LW BOGDANKA ABOUT TO SELL COAL TO UKRAINE?

CEO of LWB, Zbigniew Stopa revealed that his company is negotiating a deliveries of coal for Ukrainian heat&power plants for the upcoming winter. Few weeks ago Ukraine announced that the whole country might have serious problems with heating and power production due to the troubles with coal supplies. Will Bogdanka rescue Ukrainian energy producers, or is it just another empty rumor, like the ones that we’ve heard last year?

For the first time buzz about Poland selling steam coal to Ukraine started in September 2014, when Katowicki Holding Węglowy and Węglokoks received inquiries from Ukrainian power producers. Civil war in the eastern Ukraine caused shutting down 70% of 83 Ukrainian hard coal mines (some of them were later taken over by the United Armed Forces of Novorossiya, who wanted to export coal to Africa and Iran or – via Russia – to Europe). Before the war, trade exchange of coal was working the other way and Ukraine was exporting its coal to Poland (with annual production of around 70 million tons).

For Poland possibilities of increasing export was back then a golden opportunity to deal with coal stocked on the piles, which at the time was accounted for 8.3 million tons (in August 2015: 6.5 million). However, Polish coal wasn’t the best option for the Ukrainian energy producers. Apart from the different coal parameters, it was also too expensive. On the other end of the table Poland was also not satisfied from the output of the negotiation. Janusz Piechociński revealed in October that Ukrainians would like to receive Polish coal… for free.

In the end, Ukraine decided to buy coal from South Africa (for 86 USD/Mt) and  from Russia (80 USD/Mt), which was and still is in informal conflict with the Ukraine. From the very beginning there were many issues with the Ukrainian suppliers. In the middle of November Steel Mont Trading (London-based trader that was importing coal from SA) decided to stop the deliveries to Ukrinterenergo, because the British company did not wanted to be involved in the conflict in eastern Ukraine. Shortly after the same decision came from Russia, which stopped supplying DTEK (decision was also political, Donetsk-based energy holding claimed that there were no delays in payments).

For Ukraine, import of coal from Poland is a best solution taking into consideration not only the geographic location and freight conditions (broad gauge railway from Silesia to Ukraine) but also thanks to the political background. In January Ewa Kopacz and Arseniy Yatsenyuk met and signed a loan agreement for 100 million EUR. Both Prime Ministers discussed also connecting Ukraine with the gas terminal in Świnoujście and modernization of Ukrainian power plants so they can use Polish coal.

So far, Bogdanka claims that the coal dedicated for export to Poland’s eastern neighbor complies with the requirements of Ukrainian heat&power plants. The volume of deliveries is estimated for around 1 million tons, and LWB claims that one of the key elements of the negotiated agreement is prepayment for coal that is about to be send to the consumers. Zbigniew Stopa is convinced that Bogdanka has a serious chances for signing this contract, but at the same time he keeps in mind that Ukraine is a difficult and unpredictable market.

Advertisements