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Apr 05, 2013

Fire destroys Centrenergo’s plant


Ukraine’s plans to privatize Centrenergo, one of the tworemaining state-controlled thermal power plants, later this year, look to have all but ended after a fire seriously damaged the genco’s major power plant.

The incident could also have implications for electricity supply in Ukraine next winter and could in turn impact on exports, according to analysts. The fire, which broke out on March 29 at the 3.6-GW Vuhlehirska thermal power plant in Svitlodarske in the eastern region of Donetsk, damaged its four coal-fired power units, forcing the shutdown of the entire plant. The fire was reportedly caused by an explosion at the plant’s coal pulverizer and spread to the building’s roof, causing it to collapse and thus increasing the damage. The fire was extinguished on March 30 but the full extent of the damage has yet to be determined and disclosed. One person was killed and several injured, according to local media reports. Vuhlehirska is the largest of Centrenergo’s three power plants, and one of the largest standalone thermal power generators in Ukraine along with the Zaporizka plant controlled by the country’s major privately-owned power producer and supplier DTEK. With total installed capacity of 3.6 GW, comprising four 300-MW coal-fired units and three 800-MW gas-fired blocks, Vuhlehirska last year produced 5.8 TWh, representing 32% of Centrenergo’s total output. It was also the genco’s most fuel efficient power station, reporting fuel consumption of 370 g/kWh, the second best in the sector, compared to 406 g/kWh and 405 g/kWh for its two other power plants.

Given Vuhlehirska’s relative size and high fuel efficiency, the accident is extremely negative for Centrenergo, Dennis Sakva, utilities analyst at Kiev-based brokerage Dragon Capital, said in an April 2 equity research note. Further analysis of the implications for the genco remains difficult until the full scale of the damage is assessed, which in turn will not be possible until the collapsed roof is removed from the site, which, he said, might take a month or two. “Still, given the extent of the accident, we think Vuhlehirska is unlikely to be brought back online this year”.

The accident at the plant will disrupt the government’s privatization plans, commented Sakva. “Privatization of a controlling stake in Centrenergo, which the government scheduled for this year, now seems highly questionable. The government may either postpone the privatization until after Vuhlehirska is restarted or modify the privatization terms to account for required repairs,” he suggested. The accident also has several implications for other thermal power producers and the Ukrainian fuel and energy sector as a whole. “DTEK and Donbassenergo stand to benefit from Vuhlehirska’s shutdown by compensating for the latter’s lost output volumes. For the energy system overall, we think there is sufficient surplus capacity to meet demand during the off-peak season but do not rule out a deficit emerging during the fall-winter heating season and depressing electricity exports. Also, with the reduction in total spare capacity, there will be less flexibility in conducting scheduled repairs on operating power units.

We also see potential negative impact for coal producers given the reduced coal-fired generating capacity and consequent decline in coal demand during the heating season when thermal power stations usually ramp up production,” he concluded.

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