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Ukrainian utility DTEK launches new green strategy

Ukrainian utility DTEK promises to be carbon neutral by 2040
Ukrainian utility DTEK promises to be carbon neutral by 2040

Ukraine’s leading utility DTEK announced a new corporate strategy on December 22 that will dramatically increase the share of green energy it produces and puts environmental, social and governance (ESG) principles at the core of its business operations, the company said in an emailed press release.

“For the first time in DTEK’s history, CEO Maxim Timchenko yesterday presented the company’s 2030 corporate strategy at its partly public annual senior management conference. DTEK has committed itself to transforming into a greener, more efficient and technologically advanced business. Implementing the strategy will contribute significantly to the decarbonisation of both the Ukrainian and European economy,” DTEK said in the press release.

DTEK’s 2030 strategy is based on the ESG principles, ethical business values and the desire to meet the current needs of society, as well as global energy and development trends in Ukraine, the company said.

“These are the key factors which will determine the company's future in the decade ahead.  Over the next ten years, DTEK will focus on the gas production industry, renewable energy, trading and distribution networks,” Timchenko said. “The company plans to develop a culture of open innovation as well as completing the digital transformation of the business. These processes will be complemented by the automation of production, introduction of innovations along the entire value chain, and large-scale use of modern digital technologies and AI solutions.”

The company also intends to actively develop renewable energy sources and trading with European partners, as part of its international expansion plans.

Ukraine’s green energy flourishes

The share of renewable energy in Ukraine’s power mix has grown dramatically in recent years after a generous “green tariff” was introduced under former President Petro Poroshenko to attract investment and wean Ukraine off Russian gas imports. Foreign and local investors have directly invested some $5bn into the sector in over a hundred projects, and renewable power now makes up 9% of Ukraine’s power generation.

However, Ukraine’s green energy sector is going through the worst crisis in its short history. As of the end of November, the state owed a total of $921mn to renewable power producers, according to newly appointed acting Minister of Energy Yuriy Boyko, down from over $1bn that the state owed earlier when it temporarily suspended payments during a row over a plan to reduce the green tariffs.

On July 31, President of Ukraine Volodymyr Zelenskiy signed a bill on reducing tariffs for solar and wind power plants by 15% and 7.5% respectively.

The sector as a whole has generated about a quarter of the nearly $60bn of total foreign direct investment (FDI) in the country over the past three decades, but has been thrown into uncertainty by the government’s policy towards the green tariff.

The national power company Ukrenergo needs to attract UAH11.3bn ($400mn) under government guarantees to pay off the rest of the debt to electricity producers from renewable power sources and state-owned generating companies, Boiko said. "The debt to be paid off to the green power companies is UAH9bn, and according to our estimates, in order to maintain parity, the volume of funds raised will amount to UAH11.3bn," he said at a press conference in Kyiv on December 22. At the same time, according to him, it is necessary to "repay debts in a balanced way", which means their repayment both to renewable producers and to state-owned generating companies involved in public service obligations.

Starting in January the newly appointed deputy Energy Minister Yuriy Vitrenko has to come up with a plan to pay off the remaining debt. 

DTEK leads green power generation

DTEK has become a major player in Ukraine’s green energy and accounts for about 17% of the total green power generation, but intends to dramatically expand its green energy generation capacity as part of the new strategy both in Ukraine and in neighbouring countries.

Timchenko promised that by 2030 renewables will account of at least one third of electricity produced by DTEK.

After investing about $1bn in Ukraine wind and solar projects in the last three years, the company is also redirecting its renewables investments to the EU. “Today our investments in European countries are in a very active development phase,” Timchenko said. “In 2021, we will have the first pilot projects for the construction of wind and solar power generation in the European Union.”

Behind the pause in Ukraine investments is the $1bn overdue power bill that the state-controlled Guaranteed Buyer owes wind and power companies in Ukraine, including DTEK.

By 2030, renewables will account for at least one third of electricity produced by DTEK, which underpins the company’s 2040 carbon neutrality pledge.

“Over the past 15 years, DTEK has invested $11.9bn in [the] energy sector and sustainable development. This has ensured production growth and social development of the regions where DTEK Group's production facilities operate. Today, the energy industry is changing under the influence of global trends,” Timchenko said. “To maintain our leadership in the competitive electricity market, we are transforming our business and setting ourselves new ambitious goals. As a business, we see our task in offering our customers modern services and energy-efficient solutions. As a national investor, we are ready to help Ukraine transform the domestic energy sector to align its development with that of our European counterparts."

DTEK Group produces coal and natural gas, generates electricity at its coal-fired, solar and wind power plants, distributes electricity, supplies electricity to end-consumers, provides energy-efficient solutions and is developing a network of EV charging stations.

In 2018, DTEK’s capital investments totalled UAH20bn and paid UAH27bn in taxes. DTEK employs 80,000 people.

The company is 100% owned by System Capital Management (SCM), which belongs to Ukraine’s richest man, Rinat Akhmetov.