PRESS RELEASE

Kyiv, 25 February 2016

In 2015, DTEK companies produced 28.7 mln tonnes of coal (-22.7% YoY), generated 38.3 bln kWh of electricity (-19.9%), transmitted 45.1 bln kWh of electricity via networks (-16.2%), and produced 1.3 bcm of natural gas (+73.4%).

‘Ukrainian energy sector, most tragically, is still working in a system-wide crisis. This has had a negative impact upon DTEK's key production indicators. Our company, however, was fully aware of the responsibility for the country's energy security and did everything possible to successfully make it through the heating season,” said Maxim Timchenko, DTEK's Chief Executive Officer, commenting on the company's performance in 2015. “The miners have fulfilled the declared plans and satisfied all of the TPPs' steam coal needs. Jointly with the railway employees, DTEK restored roads and bridges destroyed by the military hostilities, and that made it possible to resume the supply of Ukrainian anthracite to the power plants. Our company completed the retrofit of Kurakhivska TPP Unit No.9 to enhance the stability of Ukraine's power grid. Throughout the last year, thermal generation suffered losses because of the tariff set too low and the billions owed by SE Energorynok. The absence of timely sector-wide decisions that would have balanced the operation of Ukraine's unified power system made it even harder to overcome objective difficulties faced in meeting the coal needs of the power plants. Hopefully, the year 2016 will see a consistent approach to the job and a constructive dialogue between the state and the market members. This is a prerequisite for riding out the crisis.’

Key production indicators

*net of DTEK Krymenergo.

**Including trading operations outside Ukraine.

DTEK ENERGY

Coal production and processing

In 2015, DTEK miners produced 28.7 mln tonnes of coal, which is by 22.7% less YoY. Processing plants followed suit and reduced their production volumes: they processed about 20 mln tonnes of ROM coal and produced 12.3 mln tonnes of concentrate.

Main factors influencing the production performance:

• maintaining the output of high volatile (steam) coal at 2014 level: 22.1 mln tonnes. The company’s miners has ensured TPPs with high volatile (steam) coal. This enabled the stations to work in high load mode securing stabilisation of energy production in Ukraine, despite understated fuel component in the tariff set for DTEK Energy’s TPPs and high level of SE Energorynok’s debts. 
• Miners of DTEK Pavlogradugol contributed a lot to the stabilization of electricity generation in Ukraine by increasing its labour productivity by 2.2%, to 99.5 tonnes per person per month in 2015. At the same time under-financing of the thermal capacities hinders the coal industry development considerably. It means tunnelling of mine workings is reducing and it is impossible to purchase and repair mining equipment.
• anthracite and lean coal production at DTEK Rovenkyanthracite, DTEK Sverdlovanthracite and DTEK Komsomolets Donbassa mine dropped by 63.4% or 8.0 mln tonnes. At the same time in HY2 the coal-mining companies increased their coal production by 59.5% or 1 mln tonnes vs. HY1 of 2015. It became possible because the railway section Mykytivka-Mayorsk, destroyed during the military hostilities in 2014, was restored.   In Q4, average daily coal supplies from the ATO zone grew by 80% YoY to make 10.2 thousand tonnes.

Key projects in 2015:

• In 2015, DTEK Energy invested over UAH 1.2 bln in renewal of the driving equipment fleet and upgrading of the transportation chain.
• DTEK Pavlogradska CPP: upgrading of the first section started. The project is aimed at increasing the plant's capacity for processing the run-of-mine coal from 3.8 to 7 mln tonnes per year, which will reduce costs for processing by external processing plants and streamline the logistic chain "mine-coal processing plant-thermal power plant".  After the upgrading completion the plant will be able to stop using its sludge pond, which is vital for the region's environmental situation.
• DTEK Oktyiabrska CPP: heavy medium cyclone that replaced a jig unit has been commissioned in the first section and is successfully operational.  It improves the production capacity of the plant, increases ash content of coal waste, reduces operating costs and helps the plant to run smoothly and failure-free.
• DTEK Pavlogradugol:
• DTEK Pavlogradugol successfully completed commercial testing of the new generation KNF Road Cutter System. Pershotravenske mine group was the first to use the KNF, and it will ensure a high level occupational safety and reduce the time for assembly chambers tunnelling by 30%.
• construction of a ventilation shaft at the Yuvileina mine continues. The first stage of the project was completed: the shaft was drilled, headframe mounted; the fan started running. The second stage includes an assembly of the hoisting machine and construction of the headframe and surface building. The ventilation shaft supplies enough fresh air down the mine for it to run in a stable manner;   
• the project aimed at increasing the carrying capacity of the hoisting equipment at Geroiv Kosmosu mine continues. It will help increase the hoist productivity to 3 mln tonnes per year.

Electricity generation

In 2015, DTEK's thermal power plants supplied 37.7 billion kWh of electricity, which is by 20.1% less YoY.

