DTEK Energy coal mining falls 11% in 8M21

Ukraine’s leading coal and power holding DTEK Energy
(DTEKUA) produced 10.99 mmt of ROM coal in 8M21, Concorde Capital calculated
based on sector-wide data provided by Energy Ministry. This is an 11.4% decline
yoy. On a like-to-like basis (adjusting for the mine that DTEK discontinued
operating), the holding’s mining fell 2.8% yoy in 8M21. Recall, in January,
DTEK Energy terminated a long-term lease agreement regarding Dobropillia Coal
and transferred all its assets under government control.

In August alone, DTEK Energy mined 1.23 mmt of ROM
coal, which is 34.4% less yoy (and 23.9% less yoy on a like-to-like basis) and
9.9% less than in July.

Alexander Paraschiy: August was the weakest month for DTEK’s coal mining since a crisis of
April-May 2020, when the holding stopped operating some of its mines due to low
demand. This time, however, the situation is different, as DTEK Energy consumed
about 1.1 mmt more hard steam coal than it produced in 8M21 (and it consumed
0.7 mmt more than produced in July-August), based on our calculations. That
means the holding will have to significantly increase coal imports in the rest
of the year, unless its coal mining recovers. We, however, continue to expect that a future raise in fuel cost due to the need
to import more expensive coal will be more than covered by better achieved
power prices, so DTEK Energy’s P&L will improve in 2H21.