Donbasenergo posts -12% EBITDA margin in 1Q10

Donbasenergo (UX: DOEN UK) posted a -12% EBITDA margin in 1Q10, according to UAH financial results filed yesterday, vs. margin of zero in 1Q09. The company also disclosed net revenue of UAH 753.7 mln, up 10.5% yoy; and a net loss of UAH 170.4 mln, 6.5x yoy more than in 1Q09. Yegor Samusenko: We relate the negative EBITDA margin to uneven growth in input and output prices. The state increased the price of coal, Donbasenergo’s main input, by 10% in January, while average electricity tariff growth in 1Q10 was only 5%. We expect coal prices to be flat until yearend, as announced by the state, while electricity prices are set to grow. We forecast Donbasenergo’s EBITDA margin to reach 6% in FY2010. Meanwhile, this news implies other Ukrainian power generators (Centrenergo (UX: CEEN UK), Zakhidenergo (UX: ZAEN UK), and Dniproenergo (UX: DNEN UK)) will also post negative margins in 1Q10.