Centrenergo reports weak 9M19 results

State-controlled power generation company Centrenergo
(CEEN UK) posted 9M19 net revenue of UAH 10,902 mln, or 4% less yoy, according
to its selected financial data posted on ProZvit, a disclosure portal for
state-controlled companies. Its gross profit was negative UAH 520 mln in 9M19
(down from positive UAH 674 mln a year ago). Centrenergo’s 9M19 operating loss
was UAH 1,681 mln, vs. a profit of UAH 623 mln in 9M18, and net loss amounted
to UAH 1,488 mln vs. net profit of UAH 490 mln a year ago.

The company reported UAH 1,189 mln of “other operating
losses” in 9M19, a 7.5x yoy surge, most likely due to one-off costs, e.g. the
writing off or provisioning of some receivables, which Centrenergo incurred in 2Q19.

Looking at 3Q19, Centrenergo’s revenue was UAH 3,643 mln,
up 8% yoy and 13% more qoq. Its gross loss was UAH 318 mln in 3Q19, down from a
profit of UAH 40 mln a year ago and 16% more than the UAH 273 mln loss in 2Q19.
The company’s operating profit was negative UAH 291 mln, down from positive UAH
69 mln a year ago and 80% less than negative UAH 1,428 mln in 2Q19.
Centrenergo’s net loss was UAH 291 mln in 3Q19, down from a profit of UAH 50
mln a year ago and 76% less than a UAH 1,227 mln loss in 2Q19.

Alexander Paraschiy: The
continued weakness of the 3Q19 results (a 16% qoq increase in gross loss) is
likely due to Centrenergo’s weak realization prices. In 3Q19, Centrenergo
likely continued to sell its electricity on bilateral contracts with companies
allegedly related to Ihor Kolomoisky at below market prices.

In the fourth quarter, Centrenergo’s result should be
a bit better taking into account the company’s statement that starting from
November, it will sell 90% of its electricity on the day-ahead market. Prices
there are transparent and higher than the company had on bilateral contracts.
But its annual results will be weak, and no dividends can be expected for 2019.