Dniproenergo reports record 47% y-o-y electricity sales growth, interim net losses in 4Q10

Dniproenergo (UX: DNEN UK), Ukraine’s largest thermal electricity producer with installed capacities of 8.2 GW, reported revenues from electricity sales of UAH 1,744 mln in 4Q10, 42% y-o-y growth, according to an announcement on its website yesterday. Dniproenergo’s net losses from its electricity segment amounted to UAH 37.2 mln (net margin of -2%) in 4Q10. The company sold 4,057 GWh in 4Q10, up 20% y-o-y (for 2010 electricity sales amounted to 14,332 GWh, up 22% over 2009). Yegor Samusenko: Revenue from electricity sales amounted to 99.7% of Dniproenergo’s total sales in 9M10, thus we estimate whole year sales at UAH 6,193 mln (up 47% y-o-y). The key takeaway from reported figures is that the company’s selling electricity price fell in 4Q10 by 6%, which resulted in a net margin decline by 4pp on a q-o-q basis – we expect similar margins declines for Centrenergo, even worser decline for Zakhidenergo, which experienced a 14% q-o-q selling price drop, and somewhat better results for Donbasenergo, which faced only a 2% electricity selling price decline in the fourth quarter. This should lead to net losses from the whole sector in 4Q10. Though there might be a moderate negative market reaction to worsened profitability in 4Q10, we note market sentiment in electricity generation has historically been neutral to the release of financials, while being sensitive to privatization-related news.