Main factors influencing the production performance:

• electricity generation by TPPs was limited as the electricity consumption in Ukraine dropped by 11.3% or 19.3 bln kWh, with existing imports from the Russian Federation and export restrictions;
• DTEK Zakhidenergo maintained its electricity supply at the 2014 level. As their availability factor was rather high, the high volatile (steam) coal fired units had an increased workload to reduce capacity shortage and maintain stable operation of the UES of Ukraine. But in Q4, as there was significant drop in industrial production and electricity export was still limited, the coal firing was decreased counter-balancing the output of DTEK Zakhidenergo within January-September 2015;   
• Electricity supply by DTEK Zuyivska TPP and DTEK Luganska TPP of DTEK Skhidenergo, as well as by Myronivska TPP of DTEK Donetskoblenergo dropped by 36.1% or 3.1 bln kWh in total due to the military hostilities that resulted in a destroyed railway infrastructure and power transmission lines;
• Electricity supplied by DTEK Dniproenergo reduced by 40.2% or 6 bln kWh as in HY1 supplies of anthracite coal from DTEK Energy mines in the ATO area was severely limited. However, in HY2 as fuel supplies increased DTEK Dniproenergo increased its supplies by 5.2% or 228.4 mln kWh vs HY1.

As of 1 January 2016, coal stocks at DTEK Energy TPPs amounted to 1.6 mln tonnes of coal, which is by 67% or 956.7 ths tonnes more than YoY.

Key projects in 2015:

•  The overhauls campaign of 2015 was completed: the main power equipment of 55 generating units and 10 sets (3 turbines and 7 boilers) repaired. The cost of the overhauls for DTEK Energy TPPs amounted to UAH 1.5 bln;
• We completed the retrofit of unit No 9 of Kurakhivska TPP. The installed capacity of the technically re-equipped unit was increased by 15 MW to reach 225 MW, and the specific fuel consumption for electricity generation dropped by 6%. The project budget totalled UAH 635 mln. Since 2012, as part of the upgrading procedure, the electrostatic precipitators at all DTEK's generating units are reconstructed to comply with the dust emission level stipulated by Directive 2001/80/ЕС;
• Kyivenergo completed the retrofit of the 330 kV outdoor switchgear at CHPP 5 aimed at covering the capacity deficiency in the central districts of Kyiv and creating a reserve for connecting new consumers. It also completed the retrofit of a demineralization plant in the chemical workshop of CHPP-6; the project implementation will reduce the corrosion of main heating and mechanical equipment and improve steam qualitative parameters.

Electricity transmission by networks

In 2015, DTEK's distribution companies transmitted 45.1 billion kWh of electricity via networks, which is by 16.2% less than YoY.

Main factors influencing the production performance:

• consumption of electricity by industrial enterprises of Ukraine decreased by 17.8% or 10.8 billion kWh, and by 7.2% or 2.8 billion kWh by households;
• decreased electricity transmission by DTEK Power Grid, DTEK Donetskoblenergo and DTEK Energougol ENE by 15.9%, or 2.8 billion kWh in total, due to the military hostilities and unstable social and economic situation in the region;
• DTEK Krymenergo was excluded from the production results due to the lack of the operational control over the company (electricity transmission by DTEK Krymenergo in 2014 was 4.3 bln kWh).

Key projects in 2015:

• DTEK Dniprooblenergo:
• in March, the company opened a Customer Service Centre (CSC) in the town of Pidhorodne of Dnipropetrovsk region operating as "one-stop shop". The Centre provides services to over 40 thousand households and one thousand of legal entities;
• in April the Company's contact centre completely covered Dnipropetrovsk region (about 1.5 mln of clients);
• the organisational structure and sales functions at the level of CSCs were transformed in September to increase the customer services' quality: district electricity supply units of DTEK Dniprooblenergo and DTEK Donetskoblenergo were transformed into CSCs;
• the company continues the implementation of an automated electricity commercial metering system in the cities of Dnipropetrovsk, Kryvyi Rih, Dniprodzerzhinsk. The system already covers over 108 households' metering points, and over 25 thousand of those points were connected in 2015.

• Kyivenergo: 
• at CHPP-5 we completed the construction of the gas-insulated 330 kV switchgear, commissioning of which enhanced the reliability and quality of power supply to Kyiv due to improved connection between the capital city's power supply system and the Ukrainian UES;
• we completed the retrofit of Stankozavodskaya substation, aimed at improving reliability of power supply to consumers;
• over three thousand heat metering points for houses installed and over four thousand metering points taken for the purposes of commercial recording.  Thus, 90% of the company consumers pay for actually consumed heat and Kyiv is ranked the first in Ukraine from the point of view of installing heat meters in residential houses;
• as part of the project aimed at introducing smart power consumption metering systems to reduce excessive losses, the company installed about 90,000 meters that can transfer data remotely;
• Kyivenergo started retrofitting and replacing 10 kV cable lines from the Moskovska substation, 110 kV cable lines from Mototsikletnaya and Tatarskaya substations to ensure more reliable and uninterrupted supply of electricity to consumers in Kyiv, and to create opportunities for energy consumption growth.
• DTEK Power Grid: The Company completed retrofit of the Dniprovska substation supplying the electricity to some mines, enterprises and households of Petropavlovsk district of Dnipropetrovsk Region. The activities were conducted without interruptions in the electricity supplies to consumers.

