DTEK mines 2.8 mmt of coal in August, enjoying high rates in October

Ukraine’s leading utility holding DTEK Energy (DTEKUA) mined 2.77 mmt of coal in August (-2% m/m), according to its monthly report released on Oct. 26. Its coal sales fell 1% m/m to 2.18 mmt, including 0.077 mmt of export sales. Coal deliveries to own power plants increased 2% m/m to 1.93 mmt. DTEK’s electricity supply to the Ukrainian wholesale market decreased 7% m/m to 3.18 TWh in August, and its average achieved electricity rate of power plants improved 9% m/m to UAH 1.13 / kWh.

In separate news, the average price of electricity supplied by all Ukrainian thermal power plants to the wholesale market (12 plants, of which eight belong to DTEK) was UAH 1.66 / kWh in October 1-20. This is 31% more than in September and 43% more than in 3Q16.

Alexander Paraschiy: Traditionally, DTEK’s operating update lags data provided by other sources, so we see no surprise in the holding’s report. The only valuable info from DTEK’s report is its total coal mining, which enables us to calculate the amount of coal mined in Russia. It reached 260 kt in August, which is 9% more than July and 136% more than January. However, this data is not helpful for understanding DTEK Energy’s prospects, given that the holding is going to spin off its Russian subsidiaries.

Of much higher importance is data on producers’ October electricity rates, which suggest that 4Q16 will be much better for all Ukrainian power producers, including DTEK. This means DTEK’s 2016 EBITDA could be better than our initially expected level of USD 475 mln, and that DTEK may distribute more than the minimum amount of coupons to the Eurobond holders in the coming months.