DTEK Energy coal mining drops 7.4% in 10M19

Ukraine’s leading coal and power holding DTEK Energy
(DTEKUA) produced 18.45 mmt of ROM coal in 10M19, Concorde Capital calculated
based on sector-wide data provided by the Energy Ministry. This is 7.4% less
yoy and 11.3% short of plan. In October alone, DTEK mines produced 1.95 mmt of
coal, which is 11.4% less yoy but 8.6% more compared to September (on a daily
average basis).

Total mining of steam coal in Ukraine dropped 11.3%
yoy to 20.52 mmt in 10M19, with DTEK’s share in total output rising to 90% from
84% a year before.

Alexander Paraschiy: DTEK’s coal
mining is recovering from its August low, but still it’s much weaker than the
holding’s performance last year. With such results, we see DTEK Energy is
unlikely to reach its latest announced annual plan of 23 mmt ROM coal. Most
likely, its 2019 output will be 22.5 mmt, or 6.5% less yoy. Such an output
level will be just enough for the holding to cover its needs in hard steam coal
in the winter season.

We maintain our bullish view on the DTEKUA bond as we
expect the soon completion of the holding’s debt restructuring, which should
raise its credit ratings.