DTEK increases coal mining 35% yoy in January

Ukraine’s leading coal and power holding, DTEK Energy (DTEKUA), mined 2.81 mmt of coal in January, we calculated based on sector-wide data provided by Interfax-Ukraine. This is 35% more yoy but 4% less compared to December 2016. The holding mined 0.91 mmt of anthracite coal at its mines located in the occupied part of Donbas (+98% yoy and -4% m/m) and 1.90 mmt of hard steam coal from outside the occupied territory (+17% yoy, -4% m/m). DTEK accounted for 91% of Ukraine’s total official mining of steam coal in January, up from 86% a year ago.

Alexander Paraschiy: Based on Ukraine’s energy balance forecast provided by the Ministry of Energy, the production of electricity from coal is going to be flat yoy this year. This means demand for coal will also be flat yoy and so may be coal mining by DTEK. The key risk for the holding is that Ukrainian paramilitary activists started blocking some of the railway connections with the occupied territory of Donbas in late January, thus preventing shipments of goods from there. Due to the blockade, DTEK will likely decrease its coal mining in the occupied territory in February. At the moment, it is hard to guess for how long the blockade will last, as the Ukrainian government is doing little to unblock the connections with the occupied territory. The government might believe that such efforts will not find support among Ukrainians. With such uncertainty, we change our optimistic view on DTEKUA notes to a neutral view.