By Marek Strzelecki, Kate Abnett and Pavel Polityuk

WARSAW (Reuters) – Ukraine is expected to start selling electricity to Slovakia and Hungary this month, a move that could boost revenues for power generators in the country, sources told Reuters.

The expansion of power trade with Europe, which is currently curtailed to limited amounts sold to Poland and Moldova, could increase cashflow to Ukrainian utilities hit by a drop in domestic electricity since the Russian invasion, while providing more energy to the 27-country European Union as it grapples with reduced gas supplies from Russia.

The EU and Ukraine linked their electricity grids on March 16 in response to Russia’s invasion, enabling Ukraine to receive emergency power from Europe if military attacks caused outages.

The emergency link – which was done in weeks, having initially been planned for 2023 – did not include commercial power trading. Continental Europe’s power grid operators ENTSO-E on Jun. 7 confirmed that electricity trade with Europe could begin if certain technical conditions were met.

Talks on those technical issues are progressing fast and trading is expected to start this month, sources familiar with the grid operators’ discussions said. ENTSO-E declined to comment.

“In principle, exports of electricity from Ukraine to the rest of Europe have been cleared. These will be limited amounts at the start, the volumes will be decided in coming days and auctions for capacity on links with Slovakia and Hungary will be announced very soon,” Volodymyr Kudrytsky, head of Ukrainian power grid operator Ukrenergo, said on Wednesday.

“Export volumes will be gradually rising to the levels that will allow Ukraine to earn billions of euros annually. We’re talking about sums that are comparable with proceeds from transit of gas via Ukraine,” Kudrytsky said.

Another prerequisite to start trade, a “solidarity algorithm” ensuring that proceeds from power sales support the stability of Ukraine’s strained power industry, is nearly ready and has to be approved by the government in Kyiv, one source said.

Ukraine’s power sector is facing a shortfall of cash as electricity consumption has dropped and some consumers have not paid bills during the war.

Filling the gap, estimated at about 250 million euros a month, would ensure Ukraine’s system can keep operating, said Artur Lorkowski, Director of the Energy Community Secretariat, a body established by the EU and aspiring member states to extend the bloc’s energy policy to would-be members.

An additional route for Ukrainian electricity to the EU markets is also in sight. A link connecting Rzeszow in Poland with Khmelnytsky nuclear power station in Ukraine is set to be opened by the end of 2022. It will allow around 1,000 megawatts per day to be sent.

(Reporting by Marek Strzelecki and Kate Abnett and Pavel Polityuk; editing by David Evans)