Centrenergo EBITDA triples yoy in 1Q17

Net revenue at state-controlled power GenCo Centrenergo (CEEN UK) rose 26% yoy to UAH 3,167 mln in 1Q17, according to its regulatory filing on April 27. The growth was fueled by a 80% yoy increase in its achieved electricity price to UAH 1,847/MWh on the background of a 30% drop in power output to 1.70 TWh. Higher power rates allowed the company to significantly boost its profitability in 1Q17: its EBITDA increased 3.1x yoy to UAH 1,148 mln and its EBITDA margin jumped to 36% (up from 15% a year before). The company’s bottom line surged 3.2x yoy to UAH 851 mln in 1Q17.

Alexander Paraschiy: The second quarter will be worse for Centrenergo, as two of its three power plants are currently idle due to a lack of coal. They burn anthracite coal, supplies of which have ceased owing to a trade blokade on occupied Donbas. At the same time, we expect Centrenergo’s profitability will continue growing in the following quarters as electricity prices will remain high. As uncertainty on its fundamentals is high for this year, we do not consider Centrenergo to be an attractive equity story.

A possible catalyst for the stock could become the company’s privatization, which Ukraine pledged to the IMF to complete in 3Q17. But we see no chance of estimating the likelihood of privatization, which was postponed several times over the last three years.