8.6 billion versus UAH 33.3 billion needed for PSO.

    To improve Ukrenergo’s financial result in the future,it is necessary to identify the additional funding sources for PSO.  At the same time, to ensure Ukrenergo’s operation without losses, the Company’s public service obligations should be aligned with expenses included in the tariff structure.

    Another 11.5% (UAH 3.3 billion) of Ukrenergo’s losses in January—September 2020 result from the difference in the value of balancing services and the value of imbalances that the Company buys/sells in the balancing market. The Market Rules require that this difference shall be compensated by funds from the UA-1 sub-account. However, this indicator of losses resulting from balancing services and value of imbalances is temporary and will be settled through the appropriate mechanism once the Market Rules are amended. 

    In January—September 2020, Ukrenergo’s net income compared to the same period in 2019 increased 2.6 times — up to UAH 40.9 billion, and its operating profit (without the impact of PSO, the effect of revaluation of assets and the difference in the value of balancing services) would have reached UAH 1.7 billion.

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