Centrenergo completing conversion of first burning unit from anthracite

Power unit #2 of Centrenergo’s (CEEN UK) Zmiyivska
Power Plant has been fully converted to burn hard steam coal instead of
anthracite, the Kharkiv Regional Administration reported on Aug. 7.
Preparations are currently being made to launch the unit, meanwhile conversion
work at the plant’s unit #5 is ongoing, the administration’s press release
stated. Centrenergo report nothing on that.

The Zmiyivska thermal power plant operates six power
units of 175 MW each (#1 – #6) designed to burn anthracite and four units of
300 MW each designed to burn lean coal. Both types of coal are not available in
Ukraine beyond occupied Donbas. Among Centrenergo’s other power plants,
Trypilska is also designed to burn anthracite, while Vuhlehirska burns hard
steam coal that is easily available in Ukraine.

Recall in early 2017, Ukraine’s Energy Minister Ihor Nasalyk announced
that Zmiyivska plant’s units #2 and #5 will be converted to burn hard steam
coal in March and May 2017, respectively.

Alexander Paraschiy: The conversion of Zmiyivska’s two
units to hard steam coal is occurring with delays, at a total cost of
conversion that is unknown (earlier we heard a range of UAH 110-175 mln). So
far, we have not heard of any explicit plans to convert the other units of the
Zmiyivska or Trypilska plants to other types of coal, but we expect that some
of the four other 175 MW-sized Zmiyivska units will be converted next year. It
may take much more time and money to convert bigger anthracite-burning power
units (of 300 MW installed capacity at Zmiyivska and Trypilska), so we do not
expect those will be converted in the next two years.

The conversion of two power units at the Zmiyivska
plant to hard coal, and the recently secured supplies of anthracite for the Trypilska plant from the
U.S., will enable Centrenergo’s power plants to get through smoothly the
upcoming winter season. We retain our view that Centrenergo is the top pick in
the local equity universe and an attractive dividend play.