Ukraine Power Report Q4 2009

The new Ukraine Power Report from BMI forecasts that the country will account for 7.90% of Central and Eastern Europe (CEE)’s regional power generation by 2013, and remain a modest net exporter of electricity to neighbouring states. CEE power generation in 2008 was 2,610 terawatt hours (TWh), representing an increase of 1.35% over the previous year. We are forecasting a rise in regional generation to 2,884TWh by 2013, representing an increase of 10.51%. Thermal power generation in 2008 was around 1,342TWh, accounting for 51.42% of the total electricity supplied in the region. Our forecast for 2013 is 1,384TWh, implying 3.11% growth that reduces only slightly the market share of thermal generation to 47.99% – in spite of environmental concerns promoting renewables, hydro-electricity and nuclear generation.

Ukraine’s thermal generation in 2008 was 90TWh, or 6.71% of the regional total. By 2013, the country is expected to account for 7.35% of thermal generation. For Ukraine, gas is the dominant fuel, in 2008 accounting for 40.9% of primary energy demand (PED), followed by coal at 29.9%, nuclear energy at 15.5%, with oil having an 11.8% share of PED. Regional energy demand is forecast to reach 1,518mn tonnes of oil equivalent (toe) by 2013, representing 11.84% growth over the period. Ukraine’s 2008 market share of 9.69% is set to ease to 9.60% by 2013. In 2008 Ukraine accounted for 25.41% of regional nuclear energy consumption, with its share down to 24.33% by 2013. Ukraine now shares last place with Slovakia in BMI’s updated Power Business Environment rating. There is no reason to expect Ukraine is able to mount a challenge for promotion over the short to medium term. The current score reflects the considerable size of the country’s electricity market and infrastructure.

Country risk factors offset the respectable industry scores. BMI is now forecasting an average annual decline in Ukrainian real GDP averaging 0.36% per annum between 2009 and 2013, although the 2009 estimate is for a decline of 14.70%. Population is expected to contract from 46.1mn to 45.2mn over the period, but GDP per capita and electricity consumption per capita are forecast to increase 9.5% and 8.1% respectively. The country’s power consumption is expected to decrease from an estimated 156TWh in 2008 to 166TWh by the end of the forecast period, reflecting largely the dramatic 2009 economic reversal. Theoretical surplus generation is expected to rise from an estimated 35TWh in 2008 to 62TWh in 2013, assuming 2.7% annual growth in electricity generation. However, the country’s transmission and distribution systems are in need of investment and maintenance, and significant quantities of generation are wasted via line losses. Between 2008 and 2018, we are forecasting an increase in Ukrainian electricity generation of 36.4%, which is towards the bottom of the range for the CEE region. This equates to 14.8% in 2013-2018, down from 18.8% in 2008-2013. PED growth is set to rise from 10.8% in 2008-2013 to 16.5%, representing 29.1% for the entire forecast period. An increase of 75% in hydro-power use during 2008-2018 is a key element of generation growth. Thermal power generation is forecast to rise 34% between 2008 and 2018, with nuclear consumption up by more than a third. More detail of BMI’s long-term forecasts can be found towards the end of this report.