Force Majeure

Boom, boom… out go the lights! Businesses sustaining losses due to emergency power outages across the country

Businesses sustaining losses due to emergency power outages across the country
Many retailers and restaurateurs are forced to work without power for hours
Photo: Konstantin Melnitskiy

Over the last week, Sky Mall, which is one of the largest Ukrainian shopping malls, has been emptying out for a few hours every day. This is an unusual situation on the eve of the holiday season. “Electricity is being cut off for a few hours from Monday to Friday,” says representative of Sky Mall Olha Tkachenko. Power is cut off suddenly, at different times of the day, which immediately blocks operation of the mall. This means tenants cannot provide services to customers.

Kyivenergo is limiting the consumption of power and is cutting off power to industrial enterprises, the company’s official statement reads. In this way Kyivenergo is fulfilling the requirements of the Ukrenergo National Energy Company. It ensures that for consumers electricity will be cut off for no more than two hours. “Kyivenergo demanded that Sky Mall reduce power consumption by 20%, which means it is forced to turn off certain systems,” says Tkachenko.

Faulty operation

The tenants in Sky Mall are not the only ones facing power outages. CEO of the Ultra Group of Companies (Baldinini, Levi's, Pierre Cardin, Lagerfeld and Guess) Andriy Makarov says the power is cut off from time to time at the Promenada Shopping Mall.

Tenants of premises and facilities outside the shopping malls face the same problem. “Last Monday, power was cut off at 11:00 am and turned back on around 4:00 pm. The refrigerators in the kitchen, the cooling system in the bar, the coffee machines and the electric heating system were left without power,” says co-owner of the ProRock Pub Denys Novikov. He said the managers had no choice but to close the establishment because working in the kitchen with candles is a violation of fire safety regulations. Power is being switched off even in the downtown area of Kyiv, adds co-owner of the Fanera Project Company (fan-bar Banka, Zheltok) Anton Beletskiy.

“But the greatest difficulties are in the regions, particularly in Dnipropetrovsk,” says co-owner of Zeebra (Butlers, Six, I am, Glossip, Peacocks) Dmytro Yermolenko. Makarov says that Ultra was forced to close its stores in Odesa and Zaporizhzhia for some time.

“According to our observations, this week power outages were non-systemic and affected some districts in the cities in the Dnipropetrovsk, Zaporizhzhia, Poltava, Odesa and Sumy oblasts,” said Chief Operating Officer at Rush (EVA chain of stores) Oleksiy Zozulya. Power outages were also observed in Kharkiv.

Given the force majeure circumstances, business owners are not daring to count their losses. Managing Partner at the Retainet Consulting Company Oleksandr Lanetskiy believes that 2–3 hour power cuts in grocery supermarkets lead to losses of several thousands of dollars per day. The most important thing is that the equipment does not fail. Indeed, the press service of the Varus grocery store chain said that power is often cut off without fair warning.

For restaurateurs the average revenue drops by 50% when electricity is cut off at night and the restaurants cannot prepare hot meals, CEO of the Restaurant Consulting Company Olha Nasonova estimated.

Seeking a solution

Such a situation may affect retail sales during the holiday season, which is considered to be the most profitable time of the year. Yermolenko says that traditionally chains of stores sell 100–150% more goods in December compared to other months of the year. But now stores in shopping malls are not only facing power cutoffs, but also calls from “bombers”. “Ocean Plaza alone was checked for explosives more than ten times,” said the expert, adding that in such cases the stores and markets have to close their doors for half a day or even a full day. The situation is aggravated by the fact that since the beginning of the year the sales of chain stores have declined by nearly 50%.

Business owners have not yet devised a unified strategy for minimizing potential losses. During power cutoffs many non-grocery retailers use “soft checks”, which they issue to buyers. The situation is much more complex for grocery retail chains and restaurateurs, which use all kinds of equipment for proper operation, for example, refrigerators. “In extreme cases we use a generator and light candles on the tables,” says Beletskiy. However, in most cases buying a generator is not always justified.

For full-time operation the pub needs a generator with a capacity of no less than 50 kW, which costs approximately UAH 95,000, according to Novikov’s estimates. For its maintenance the establishment will have to spend UAH 4,800–5,000 per day and the current cost of electricity is UAH 600 a day. “This is hardly a rational solution to the problem,” he says. Co-owner of the Furshet chain of supermarkets Ihor Balenko is also not ready to buy generators for all the stores. “Each one costs US $30,000–40,000, so it is virtually impossible to buy such equipment for 100 stores,” he said.

Many tenants are trying to persuade their landlords to lower rents until the situation stabilizes. For example, Makarov is writing letters to all landlords with a request to lower the rent due to the problems with the power supply. Tkachenko says a decision on discounts has not yet been made – Sky Mall is examining the situation. Nonetheless, Makarov says managers of shopping malls are willing to hold talks assuming that they will achieve some concessions.

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