DTEK PEM Enerhovuhillia PAT : production indicators for 9 months of 2015

17.11.2015

Kyiv, 17 November 2015. In 9 months of 2015, DTEK companies produced 21.4 million tonnes of coal (-25.6% YoY), supplied 28.1 bln kWh of electricity (-20.5%), transmitted 33.6 bln kWh (-16%) of electricity via networks, and produced 905.1 mcm of natural gas (+62.4%).

'The macroeconomic situation in Ukraine remains extremely difficult: the industrial production level is the lowest for the last several years and the economic situation always influences the energy sector', said Maxim Timchenko, DTEK CEO, commenting on the company performance results for 9 months of 2015. 'Artificial underpayments through the tariffs and billions of debts of Energorynok SC put additional pressure on thermal generation. As the result, miners were forced to scale down the tunnelling. If negative tendency prevails, high volatile coal mining may significantly drop next year. DTEK, as before, makes every effort to ensure stable operation of the Unified Energy System of Ukraine. DTEK's thermal power plants fired by high volatile coal operate at a higher load. Due to the joint efforts of railway personnel and DTEK on restoring the railway infrastructure destroyed during the military combat, the anthracite supplies from Donbass have grown in Quarter 3. We hope that the supplies will remain regular. This will ensure the availability of Ukrainian anthracite coal not only on DTEK' thermal power plants but on TPPs of other generating companies.'

Key production indicators

Indicators	Unit	9 months of 2015	9 months of 2014	Variance (+/-)	Variance (%)
Coal mining	ths tonnes	21,433.4	28,805.2	-7,371.8	-25.6
Coal processing:
ROM coal processing	ths tonnes	14,659.5	21,308.8	-6,649.3	-31.2
Concentrate production	ths tonnes	8,918.0	13,934.0	-5,016.0	-36.0
Electricity generation (supply)	mln kWh	28,145.7	35,400.2	-7,254.5	-20.5
including DTEK RENEWABLES	mln kWh	452.4	452.6	-0.2	-
Electricity transmission by networks	mln kWh	33,572.0*	39,965.1	-6,393.1	-16.0
Electricity export	mln kWh	2,665	6,936.7	-4,271.7	-61.6
Coal exports**	ths tonnes	1,036.8	3,631.4	-2,594.6	-71.4
Coal imports	ths tonnes	404.1	1,144.3	-740.2	-64.7
Natural gas production	mln cub m	905.1	557.2	347.9	62.4
Gas condensate production	ths tonnes	32.0	20.8	11.2	53.8

*net of DTEK Krymenergo.

**Including trading operations outside Ukraine.

DTEK Energy

Coal production and processing

In 9 months of 2015 DTEK mining companies produced 21.4 million tonnes of coal, which is by 25.6% less YoY. Processing plants followed suit: run-of-the-mine coal processing totalled 14.7 mln tonnes, concentrate production - 8.9 mln tonnes.

Main factors influencing the production performance:

- High volatile coal production increased by 1.6%, or 261.2 ths tonnes. To stabilize electricity production in Ukraine, DTEK Pavlogradugol miners increased their labour productivity by 4.1% to 100.4 tonne per person per month. At the same time, underfunding of the thermal energy sector decreases the financial stability of the coal industry. It results in the reduced scope of tunnelling, limited opportunities for purchasing and repairing mining equipment;

- anthracite and lean coal production at DTEK Rovenkyanthracite, DTEK Sverdlovanthracite and DTEK Komsomolets Donbassa Mine dropped by 69.8%, or 7.5 mln tonnes. Nevertheless, in July-September our companies increased the production by 41.9% or 429.3 ths tonnes vs. April-June, as a new logistic coal transportation route from the ATO zone had been opened. DTEK assisted in the restoration of the railway section Mykytivka-Mayorskaya, which was destroyed last year during the military operations. In Q3, average daily coal supplies grew by 7% to 12 thousand tonnes. The company continues its efforts to increase the supplies to provide TPPs with fuel for the heating season: coal stocks in the ATO zone made about 2 mln tonnes.

