DTEK attracts USD 545 mln in debt financing

Ukraine’s leading coal and power holding DTEK (DTEKUA) reported on September 9 it attracted two credit lines at a total USD 545 mln, both structured into 3-year and 5-year facilities. The first facility, at a total amount of USD 375 mln, was gained from a syndicate of European and Russian banks and will finance DTEK’s export activity. The second one, in the amount of RUB 5.35 bln (about USD 170 mln), was gained from Russia’s VTB Capital and will finance working capital and CapEx. No interest rates on the facilities are disclosed.

Alexander Paraschiy: It’s no surprise that the holding was able to attract large loans. DTEK’s low leverage as of its last reporting date (net debt/EBITDA in 2012 stood at 1.1x) makes it a potentially attractive borrower. While the company generates most of its revenue domestically, we expect that DTEK’s export revenue will cover its interest expenses on foreign debt in excess of 1.5x in 2013 and 2014. The new financing will hardly add more risk to the holding’s leverage: its total debt/consolidated cash flow will increase to an estimated 1.7x by the end of 2013 (vs. 1.3x a year before), still far below the Eurobond covenant of 3.0x.

The holding clearly needs to finance its investment into outdated power and heat generation capacities that it acquired over the last couple of years, and international financing at presumably low rates looks as the most efficient way. Meanwhile, we are slightly concerned by DTEK’s aim to significantly increase financing of its export operations: the prospect of electricity export growth (DTEK’s key export item) doesn’t look clear at the moment, while global prices for coal (its second top export item) are currently at their three-year low.