Dniproenergo, Zakhidenergo increase EBITDA, losses in 1Q14

Power GenCo DTEK Dniproenergo (DNEN UK) reported a 7% yoy decrease in net revenue to UAH 1.92 bln in 1Q14, caused by a decrease of power tariffs and a 3% decrease of power supplies to the wholesale market by 3% yoy to 3.52 TWh. Despite weaker power tariffs, the company managed to increase its EBITDA 78% yoy to UAH 267 mln, while its bottom line suffered from AH 275 mln in “other expenses”. Net losses for the quarter amounted to UAH 128 mln, up 5.8x yoy. 

A similar financial performance for 1Q14 was demonstrated by DTEK Zakhidenergo (ZAEN UK). Its net revenue fell 2% yoy to UAH 2.39 bln on flat yoy power supplies (at 3.81 TWh). The company’s EBITDA advanced 2.2x yoy to UAH 98 mln, and net losses were extended 2.4x yoy to UAH 214 mln, again due to high “other expenses” which amounted to UAH 207 mln in 1Q14 (vs. nil in 1Q13). 

Alexander Paraschiy: Usually, the first quarter financials are not indicative for power GenCos’ full-year outlook. In this case, the good news is that both companies were able to improve their operating profits on a yoy basis (and large “other expenses” seem to be one-offs). On the other hand, we see a high risk that GenCos’ financial performance will be not as good in the coming quarters. Domestic coal prices tend to increase in Ukraine, while a corresponding increase in wholesale tariffs for electricity is unlikely.