Key projects in progress in the reporting period:

Construction of a ventilation shaft at the Yuvileina mine. The implemented project will provide the mine with the required air volume, which will ensure stable operations and an increase in the annual coal production to 1.4 mln tonnes. Total project budget exceeds UAH 200 mln.

Increase of the conveying capacity of the winder set at the Geroiv Kosmosu mine. The project is aimed at increasing the capacity of the coal winder up to 3 mln tonnes per year. Total project budget exceeds UAH 150 mln.

Upgrading of Pavlogradskaya CPP, which will increase the processing of ROM coal to 7 mln tonnes per year and cut costs for coal processing by external CPPs. Total project budget exceeds UAH 300 mln.

DTEK Pavlogradugol started commercial application of the new generation KNF Road Cutter System. The equipment was tested at the Stepova mine and Yuvileina mine to refine the design. This new equipment will reduce time for driving face entries by 30% and ensure a high level of occupational safety.

Electricity generation

In 9 months of 2015, the fossil-fuelled power plants of the company reduced electricity supply by 20.8% to 27.7 bln kWh YoY.

Main factors influencing the production performance:

- supply increase by 10.9%, or 1.2 bln kWh, DTEK Zakhidenergo. The generating units firing high volitile grades of coal have high technical availability, thus can bear higher load to reduce the capacity shortage and maintain stable operations of Ukrainian UES.

- reduction in electricity supply by DTEK Skhidenergo and Myronivska TPP of DTEK Donetskoblenergo by 29.6% or 3.3 bln kWh in total, mainly due to the active combat in Donbass;

- DTEK Dniproenergo's supply reduction by 44.1%, or 5 bln kWh due to the limited supply of low-volatile coal from DTEK mines operating in the ATO zone. Since autumn last year, DTEK Kryvorizka TPP has been operating the minimal number of generating units due to shortage of lean coal. DTEK Prydniprovska TPP had to stop on August 1, 2015 to accumulate anthracite for the coming heating season. As the fuel supplies from the ATO zone increased in Q3, the plant resumed its operation in the UES of Ukraine on 30 September.

In total, coal stocks at DTEK TPPs increased by 33% in July through September, and by 1 October 2015 they reached 1.5 mln tonnes, which is almost the same YoY.

In preparation for winter, the company continued overhauls of the main energy equipment of the thermal power plants. As of 30 September 2015, 39 generating units and facilities (turbines, boilers) have been repaired.

Electricity transmission by networks

In January through September 2015, DTEK Energy's distribution companies reduced electricity transmission by networks by 16% YoY to 33.6 bln kWh.

Main factors influencing the production performance:

- shortage of capacities in the Ukrainian grid, which resulted in local limitations of power supplies on the back of a general decline in electricity consumption by Ukrainian industrial companies by 18.2%, or 8.4 bln kWh;

- decreased electricity transmission by DTEK Power Grid, DTEK Donetskoblenergo and DTEK Energougol ENE by 17.5%, or 2.4 billion kWh in total, due to the military hostilities, which entailed reduced electricity consumption by all consumer categories and caused interruptions in power supply;

- exclusion of DTEK Krymenergo from the production results due to the lack of operational control over the company (electricity transmission by DTEK Krymenergo over 9 months of 2014 was 3.2 bln kWh).

Key projects in progress in the reporting period:

Kyivenergo started retrofitting and replacing four 10 kV cable lines from the Moskovska substation to secure more reliable and uninterrupted supply of electricity to consumers in the southern part of Kyiv.

The company continues the retrofit of a 110kV outdoor switchgear with the replacement of power transformers at the ST-2 substation, which will ensure uninterrupted power supplies at increased loads for consumers in the central part of Kyiv and Podol district.

DTEK Dniprooblenergo continues the deployment of an automated electricity commercial metering system in the cities of Dnipropetrovsk, Kryvyi Rih and Dniprodzerzhynsk. By the year end, the system will cover over 100,000 households' metering points.

Commercial activities

Coal supplies

Since the start of the year, coal supplies to external markets have declined: over 9 months 2015 the company has supplied 1 mln tonnes, which is down by 71.4% YoY.

