Ukraine Power Report Q1 2008

The new Ukraine Power Report from BMI forecasts that the country will account for 9.77% of CEE regional power generation by 2011, and to remain a modest net exporter of electricity to neighbouring states. BMI's CEE power generation estimate for 2006 is 2,006 terawatt hours (twh), representing an increase of 4.00% over the previous year. We are forecasting an increase in regional generation to 2,451twh by 2011, representing a rise of 22.14%.

CEE thermal power generation in 2006 is estimated by BMI at 1,247twh, accounting for 62.23% of the total electricity supplied in the region. Our forecast for 2011 is 1,527twh, implying 22.54% growth that raises the market share of thermal generation to 62.32% - in spite of environmental concerns that should be promoting renewables, hydro-electricity and nuclear generation. Ukraine's thermal generation in 2006 is estimated at 88.03twh, or 7.08% of the regional total. By 2011, the country is expected to account for 7.50% of thermal generation.

For Ukraine, gas is the dominant fuel, accounting for 43.4% of primary energy demand (PED), followed by coal at 28.8%, nuclear energy at 14.8%, with oil having a 10.9% share of PED. Regional energy demand is forecast to reach 1,724mn toe by 2011, representing 19.8% growth over the period. Ukraine's 2006 market share of 13.35% is set to rise to 13.89% by 2011. Ukraine in 2006 accounted for 26.24% of regional nuclear energy consumption, with its share virtually unchanged by 2011.

Ukraine's overall business environment can be considered highly unattractive in a regional context, with high long-term political risk, moderate economic risk, modest forecast growth in power consumption and generating capacity, a relatively high level of energy import dependence and only moderate progress towards deregulation and privatisation. In the BMI Business Environment Ranking matrix, Ukraine receives a higher composite score of 20, which still ranks the country last out of nine states included in the CEE region.

BMI is forecasting Ukrainian real GDP growth averaging 5.6% per annum between 2006 and 2011, although this year's forecast is 6.0%. Population is expected to contract from 46.4mn to 45.5mn over the period, but GDP per capita and electricity consumption per capita are forecast to increase significantly.

The country's power consumption is expected to increase from an estimated 183.1twh in 2006 to 203.8twh by the end of the forecast period, providing potential exports rising from 9twh in 2006 to 35.6twh in 2011, assuming 4.4% annual growth in generating capacity.