RusHydro was promised corridor coal – Newspaper Kommersant No. 27 (7472) dated February 14, 2023
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As Kommersant found out, the government and coal miners have worked out compromise solutions to the problem of coal supplies for RusHydro’s TPPs in the Far East. The authorities abandoned strict export restrictions, but demanded that coal companies provide TPPs with fuel on a priority basis under long-term contracts. At the same time, the regulator will set indicators for the volume of deliveries and price corridors for coal. RusHydro says that they will be satisfied with any mechanism that allows them to work without losses.
The government decided not to restrict coal exports to the east amid complaints from RusHydro about the too high cost of fuel for the company’s TPPs in the Far East. The problem is proposed to be solved through targeted measures for specific power plants, according to the minutes of the meeting with First Deputy Prime Minister Andrei Belousov, held on January 31 with the participation of Deputy Prime Minister Alexander Novak (“Kommersant” saw the document). Participants agreed that “system-wide regulatory measures” of the market are not required, and “linking the volume of coal exported for export in the east direction with the volume of deliveries to the domestic market” is currently inappropriate. Alexander Novak’s office redirected Kommersant’s request to Andrey Belousov’s secretariat, where they confirmed to Kommersant the fact of the meeting.
Russian President Vladimir Putin instructed RusHydro’s thermal power plant to intervene in the situation with rising coal prices (see Kommersant dated February 3). He suggested taking the example of regulating the supply of fertilizers and first ensuring the supply of coal to the domestic market and only then to export. There is no formal regulation of supplies in the fertilizer market, but chemical companies voluntarily form a plan for supplies to the Russian Federation, and also restrain prices within the country.
In the coal market, apparently, there will also be manual regulation of the volumes and prices of supplies. The Ministry of Energy, together with RusHydro and the Russian Union of Industrialists and Entrepreneurs, will identify “potential suppliers” for specific TPPs (taking into account coal grades) and form an “indicative balance of consumption”, on the basis of which “the potential for cost optimization will be determined”, including through the conclusion of long-term purchase contracts and delivery of coal. At the same time, the FAS, together with the Ministry of Energy and the RSPP, will establish indicative price corridors for coal for RusHydro for 2023-2025. At the same time, coal mining companies will fix in their trade policies public provisions on the priority provision of the needs of the domestic market.
The meeting participants explained the rejection of strict regulatory measures by the “insignificant” share of coal consumption for TPPs in the Far East. The volume of coal supplies to the region is really small: RusHydro’s thermal power plants in the Far East (4 GW) in 2021 consumed 8.9 million tons of coal for 25.99 billion rubles. In total, in Russia in 2022, 172.4 million tons were shipped to the domestic market, and 210.9 million tons were exported.
RusHydro told Kommersant that the holding would suit any mechanism developed by the government for supplying coal to thermal power plants at prices included in tariffs and in the volumes necessary to meet energy consumption in the region. “Today’s losses of the generating companies of the RusHydro group due to high coal costs not taken into account in tariffs have led to a deterioration in the financial condition and high debt burden of energy companies,” the state holding noted.
At the same time, Andrey Belousov instructed the Ministry of Energy and RusHydro to develop and implement a three-year plan for the modernization of thermal power plants and increase the efficiency of their work, including through the introduction of more efficient equipment. Such proposals, according to Kommersant’s sources, were made by coal miners. Thermal power plants in the Far East really require modernization, but the state holding has repeatedly pointed out the impossibility of replacing equipment due to low tariffs.
Sergey Grishunin, Managing Director of the NRA Rating Service, believes that with mandatory deliveries to RusHydro enterprises, there is a risk of a drop in the margin of coal companies, therefore it would be fair to set the maximum margin level for a supplier at 20%, as is done in the military-industrial complex, so that coal companies in exchange guaranteed sales were able to at least service their debt obligations. It is also inexpedient to link export volumes to the volume of deliveries to the domestic market, since a large number of exporters sell coal of a higher quality than RusHydro’s stations require. The market situation will soon require low-grade coal suppliers to look for sales markets, and here firm contracts with energy companies with a fixed margin level can be beneficial for both buyers and suppliers, he believes.
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