DTEK coal output up 7.3% y-o-y, electricity generation up 15% y-o-y in 3Q10

DTEK increased total coal production by 7.3% y-o-y in 3Q10 (and by 11.4% y-o-y in 9M10) with thermal coal accounting for 89% of all output in 9M10, according to a company press release yesterday. Electricity generation at Vostokenergo and Dniproenergo (UX: DNEN UK) combined was up 15% y-o-y in 3Q10 and 19% in 9M10. The amount of electricity purchased on the wholesale electricity market (for its electricity distribution business) increased by 7.6% y-o-y in 3Q10 and 15.3% y-o-y in 9M10. According to the press release, the company actively pursued equipment upgrades and investments at both coal mining/preparation and electricity generation/distribution facilities. Mykyta Mykhaylychenko: For 2010, we expect DTEK to generate EBITDA of some USD 720-750 mln (+75%-80% y-o-y growth, EBITDA margin of ~27%). DTEK’15 Eurobonds are now traded at 8.1% YTM or about a 200 bps spread over Ukraine’s sovereign yield curve. We believe that DTEK bonds are attractive given the return for the level of risk, although we do not anticipate significant price upside potential.