DTEK considers selling Russian mines for USD 436 mln

Ukraine’s leading energy holding DTEK (DTEKUA) is considering selling its Russian assets in exchange for reducing its debt by about USD 436 mln, CEO Maxim Timchenko told the dt.ua news site in an article published on April 15. “Currently, we are discussing the details of this deal with interested parties,” he said.

In Russia, DTEK controls coal mines that will produce about 2.6 mmt of run-of-mine coal in 2016, according to Timchenko. He also said that DTEK is selling these coal mines in Russia strictly on the Russian and EU markets. DTEK’s Russian mines produced about 2.0 mmt of coal in 2015, or 7% of the holding’s total coal production.

Alexander Paraschiy: The fact that Timchenko has disclosed the value of potential divestment deal suggests DTEK is really close to finishing it. The disclosed non-rounded number in dollars does not necessarily suggest there is an exact deal value that has been agreed upon. It might be simply a dollar equivalent of RUR 29-30 bln, depending on the exchange rate used. Also, the USD 436 mln figure is very close to DTEK’s banking debt in Russian currency (which was USD 425 mln as of end-2015, and which might have increased since then).

If the sale happens under the disclosed parameters, it will decrease DTEK’s interest-bearing debt by about 17% from its end-1Q16 level, which will be a bargain for the holding. At minimum, it will significantly increase the chance that DTEK won’t need a haircut on the principal value of its debt.