Main factors influencing the production performance:

- destructions of the railway infrastructure caused by military hostilities which considerably restricted shipment of anthracite and lean coals from DTEK Rovenkyanthracite, DTEK Sverdlovanthracite and DTEK Mine Komsomolets Donbassa;

- coal supplies to industrial consumers in Ukraine have dropped by 58%, or 456 ths tonnes. To pass through the heating season, the company has been shipping coal to its TPPs. In 9 months of 2015, DTEK's mines have shipped 2.2 mln tonnes of anthracite to thermal power plants;

- shortage of flexible capacities in the Ukrainian United Energy System caused by fuel deficit: in 1Q, the company imported coal from the RSA and Australia. Since 2Q coal has not been imported as the tariff set for DTEK's TPPs does not cover the costs for generation of electricity from the imported coal.

Electricity supplies

In January - September 2015, the company has decreased electricity exports by 61.6% to 2.7 bln kWh. The main factors influencing the production performance are: capacity shortage in the Ukrainian United Energy System (since August 2014, the decision of the Ministry of Energy and Coal Industry on limiting electricity exports has been in force).

DTEK RENEWABLES

Over 9 months of 2015, the output of the Botievo wind farm has amounted to 452.4 mln kWh. In the reporting period, the net output has been 0.6% above the target one due to favourable weather conditions and efficient use of time for Plant's wind turbines and substation maintenance.

DTEK Oil & Gas

In 9 months 2015, Naftogazvydobuvannya has produced 905.1 million cubic metres of natural gas and 32.0 ths tonnes of gas condensate, which exceeds YoY indicators by 62% and 54%, respectively.

Main factors influencing the production performance:

- completion of the investment project on drilling six deep wells, which started in 1HY 2014;

- putting into trial operation of 6,750 m ultra-deep well 17 (the deepest one in Ukraine) in the Semyrenkivske filed, which tapped gas deposits and started production;

- completion of workover at well 51 in the Machukhske field and well 63 in the Semyrenkivske field;

- implementing measures on stimulation of gas production at the wells of the Semyrenkivske and Machukhske fields.

Key projects in progress in the reporting period:

In 1Q 2015, Naftogazvydobuvannya started drilling three ultra-deep wells. Naftogazvydobuvannya's business plan envisaged drilling of 8 wells, however, the investment programme was revised due to extension of the increased royalty rates and restrictions of the activities imposed by the decision of the Kyiv Pecherskyi District Court ordering seizure of the Company's property, accounts and products on the basis of motions filed by the General Prosecutor's Office. Restrictions on Naftogazvydobuvannya's activity were based on the three-year old criminal proceedings initiated against the Company when it was not a part of DTEK yet. Naftogazvydobuvannya considers the above measures of the governmental bodies groundless and continues challenging them in courts.

Naftogazvydobuvannya has completed a 3D wide-aperture seismic survey in the Machukhska and Semyrenkivska licence blocks to
develop the resource potential at great depths (6,500-7,000 m). The study is unique for Ukraine in terms of applied methods, scope, and complexity.

Profile

DTEK is a strategic holding company that manages three operational sub-holding companies with the assets in the coal production, thermal energy generation and distribution as well as alternative energy and gas production. 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 127 thousand people.

The coal production, thermal energy generation and distribution assets portfolio is represented by ten thermal power plants and two combined heat and power plants with 18.6 GW of total installed capacity; five electricity distribution enterprises, which provide services to over 5.2 million customers - both individuals and legal entities; 31 mines and 13 coal-processing plants. The alternative energy sector is represented by one wind farm with the designed installed capacity of 200 MW. DTEK produces hydrocarbons at two fields with proven natural gas reserves of 20 bln cubic meters.

In 2014, DTEK's enterprises generated 47.8 bln kWh, including 651.5 mln kWh generated by the wind farm; transmitted 53.8 bln kWh of electricity; coal output equalled 37.1 mln tonnes and natural gas - 752 mln cubic meters.

To learn about the social partnership projects in progress in the towns and cities of DTEK companies' operations and get a detailed status report on their implementation, visit www.spp-dtek.com.ua