Commercial activities

Coal supplies

In 2015, we supplied 1.4 mln tonnes of coal to external markets, which is by 65.8% lower than in 2014.

Main factors influencing the indicators:

• shortage of flexible capacities in the UES of Ukraine at the beginning of the year, caused by insufficient coal supplies. In Q1 DTEK imported coal from the RSA and Australia to compensate the capacity deficit during the 2014-2015 heating season;
• destructions of the railway infrastructure in the ATO area, which considerably restricted shipment of anthracite and lean coals from DTEK Rovenkyanthracite, DTEK Sverdlovanthracite, and DTEK Mine Komsomolets Donbassa in HY1;
• coal supplies to industrial consumers in Ukraine dropped by 36% or 449 ths tonnes as the industrial production dropped by 13.5% in 2015 and coal was re-channelled to DTEK Energy TPPs for the heating season;
• licensing of anthracite export transactions became a bottleneck for deliveries to international markets. At the same time energy consumption dropped by 11.3% or 19.3 bln kWh, and coal delivered from ATO zone were stabilised in 2^nd half of the year. In 2015, we supplied 3.2 mln tonnes of coal from the ATO area, out of which 2 mln tonnes were supplied in HY2, and it is by 160% more than YoY.

Electricity supplies

In 2015, the company decreased electricity exports by 55% up to 3.6 bln kWh. The main factors influencing those indicators are: the decision of the Ministry of Energy and Coal Industry on limiting electricity exports has been in force since August 2014.  However, when electricity consumption in Ukraine drops, export helps maintain production efficiency both in thermal generation and in coal production.

DTEK RENEWABLES

In 2015, the actual output of the Botievo wind farm amounted to 634 mln kWh, which is by 10 mln kWh above the planned targets. Such performance indicators were reached due to favourable weather conditions, high availability factor of the wind turbines (98.9%), efficient use of time for the wind farm's turbines and substation maintenance.

In June 2015, the wind farm was connected to the transmission line 'Botievo wind farm-Melitopol 330'. It helped eliminate the 20 MW restrictions on the supplied capacity and the working capacity of the wind farm reached the design level - 200 MW.  

DTEK Oil&Gas

In 2015 PJSC Naftogazvydobuvannya produced 1,304.6 bcm of natural gas and 45,3 thousand tonnes of gas concentrate, which exceeds YoY indicators by 73% and 56% respectively.

Main factors influencing the production performance:

• commissioning of six new wells, drilling of which started in 1HY 2014;
• putting into trial operation of 6,750 m ultra-deep well No. 17 (the deepest one in Ukraine) in the Semyrenkivske filed;
• completion of wells 60 and 63 workover in the Semyrenkivske field and well 51 in the Machukhske field;
• implementing measures on stimulation of gas production at the wells of the Semyrenkivske  and Machukhske fields.

Main projects implemented within this period:

• in 1Q 2015, three wells drilling was started;
• a 3D wide-aperture seismic survey was completed in the Machukhska and Semyrenkivska licenced blocks to develop the resource potential at great depths (6,500-7,000 m). The study is unique for Ukraine in terms of applied methods, scope, and complexity.

Profile

DTEK is a strategic holding company that manages three operational sub-holding companies with the assets in the coal production, thermal energy generation and distribution as well as alternative energy and gas production. It is part of the financial and industrial group System Capital Management (SCM). The shareholder of the group is Rinat Akhmetov. Maxim Timchenko is the Chief Executive Officer of DTEK. Currently, DTEK employs 118 thousand people.

The assets portfolio of DTEK in coal production, thermal generation and distribution sectors is represented by 31 mines and 13 coal processing plants; 10 thermal power plants and 2 combined heat and power plants with 18 GW of total installed capacity; and six electricity distribution companies, which provide services to over 4.4 million of customers. The alternative energy sector is represented by one wind farm with the installed capacity of 200 MW. The proven reserves of natural gas (С1, С2) at three fields amount to 26 billion cubic meters.

In 2015, DTEK’s companies generated 38.3 bln kWh, including 634 mln kWh generated by the wind farm, transmitted 45.1 bln kWh of electricity, and produced 28.7 mln tonnes of coal and 1.3 bln cubic meters of natural gas.

For more information, visit: www.dtek.com

To learn about the social partnership projects in progress in the towns and cities of DTEK companies' operations and get a detailed status report on their implementation, visit www.spp-dtek.com.ua

Corporate Communications Department

DTEK

Tel.: +38 (044) 581 45 35

+38 (044) 581 45 70

E-mail: pr@dtek.com

www.dtek.com