Managers of Ukraine’s top six steel plants with a 50% plus 1 share of electricity in their production cost have made another effort to talk the president, government, and Council for National Defense and Security into urgently granting them preferential rates for electricity, sending a strongly worded letter to Leonid Kuchma, Viktor Yushchenko, Yuliya Tymoshenko, Serhiy Yermilov, Yevhen Marchuk, and Anatoly Kinakh, president of the Ukrainian Union of Industrialists and Entrepreneurs. The letter was signed by managers of ferroalloy plants in Zaporizhzhia, Nikopol, Stakhanovsk, Zaporizhzhia-based aluminum and titanium/magnesium plants, and Dniprospetsstal.
“At the present moment”, the letter reads, “the cost of electricity in industrial regions is at 10-12 kopiykas per one kWh (VAT excluded). By contrast, electricity prices in foreign countries with developed energy-intensive production are 40-50% down on Ukraine’s prices. For instance, the price of 1 kWh of electricity in Russia is 9-1.1 cents, in the United States 1.22-1.6, in Norway 7-1.5, in Holland 1-1.1 cents. In addition, in most countries rates are differentiated depending on the category of consumers and supply levels. Special rates are imposed for energy-intensive enterprises.
“The facts cited clearly show that domestic energy-intensive products are not competitive with similar foreign-made goods on world markets. As a result, domestic companies are forced to withdraw from cash flow funds earmarked for current maintenance, modernization of production assets, implementation of energy-saving technologies. This cuts down on the reserves needed to keep up the required levels of quality goods turnout.
“Top-ranking officials today are urging the government to impose preferential electricity rates for energy-intensive enterprises. However, no practical steps to solve the problem have been taken.
“We have been forced to conclude with a high degree of certainty that any delays with the solution of this issue could lead to the loss by domestic producers of their hard-won positions on international and domestic markets and may increase the dependence on foreign suppliers of Ukraine’s industrial enterprises which buy our products. By ousting domestic producers, foreign entities could become monopolists on the Ukrainian market. The results of such monopoly for Ukraine have been bitter in the past,” the industrialists stressed in their letter.
As the director of the Zaporizhzhia Ferroalloy Plant, Vitaly Belan, stressed to The Day , the letter had been provoked by a critical situation in the sector, with enterprises capable of making high-liquidity goods and bringing live money to state coffers finding themselves on the verge of idleness. Due to short supplies of electricity, ZFAP, for instance, is currently working at only 60% capacity.
Five out of ZFAP’s 14 ferroalloy furnaces have been shut down. Lost-production figures have reached UAH 159 million since the beginning of 2000. In September, when Vitaly Belan managed (alas, for a short period) to negotiate the needed electricity, the plant had to use UAH 3 million from its profits just to restart the furnaces. According to the ZFAP director, by ignoring the demands of industrialists the government will soon find itself faced not merely with economic problems but also with very bitter environmental ones, as the production cycles of most of the energy-intensive enterprises are continuous and any work stoppages could lead to serious accidents and loss of life.
