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Reduction of the volume of PSO for Energoatom is very limited and will not improve the Company’s financial standing without substantial changes to rules in the electricity market

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21.05.2020

The Governmental resolution about 5% decrease in the volume of public service obligations (PSO) imposed on NNEGC Energoatom, will not result in significant improvements of the Company’s financial standing. (On 20 May the Cabinet of Ministers of Ukraine approved the motion of Ministry of Energy and Environmental Protection to reduce the share of PSO  for Energoatom from 85% to 80% of the volumes of electricity produced by NPPs, providing the possibility of selling 5% of electric power under direct contracts).

NNEGC Energoatom is a socially conscious enterprise, and from the very first days of discussions about a new electricity market, it supported imposing temporary special obligations for cheap electricity production on the Company.  At the same time, Energoatom has repeatedly pointed out to the distortion of the current PSO mechanism. Since the beginning of this year, Energoatom was supposed to supply 90%, and then 85% of the electricity produced by NPP, at marginal prices (56.67 kopecks per kW*h, VAT excluded) to SE Guaranteed Buyer, which, eventually, sells electricity to universal services suppliers in the volumes required to cover the needs of household consumers.

Since January 2020, Guaranteed Buyer has been facing financial problems that led to the failure to meet the terms of payment for electricity to Energoatom as set forth in the placed  contract, and eventually, to the accumulation of debt to NNEGC Energoatom, which now exceeds UAH 5 billion.

Such outstanding payments for electric power and related services have an extremely negative impact on the financial standing of the Company, for which the electricity sale under PSO provides the main source of fund receipts.

Thus, a 5% decrease in the volume of PSO will not result in significant improvements of the situation. According to Energoatom specialists’ estimates, reduction of the PSO share to 50% of the volume of electricity produced will allow overcoming the problem and will be enough to cover the public needs, while the company could sell the other 50% of electricity in the market of bilateral contracts, provided that NEURC changes the rules in the electricity market.

Energoatom is counting on further decrease in the volume of PSO and realization of its other suggestions on the required changes to rules of the electricity market, which are aimed at resolving the critical situation with payments for the electricity supplied by the Company.