Akhmetov created a competitor for himself

Rinat Akhmetov

DTEK's owner now has the opportunity to create a backup plan in the energy market.
The energy market learned of ERU Trading only a few months ago, when it joined the tight circle of suppliers of imported gas to Ukraine. From its earliest days, gossipmongers believed the company was within Rinat Akhmetov's purview. This was supported by the fact that the beneficiary of the private enterprise is Russian citizen Andrey Favorov, who previously headed Power-Trade LLC, established by the DTEK group to distribute Ukrainian electricity to European and CIS markets, and served as the commercial director of Akhmetov's energy holding until mid-2014. However, the behavior of ERU Trading, which was founded in 1997 in Kharkiv under the name "Computers" and was acquired by Favorov in 2014 after his dismissal from DTEK, suggested that speculation about its closeness to the Donetsk businessman was nothing more than a conspiracy theory.

Throughout its history of gas trading, this company never assumed responsibility for supplying resources to Rinat Akhmetov's enterprises. It focused on purchasing Slovakian natural gas from entities within the French group GDF Suez, and after clearing it through customs in Ukraine, it sold it to various Ukrainian industrial consumers. Recently, Favorov's enterprise attracted renewed attention after ERU Trading became a Ukrainian electricity exporter. "The company has begun deliveries to Slovakia, Hungary, and Romania. The exact volumes of electricity exports by the end of the year will be determined by the pricing environment on European energy markets," the company recently reported.

From a bureaucratic standpoint, ERU Trading's entry into the electricity market is flawless. The company acquired the right to conduct domestic electricity transactions back in February of this year, when the National Commission for State Regulation of Energy and Public Utilities (NEURC) issued it a license to supply electricity at an unregulated tariff. The company gained the opportunity to engage in external electricity sales after acquiring access to interstate transmission lines connecting the domestic power grid with Western European countries at a monthly auction held by Ukrenergo.

ERU Trading can export electricity to Europe only by synchronizing its actions with DTEK, which controls the Burshtyn TPP of Zapadenergo.
But this triumphant advance comes with at least two caveats. First, ERU Trading can only export electricity to Europe by synchronizing its operations with DTEK. This is because the Donetsk group owns the Burshtyn Thermal Power Plant (TPP), the baseline power plant of the eponymous "energy island," from which all domestic electricity sales to Europeans are made. Second, ERU Trading is entering the energy export market with virtually zero profitability, a situation brought about by the Cabinet of Ministers' adoption of Order No. 1280-r a year ago, which abolished preferential prices for the purchase of electricity for subsequent export. At the time, this government decision was presented as a deprivation of the Donetsk oligarch's privileges. But ironically, it played into the hands of Rinat Akhmetov.

The collapse of this business's profitability made it unattractive even for the current government's favorite businessmen. At the same time, the Donetsk oligarch was able to continue making money from these operations thanks to a pre-established vertically integrated supply chain, which involved fuel supplies to the aforementioned Burshtyn Thermal Power Plant (TPP) from related mines (the plant runs on grade G coal, which is abundant in Ukraine). This allowed DTEK to achieve the effect of "exporting cheap Ukrainian coal to Europe via pipelines." This formula remains in effect today, but this hasn't stopped Favorov's company from making global export plans. The private enterprise has already announced plans to participate in the upcoming auction, where Ukrenergo will sell access rights to interstate power grids throughout the next year. However, ERU Trading's victory in this competition may not mean DTEK's defeat: by leveraging established communications with his "competitor," Akhmetov could maintain operational control over the energy export business, while finally freeing himself from accusations from the Ministry of Energy and Coal Industry of monopolizing this market.

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