DTEK halts biggest mine complex, endangers 30,000 jobs

Ukraine’s largest private power company DTEK plans to suspend operations at one of its largest coal mining complexes, potentially leaving 30,000 miners out of a job, the company’s CEO Maksym Tymchenko said at a briefing on April 14.

Blaming Ukraine’s deteriorating economy and a financial crisis in the energy industry, Tymchenko said that on April 20 the company will partly halt Ukraine’s largest coal mining enterprise, Pavlogradugol, which is located in the country’s eastern Dnipropetrovsk Oblast.

“The crisis in our industry is caused by a domestic enemy: by irresponsibility, unprofessionalism and populism,” Tymchenko said. “(These) things, over the last nine months, have led the energy industry to a systemic crisis.”

DTEK will place the enterprise on “life support”: 18,700 employees will be given paid leave, while the rest will continue maintaining the factories and mines, according to the DTEK.

According to Tymchenko, DTEK must take this step to save money on logistics and other expenditures in order to eventually be able to continue paying its employees – at least partly.

DTEK Energo plans to earn Hr 1.6 billion ($58.8 million) in April, while Pavlogradugol alone is set to spend Hr 2.9 billion ($106.6 million) that same month, the executive said.

Pavlogradugol isn’t the only enterprise left out of work: On April 1, DTEK had already temporarily suspended operations at some of its other coal mining complexes, including Dobropilliacoal, Bilozerska and Zhovtneva, which collectively employ 8,000 people.

Financial strains

These closures aren’t coming out of blue. Owned by Ukraine’s richest man, oligarch Rinat Akhmetov, DTEK had already warned its lenders in a March 27 statement that it would miss its debt payments due to the COVID-19 pandemic and would seek to restructure its loans in the future.

Konstantin Fastovets, head of research at Adamant Capital, told the Kyiv Post that DTEK’s economic problems aren’t exactly new – the situation on the local energy market has been unfavorable for the company for a long time.

But the pandemic has significantly added to its troubles, as the lockdown imposed by most European countries in mid-March caused thermal energy prices to fall and electricity consumption to drop, while the market dictates that green energy must be consumed first, Fastovets said.

“It is a perfect storm for DTEK”, he said.

Besides, as a result of low demand, DTEK has accumulated over 2.9 million tons of coal in storage, with no buyers for it, according to Fastovets. And this coal – prone to soaking up humidity over time and losing its quality – is high maintenance. Hence, the expert suggested DTEK is shutting down these mines because its coal stocks are too high.

Dennys Sakva, a senior analyst at Dragon Capital, echoed this statement.

Savka added that 2019 was terrible for DTEK, due to extremely warm weather and a 12% drop in electricity prices combined with inefficient government policy on the domestic energy market. Together, these factors resulted in DTEK’s poor performance and small safety margins.

In 2019, DTEK reported over $110 million (Hr 3.3 billion) in profit and almost $2 billion (Hr 53.4 billion) in revenue.

Owner of the mines

Meanwhile, DTEK’s owner Akhnetov once again entered the 2020 Forbes list of the world’s richest people, with assets worth $2.4 billion. However, the energy market crisis has affected his positions: Over the last year, the billionaire has lost roughly $3.6 billion and fallen 600 positions in the Forbes ranking, to 875th place.

In January, he made news when his company bought a 200-million-euro luxurious villa on French Riviera, the Villa des Cèdres. The 18,000-square-foot mansion on the Mediterranean coast once belonged to Belgium’s King Leopold II and was known as the most expensive house in the world.

Akhmetov also owns a flat in London’s One Hyde Park worth 137 million pounds. At the time he bought it in 2011, it was the highest price ever paid for a U.K. residence.