They are not very profitable, and DTEK wants to commit to a long-term strategy with a shift towards green energy.
Most of the Ukrainian coal mines are unprofitable. The Ukrainian government owns some mines, and so does the largest private energy company in Ukraine, DTEK. The Ukrainian government has long talked about selling or closing several coal mines, and Maxim Timchenko, CEO of DTEK, says that DTEK is now also considering “the sale of (its) power stations and coal mines,” to shift towards producing more green energy.
“If there is demand for 10 percent of our portfolio of power plants and mines, we will sell 10 percent. If there is demand for 100 percent, then we will sell 100 percent,” he said, but pointed out that DTEK is more likely to sell individual power plants and coal mines than entire companies and that DTEK still needs clearance from its creditors.
Kyiv Post spoke to Alex Ryabchyn, an energy expert, who said that the move by DTEK comes to secure loans to other investments.
“They know that without an environmental, social, corporate governance strategy and a long-term goal of climate neutrality, they won’t be able to provide financing for their companies,” Ryabchyn said to the paper.
A sector in crisis
The Ukrainian coal production is declining rapidly, which also is illustrated in the graph below. Production fell seven percent in 2020 to the lowest level since 1916. The decline is affected several cities in Eastern and Western Ukraine, where almost everyone works in the local coal mine, and where many are worried about what will happen if the mines close.
The Ukrainian coal production since in TOE mn:
Coal production took a big hit in 2014 when the war between Ukraine and the Russian-backed separatists broke out in Eastern Ukraine. Several coal mines are now in the area controlled by the separatists, and many are flooded, affecting production.
The Ukrainian Prime Minister Denys Shmyhal previously said that Ukraine needs to close some of its mines. Ukraine also needs to find another solution for the thousands of workers in the sector who need another job, the Prime Minister said.
“A separate issue is the fair transformation of coal regions. We are talking about the situations when production is completed, and mines are closed. We cannot just leave it. The question is: how the monocities will exist, what will happen to the mines, how people and communities that depend on these enterprises will live,” Shmyhal said.
“We explained this problem to them (the German government). They have similar experience; they provide relevant projects and are ready to provide funding, specialists, and experts. This is a long-term work. It is strategic and will take years to transform the coal regions. This is our strategy,” he stressed to Ukrinform.
Less power production and green energy
The coal mines are also affected by decreasing power consumption in Ukraine which is a result of more energy efficiency in buildings and factories, a declining population, decreasing industrial output, and an inconsistent energy policy. Kyiv Post writes that “power consumption in Ukraine is expected to fall by more than 29.6 terawatts over the next decade, from 127 terawatts in 2020 to 92 terawatts in 2030.”
At the same time, the production of renewable energy increases. The International Energy Agency writes that renewables in Ukraine increased from five percent of the energy mix in 2018 to nine percent (13.4 TWh) in 2019.
Ukrainenu has previously pointed out that the increase in renewable energy production hasn’t resulted in a decline in the use of dirty energy sources. It is still challenging to shut down thermal power plants because there needs to be a backup system if the weather makes it impossible to produce green energy.
“The solution to the issue is the construction of a sufficient number of new flexible and accumulation capacities, which will require multi-billion-dollar investments,” wrote Unian in a lengthy analysis.
You can read more about that issue in the article below: