Donbasenergo reports encouraging 1Q13 financials

Power GenCo Donbasenergo (DOEN UK) reported 10% yoy growth in revenue to UAH 1,190 mln in 1Q13. The company’s EBITDA amounted to UAH 131 mln for the period (vs. UAH -66 mln in 1Q12), and net profit reached UAH 105 mln (vs. a net loss of UAH 111 mln in 1Q12). The company increased power production 1% yoy to 2,502 GWh, implying its March production grew 24% yoy to 878 GWh.

Alexander Paraschiy: A profitable first quarter is something very unusual for Ukrainian GenCos, so we explain the company’s profit as the result of enormous weakness on the coal market. The official coal price was 10% lower in 1Q13 than a year before, while the market price was even weaker. Interestingly, the company reported just 60% yoy growth in its inventories to UAH 514 mln (which we assume is mostly coal), while in physical terms its coal stockpiles increased 110% yoy (to 642.8 kt). This suggests the company is in fact enjoying beneficial coal pricing, so we expect it will continue to show good profitability in the next quarter.

On top of that, Donbasenergo should gain some indirect benefit (in the form of higher demand for its power) from the technical failure at the neighboring Uglegorsk thermal power plant belonging to Centrenergo. At least, we believe the company’s March output hike was partially driven by this factor. All in all, we see Donbasenergo as the one and only company in Ukraine’s power sector worth investing in.