June 2, 2015 / 11:02 AM / 5 years ago

INTERVIEW-Ukraine's DTEK aims for $3 bln long-term debt deal by October

* Long-term restructuring needed to service obligations

* Aims to double coal supply from rebel-controlled region

* Loss of 2.5 bln hryvnia in generation unit in first 4 mths

By Christoph Steitz and Geert De Clercq

BERLIN, June 2 (Reuters) - Ukraine’s biggest private power producer DTEK hopes to hammer out a deal with banks by October to delay payment of most of its $3 billion in debt as it is unable to service obligations after being hit by the country’s political crisis, its CEO said.

About a third of DTEK’s debt is public in the form of Eurobonds, but the vast majority is owed to banks including Dutch ING, Italy’s UniCredit and Austria’s Erste Bank and Raiffeisen Bank.

“We have started formal discussions with all these banks about restructuring of our debt for a longer-term period,” Maksim Timchenko said, adding that the average maturity of DTEK’s debt is three years.

Timchenko said that as the conflict in Ukraine has disrupted the firm’s operations, “it is just impossible to service (our debt)”.

DTEK, owned by Ukrainian tycoon Rinat Akhmetov, generates about 27 percent of Ukraine’s electricity and produces half of the country’s coal. It already struck a deal with creditors in late April to restructure $200 million of Eurobonds due in April 2015 to 2018.

Timchenko said the aim was to reach a general agreement with its banks by October, adding he was confident that a deal would be reached.

“I have no doubt that DTEK will survive,” he told Reuters at European utilities industry trade group Eurelectric’s conference in Berlin.

DTEK has been suffering from the fallout of the political crisis in its home country, leaving many of its most important anthracite coal mines in territory controlled by pro-Russian rebels in the east.

Timchenko said the firm would have no choice but to import more coal from Russia, which he said is using Ukraine’s energy dependence to force it into concessions over eastern Ukraine.

About half of Ukraine’s energy is supplied by state-owned nuclear plants which rely on imported nuclear fuel from Russia, Timchenko said, adding the country had started to import small amounts of the material from Western suppliers.

DTEK made a net loss of 19.6 billion hryvnia ($938 million) in 2014, compared with a profit of 2.98 billion hryvnia a year earlier.

Timchenko said that before the crisis DTEK’s monthly shipment of coal out of rebel-held eastern Ukraine was 1.2 million tonnes, compared with 300,000 tonnes per month now.

He added that DTEK has about 2.5 million tonnes of anthracite coal stock in the territory, but is unable to ship it to its power plants in the west and centre of Ukraine.

Timchenko said DTEK had started to import coal from Russia, Australia and South Africa, adding there were talks underway to also solve the supply bottleneck in rebel-held territory.

He said he was confident of doubling monthly supply from that region to 600,000 tonnes within the next 2-3 months.

Timchenko criticised the Ukrainian government for energy tariffs he says are too low to make a profit and Timchenko said DTEK made a loss of 2.5 billion hryvnia in its generation business in the first four months of the year as a result.

Ukraine used to be self-sufficient in electricity but was forced to turn to Russia for coal and power supplies over the winter, a trend Timchenko expects to intensify.

He said the main problem for the next winter is coal stock. As DTEK only has 600,000 tonnes in reserve, compared to more than 4 million tonnes a year ago, it would have to import more coal from Russia, he said.

Europe as a whole has been trying to reduce energy reliance on Russia - which supplies a third of the continent’s oil, coal and natural gas - partly by pouring billions of euros at raising the share of renewable energy.

For Timchenko’s peers at the helm of energy firms like French Engie and Germany’s E.ON and RWE , this has been a major headache, as subsidised solar and wind capacity continues to push their conventional gas- and coal-fired power stations out of the market and causing billions of euros of writedowns.

“To be honest, I would love to have their problems,” Timchenko said. ($1 = 20.9000 hryvnias) (Editing by Susan Fenton)

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