DTEK boosts Ukraine coal mining 3% in 8M16

Ukraine’s leading coal and power holding DTEK Energy (DTEKUA) boosted its coal mining in Ukraine by 3% yoy to 17.94 mmt in 8M16, we calculated based on sector-wide data presented by Interfax-Ukraine. This is slightly better than +1% yoy in 7M16. DTEK’s production of anthracite coal (mined on the occupied territory of Ukraine) rose 77% yoy to 4.55 mmt, while mining of hard steam coal fell 10% yoy to 13.39 mmt in 8M16.

In August alone, DTEK Energy mined 2.51 mmt of coal, which is 13% more yoy, but 3% less compared to July. Mining of anthracite coal reached 0.70 mmt in July, which is +60% yoy but 4% below July’s level.

In other news, Ukraine’s power sector regulator announced on Sept. 27 its resolution to increase retail electricity rates for commercial consumers by 10% in October. Since September, the regulator increased electricity rates for residential consumers by about 25%.

Alexander Paraschiy: The recent coal statistics are broadly in line with our expectations that DTEK Energy will reach a 5% yoy increase in mining this year. The higher electricity rates for commercial consumers in October means Ukraine’s regulator is moving on with its plans, announced in April-May, to include the international coal price (including delivery costs) in electricity rates. That development would be clearly beneficial for DTEK Energy. Meanwhile, we remain neutral on DTEKUA bonds.