Unification of tariffs for electricity distribution is not economically justified – Ferrexpo

The company's additional costs can amount to hundreds of millions of hryvnias every year, provided the assets are operating at full capacity

Possible unification of tariffs for electricity distribution, noted in the Ferrexpo iron ore company with assets in Ukraine, which was listed on the London Stock Exchange, will have a significant negative impact on the Ukrainian industry. This GMK Center reported in the press service of the company.

In the event of such a step, this will five times increase Ferrexpo’s costs for distribution, which, in turn, will create some financial pressure on the group’s enterprises and lead to additional costs in the amount of several hundred million hryvnias annually, provided that the assets are operating at full capacity.

«We believe that the decision to unify tariffs, taken without taking into account the opinion of large electricity consumers, can cause significant damage to Ukrainian industry. While in Ukraine there are only two classes of energy consumption, in the EU countries there are usually three or more. This is logical, because it is more profitable and cheaper to supply electricity to large energy-consuming facilities. Given that Ukraine should move towards European integration, the idea of combining these two classes looks unexpected. This approach is not economically sound and can lead to serious negative consequences for the Ukrainian economy, «the company said.

Iron and steel enterprises, cement plants, agricultural enterprises and other export-oriented production will suffer primarily from the unification of the tariff. If such a decision is made, according to estimates of Ukrmetalurgprom, MMC will be forced to pay an additional UAH 10 billion per year. The costs of companies in the industry, according to estimates by the GMK Center, may increase by €22 per MWh.

In addition, an attempt to introduce a single tariff in Ukraine will contradict Directive 2019/944 and Regulation 2019/943, the implementation of which is provided for by the Ukraine Facility program. These documents stipulate that distribution tariffs should be transparent, non-discriminatory and consistent with real costs.