Centrenergo improves its 3Q14 P&L, compared to recent quarters

Power GenCo Centrenergo (CEEN UK) reported flat yoy revenue at UAH 5.56 bln in its 9M14 financials filed on Oct. 24. The company’s EBITDA decreased 46% yoy to UAH 372 mln and its bottom line fell 58% yoy to UAH 219 mln in 9M14. These results imply Centrenergo improved its quarterly EBITDA 12% yoy to UAH 188 mln and its bottom line by 43% yoy to UAH 143 mln in 3Q14.

Alexander Paraschiy: The company’s operations are hard to predict, given that all three of its thermal power plants (TPPs) have had their operations affected by the Donbas war. Its Vuhlehirsk TPP is located in the Donbas region at the border zone between Ukrainian forces and Russian-terrorist forces. Its other two TPPs are located in safe zones controlled by the Ukrainian government, though they lack sufficient supply of anthracitic coal (which they are designed to use) since all of the domestic anthracite mines are on war-torn territory.

Recently, the state power sector regulator has approved special rates for electricity of power plants that consume anthracite to enable them to buy coal abroad at prices that are higher than have been domestically. Therefore, Centrenergo may end up having sufficient working capital for coal purchases and may be able to timely replenish its coal stockpiles. Nevertheless, we expect the company will report a negative bottom line in 4Q14, as tradition, to minimize its net income, at least 30% of which it will have to pay in dividends.