DTEK Energy 3Q16 EBITDA quadruples qoq

Ukraine’s leading coal and utility holding generated UAH 4.16 bln in EBITDA in 3Q16, according to its regular report of non-IFRS results on Nov. 29. This was 4.2x more than its restated EBITDA for 2Q16 and 30% more than it generated in the first half of the year. Its revenue increased 16% qoq to UAH 29.32 bln, while COGS (ex-wages) increased only 2% qoq to UAH 9.94 bln in 3Q16.

DTEK’s operating cash flow before working capital changes advanced 2.7x qoq to UAH 5.30 bln in 3Q16, of which UAH 0.83 bln was spent for investments in working capital and UAH 1.66 bln was spent for CapEx. Its free cash flow for the quarter was UAH 1.40 bln in 3Q16, rising from negative UAH 0.14 bln in 2Q16 and positive UAH 0.82 bln in 1H16.

The quarterly result implies DTEK Energy’s 9M16 revenue is UAH 86.3 bln (or about USD 3.40 bln) and EBITDA is UAH 7.3 bln (or about USD 290 mln).

Alexander Paraschiy: Given that electricity prices for thermal power plants in 4Q16 will be about UAH 600/MWh higher than in 3Q16, DTEK Energy should generate even better EBITDA in the last quarter of the year. The increase from 3Q16 could reach UAH 3.5-4.0 bln, which will result in DTEK’s 2016 EBITDA at about UAH 15.0-15.5 bln, or USD 585-600 mln. That’s much higher than we initially expected (USD 450 mln) and higher than DTEK guided (USD 550 mln). We confirm our bullish view on DTEKUA bonds.