UKRENERGO IS TO MODIFY THE INVESTMENT PROGRAM AND TARIFF FOR 2018 ALREADY APPROVED BY NERC
05 January 2018
For the first-ever time Ukrenergo celebrates New year with approved main documents: financial plan, Investment program and tariff for 2018. However do they correspond to our expectations?
Financial plan – is one of the main Company`s documents which is to handle the funding sources as well as to define the areas of their placement in particular for grid development, tax payment and mandatory payments to the State budget of Ukraine.
Vsevolod Kovalchuk, CEO at Ukrenergo, commented as follows “Ukrenergo`s financial plan is approved by a Government decision of 27 December 2017 and for the first time it occurs before the commencement of the financial year. Usually, the Company`s financial plan was approved by the Government in the third quarter of the financial year and until that time the Company had to operate on the basis of the estimations limiting costs on grid development”.
The document stipulates for funding transmission lines construction and reconstruction in the scope up to 133 mln euros including attraction of loans in the amount of 50,7 mln euros within current loan agreements with the international financial institutions (IBRD, EBRD, EIB as well as KfW). The annual income of Ukrenergo is expected to reach the level of 240 mln euros whereas the average weighted tariff amounts to 0,195 €/kWh.
The Investment program of Ukrenergo for 2018 was approved during the open session of the National Commission for State Regulation of Energy and Public Utilities (hereinafter NERC) as of December 28. However, the Regulator reduced the scope of funds previewed by Ukrenergo for the grid development measures by 35,8 mln euros excluding those without any construction documents.
“Most of the projects we`ve submitted correspond to the Company`s development strategy and the 10-year grid development plan. The projects have already been approved by the experts however given the prolonged approval procedure by the Government we are to finish their approval during the 1Q of 2018. Ukrenergo will submit the measures foreseen by the draft Investment program-2018 along with its amendment”, commented Vsevolod Kovalchuk.
The Regulator, in its turn, will address the Government in order to speed up the consideration and approval procedures of the projects constituting the Ukrainian grid development plan so that they are included to the Investment program for further implementation.
The Ukrenergo`sInvestment program is based on the Company`s tariff being approved by the NERC on the annual basis. The Regulation of the NERC #1512 as of 28.12.2017 establishes the Ukrenergo`s tariff for the electricity transmission, including fees for the operational and technological control of the Ukrainian energy system, for 2018 at 0,152€/kWh..
It is actually 20% lower than the tariff being offered last August. At that time Ukrenergo offered to reduce the tariff in 2018 by 10% from the current one in 2017, thus from 0,216 €/kWhto 0,195 €/kWh.
Besides, the Company`s financial plan for 2018 was developed basing on the following tariff (6,24 kop/kWh). The plan was approved by the Government`s decision as of December 27, 2017.
Thus, the Ukrenergo`s tariff at 0,152€/kWh approved by the NERC for 2018 is actually lower by 30% that the one last year which substantially limits the funding of certain articles in the Investment program.
Besides cutting of funds previewed for grid development and notwithstanding the petitions of the Ministry of Foreign Affairs and The Ministry of Energy and Coal Industry, the tariff`s structure doesn`t include as well the funds to support the claim against the Russian Federation to compensate the losses related to the occupation of Crimea and loss of assets.
CEO at Ukrenergo stated the following “It is an extremely important State position. We have already launched the process in 2017. We are to get the first claim to the Russian Federation in January; estimation of the lost assets is to be held in the first half of the year. The following process is to be supported by the foreign advisors with whom we are currently holding negotiations. Moreover, our expenditures in the direction are 5 times lower than those within bank or oil and gas spheres”.
New tariff also significantly “cuts” the costs for the paramilitary security services within the Company`s premises whereas the Government`s decision previews for 3-times higher number of objects which are to be mandatorily protected.
The tariff reduced as well the expenditures for the consulting services whereas Ukrenergo is to take inventory and main assets valuation within corporatization process which is to start on January, 20. Those expenditures were excluded from the tariff.
“Ukrenergo will initiate the revision of the tariff and the Company`s investment program-2018 in order to ensure the implementation of the grid development plan as well as the Company`s reform strategy”, summed up Vsevolod Kovalchuk.