Donbasenergo AGM: Operating Performance Up, Profits Deceiving

Donbasenergo’s (DOEN: HOLD) shareholders approved the company’s 2006 financial results at their AGM yesterday: sales of USD 272 mln (+20% yoy), EBITDA of USD 29 mln (-5% yoy) and net losses of USD 0.8 mln. The company decided not to pay dividends due to its reported losses. Alexander Paraschiy: Despite a decrease of reported profits, DOEN has in fact improved its operating performance: the company has increased fuel consumption efficiency and the profitability of power generation from 1.2% in 2005 to 4.8%. The drop in EBITDA is due mainly to smaller additional payments from the wholesale energy markets: USD 5.1 mln in 2006 compared to USD 26.6 mln in 2005. The company’s financials netted by additional payments look encouraging: adjusted EBITDA grew 4.78 times yoy. We remain optimistic about DOEN’s upside potential.