Centrenergo reports strong 2Q12 financials

Centrenergo (CEEN UK), the Ukrainian electricity generation company, increased net revenue 38% yoy to USD 542 mln in 1H12 on higher electricity output (+30% yoy) and an increase in its effective power tariff by 6% yoy. EBITDA increased 18% yoy (to USD 41 mln) and the bottom line was up 29% yoy (to USD 22 mln) in 1H12. The results for 2Q12 alone are even more spectacular: EBITDA reached USD 56 mln – up from negative USD 15 mln in 1Q12 and 62% higher yoy. The quarter’s net income reached USD 44 mln (vs. a USD 22 mln loss in 1Q12).

Alexander Paraschiy: The key driver for the recovery in Centrenergo’s P&L in 2Q was a cut in fuel costs caused by the reduction in the wholesale coal price benchmark from UAH 770/t in 1Q to UAH 700/t (USD 88/t) since April 2012, as well as an upward adjustment in its achieved power tariff. The resulting increase in the spark spread in 2Q12 allowed the company to double-cover its net loss posted a quarter ago. We expect Donbasenergo (DOEN UK) will report much stronger 2Q12 results as well, and we see 3Q12 as good for GenCos too: usually the regulator allows for higher profits in mid-year so GenCos can smoothly accumulate coal stockpiles and prepare for the winter season. The situation is very likely to change for the worse in 4Q12: power tariffs traditionally decrease in 4Q and there is a risk that coal prices will be adjusted upward later this year.