Ukrainian retail analyzes rationality of importing electricity

In conditions of energy shortages and abnormal temperatures, some shopping centers in Ukraine are switching to importing electricity, grocery chains are introducing enhanced control over the storage and sale of perishable goods, according to a survey of companies conducted by Interfax-Ukraine.

Respublika Park shopping center and Gulliver multifunctional complex have already announced the transition to importing electricity. Technical director of Gulliver Serhiy Kekukh said the tariff is dynamic, the cost of such electricity is difficult to predict, but as of July, on average it is 25% more expensive than the Ukrainian one and cheaper than electricity from diesel generators.

Both shopping centers are equipped with generators. In 2023, Respublika Park invested more than $1 million in the purchase of powerful generators, and spends hundreds of thousands of hryvnias monthly on their maintenance and fuel. Gulliver complex has four diesel generators with a capacity of 2.2 MW, which are enough to ensure the operation of all engineering systems, except climate control.

Arricano (RayON and Prospekt malls in Kyiv, Solar Gallery in Kryvy Rih, City Mall in Zaporizhia) have not yet decided whether to use imported electricity. "We are studying this approach and analyzing technical capabilities," Arricano Marketing Director Inna Morozova said.

But the Mandarin Plaza Group considers this option to be ineffective, although they are also negotiating imports in search of effective and rational options.

"Due to the assessment of risks and a large number of unpredictable consequences (I emphasize as of now, July 24, 2024), primarily for visitors to the shopping center and the work of tenants, our facilities are powered by national networks and our own generators," Operating Director of Lavina Mall and Blockbuster Mall Dmytro Lashyn.

He explained this decision by saying that a significant increase in the price of electricity will be included in OPEX, which will accordingly be compensated by tenants in their goods for end consumers and visitors to the shopping center.

"The instability of prices for imported electricity also complicates financial planning, and we are not ready to change the conditions of tenants or leave uncertain conditions in contracts," Lapshyn said.

He also said the import mechanism does not guarantee the absence of shutdowns.

"There are examples of metropolitan shopping centers that switched to imported electricity and already had a blackout. At the same time, we always remember that businesses do not return advance payments for unused electricity," the operating director said.

In this regard, he is convinced that the "era of generators" will not end soon, so one's own generation should always be at hand in working order.

"We will partially switch to supplying energy to our facilities through imports within the next few months (we are currently finalizing several contracts and have completed negotiations with DTEK), but the structure of this import will reflect the most optimal configuration for the businesses that trust us and operate in our shopping centers," he said.

At the same time, he said strategically the problem of energy shortages cannot be solved through imports. "The maximum amount of imported electricity for all consumers (the SEC is only a tiny component of it) has its own limits and, after some time, we may find ourselves in a situation where, due to a large number of applications, the imports already purchased will not be enough. And we understand what priorities in providing energy to enterprises may be in a country that is fighting back the enemy," he said.

As for grocery chains, they are currently relying on generators, restructuring processes and strengthening quality control of perishable goods.

In particular, ATB said there are 1,228 ATB chain stores throughout the country, some 1,219 of which are equipped with stationary diesel power plants. The rest, out of necessity, work at mobile generating stations, of which the company has 15 units. In order to ensure maximum preservation of the freshness of goods for such groups of goods, meat, milk, chilled fish, and cakes at ATB work without any carryover balance in warehouses.

Deputy Director General of ECO MARKET Denys Pohorilov said for retail chain management said that all 85 stores of the chain are equipped with generators and modern refrigeration equipment.

"Due to the abnormal heat, we are forced to optimize the display of some product categories. The stock of products that can quickly spoil (dairy products, fresh fish, etc.) has been reduced in the sales area. Enhanced monitoring of the condition of products is carried out. This applies both to incoming control when receiving goods from suppliers, and directly in the stores themselves," Pohoreliv said.

Auchan said during power outages, hypermarkets operate on generators, but the network has proactively introduced energy-saving methods to help stores spend less electricity: they modernized existing refrigeration equipment, thereby reducing cold losses; for hot shops, a furnace operating schedule has been created, which significantly reduces the load on the energy system, and energy-saving LED lighting has long been used to illuminate sales areas.

"Due to energy restrictions, we have optimized logistics routes for delivering products to reduce delivery time to points of sale. In order to store cold, we use bottles of refrigerant, which we place in the refrigerator, which increases the cold storage by four hours. Each Auchan store has a departmental veterinary service that monitors temperature conditions and regulates the amount of refrigerants for storing products; if necessary, more refrigerants are added," the company said.

However, in cases of prolonged power outages, store managers coordinate the removal of products by a logistics company to prevent damage to the goods, which must be kept refrigerated.

Operating retail facilities using generators is two to three times more expensive (depending on the power of diesel power plants), ATB and Auchan reported. As for end consumers, the situation with energy shortages is already reflected in the prices of goods. For example, ATB compensates for the operation of generators at the expense of its income, but they are already recording a partial increase in prices for goods by manufacturers, which probably already takes into account the increase in the basic cost of electricity.