DTEK has announced its performance results for January-September 2014

“The third quarter of this year was quite challenging for the country and businesses, and our company is not an exception. Yet, there is an upside: DTEK has gained experience in overcoming new crisis situations. We readjusted and managed to retain control over all our assets. Our experience proves that a well-balanced vertically-integrated company has a certain resilience and underlying strength. Unfortunately, it has its limits,” commented DTEK’s CEO Maxim Timchenko on the company’s performance results for 9 months of 2014. “I have to say that the government has left business face to face with the problems in the energy sector. We had anticipated difficulties with coal supplies as early as July-August and called for joint effort to solve the problem, which our government has admitted to have only now. A number of decisions important for the sector are yet to be made to ensure uninterrupted heat supply during the heating season. The key decision is to make state-run Energorynok repay the debt to generation companies, thus providing funds to purchase required coal grades. Ukrainian fossil-fuelled generation has never experienced such crisis before. Only consolidated efforts of business, society and state can preserve the integrity of the national energy system and help Ukraine survive the winter.”

Production of natural gas and gas condensate

As of 9 months of 2014, Naftogazvydobuvannya produced 557.2 million cubic metres of natural gas and 20.8 ths tonnes of gas condensate, which exceeds YoY indicators by 51.9% and 47.4% respectively.

Main factors influencing the performance indicators:

— commissioning of well No.8 at the Semyrenkivske Gas Condensate Field;

— completion of workover of wells 60, 4 and 2 at the Semyrenkivske Gas Condensate Field;

— measures to stimulate production of hydrocarbons and to optimise technological modes of well operation at the Semyrenkivske and Machukhske Gas Condensate Fields.

Capital investments:

Capital investment of Naftogazvydobuvannya in January-September 2014 amounts to 890.4 mln hryvnias. Nine new wells more than 5 kilometres deep are being drilled: works on drilling and building of surface facilities at the three wells at Semyrenkivske and Machukhske fields, which started last year, have been resumed; we are also drilling six new wells. Thus Naftogazvydobuvannya became the top company in Ukraine as to the scope of drilling of deep wells.

The Company completed the construction and commissioned the Olefirivka gas processing facility with the capacity of over 2 bln cubic metres per year in the Semyrenkivske field.

Commercial activities

Coal sales in international and domestic markets

In 3Q 2014, DTEK reduced coal supplies to external markets by 18.0% or 205.8 ths tonnes YoY. Due to the positive trend in 1H, the company increased sales over 9 months 2014 by +12% to 3.6 mln tonnes.

Due to a shortage of anthracites in the domestic market of Ukraine, we redirected contracted export volumes to thermal power plants. Furthermore, in 3Q 2014, DTEK imported 1.1 mln tonnes of A and T grade coals to Ukraine (including coal produced by DTEK’s Obukhovskaya mine group in Russia) to supply thermal power plants.

Main factors influencing the performance indicators:

— a decrease in anthracite production by DTEK’s companies and destruction of the railway infrastructure within the area of military operations, which constrained coal supplies and delivery;

— continued cooperation with the countries where we shipped coal in 2013: the USA (+130%), India (+108%), Turkey (shipment almost doubled), Morocco (+52%), Russia (+27%).

From January to September, coal sales in the domestic market were 20% down to 1 mln tonnes due to the reduced industrial production in Ukraine by 8.7% and military hostilities. In particular, coking coal supplies decreased due to suspended operations at six coking plants in Donbas region.

Electricity sales in international and domestic markets

In January to September 2014, DTEK decreased electricity exports by 6.7% to 6.9 bln kWh, compared with the similar period of the last year.

Main factors influencing the performance indicators:

— in August, the Ministry of Energy and Coal Industry decided to limit electricity exports to Moldova and Belarus. The company reduced electricity supplies to these directions jointly by 8.6% or 0.1 bln kWh in 3Q 2014 comparing with 2013;

— reduction of electricity supply to Poland by 182 mln kWh in 3Q 2014.

The average electricity price in Europe went down by 5.3% to EUR 38.3/MWh for January-September 2014 due to the increased output from renewable energy sources and limited cross-flows between the countries.

In January to September 2014, the electricity selling price by TPPs to the Ukrainian wholesale market increased by 1.4 % YoY, taking into account the investment component. The main factor influencing the tariff for thermal generation was reduced electricity supply by Ukrainian hydro power plants and pumped storage power plants, the tariff growth for nuclear power plants by 26.3% and for wind farms by 9.5%.

DTEK is the largest energy company in Ukraine. 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 140 thousand people.

Electricity is the core product of DTEK. The assets portfolio is represented by 10 thermal power plants and two combined heat and power plants with 18 GW of total installed capacity; one wind farm with the installed capacity of 200 MW; five electricity distribution and sales enterprises, which provide services to over 5.2 million customers — both individuals and legal entities; 31 mines and 13 coal-processing plants; oil and gas extraction assets.

In 2013, DTEK’s enterprises generated 53 TWh and purchased 56.9 TWh of electricity for further supply to consumers; coal output equalled 41.4 mln tonnes and coal processing amounted to 29.3 mln tonnes. DTEK exports electricity to four countries and coal to 31 countries worldwide.