DTEK increases power generation 4.5% in 2016

The power plants of Ukraine’s leading coal and power holding, DTEK Energy (DTEKUA), generated 40.49 TWh of electricity in 2016, which is 4.5% higher yoy, we calculated based on sector-wide data provided by Energobiznes. DTEK’s three thermal power plants burning anthracite and lean coal increased their generation 66% yoy to 11.03 TWh, while five power plants burning hard steam coal decreased their production 11% yoy to 26.03 TWh. Heat and power plants, burning mostly natural gas, increased power generation 16% yoy to 3.44 TWh.

The above data does not include DTEK’s Zuyivska TPP located in the occupied territory of Donbas. In 2015, Zuyivska produced about 3.4 TWh, or 8% of DTEK’s total power. Currently, DTEK cannot supply its coal (mined outside the occupied territory) to the plant due to the blockade of railway connections with the occupied territories.

DTEK’s other power plants that are currently suffering from the inability to receive coal from the occupied territories (Kryvorizka and Prydniprovska power plants) generated 7.69 TWh of electricity (+89% yoy), or about 17% of DTEK’s total in 2016.

Alexander Paraschiy: The result is in line with our previous expectations. In our base-case, we expect that DTEK will generate about the same amount of electricity this year as in 2016. The rail blockade may bring changes to our forecast, especially taking into account that three power plants (which generated about 25% of electricity for DTEK last year) are currently suffering from coal supply blockages. So far, Kryvorizka and Prydniprovska plants have enough coal stockpiles to operate in economy mode for 49 and 67 days, respectively, according to today’s Ukrenergo data. If the blockade won’t finish soon, DTEK will have to start importing anthracite, which will significantly increase its power production costs. We still hope that the railway blockade will be eased by the end of March. However, as uncertainty remains, we see a high price risk for DTEKUA bonds in the coming days. We are neutral on DTEKUA bonds currently.