DTEK Energy coal mining falls 5% yoy in 8M19

Ukraine’s leading coal and power producer DTEK Energy
(DTEKUA) mined 14.76 mmt of raw hard coal in 8M19, we calculated based on
sector-wide data provided by Interfax-Ukraine on Sept. 11. This is a 5.1% yoy
decline.

In August alone, DTEK Energy mined 1.68 mmt of hard
coal, or 54.2 kt per day. This is 4.0% less compared to July, 22.8% less yoy,
and the weakest result for the last 39 months.

Alexander Paraschiy: DTEK’s
mining results are going far below the plan, as it is becoming increasingly not
self-sufficient in own coal (to remain self-sufficient in hard coal, the
holding should produce no less than 60 kt of raw coal per day). This explains
DTEK’s recent initiatives to import more hard coal. Imported coal could
negatively affect the profitability of DTEK’s electricity segment, though such
cost increase is likely to be at least partially offset by higher achieved
power prices in 3Q19 as compared to 2Q19. All in all, we do not expect any
significant decline in DTEK’s profitability in full-year 2019 and remain
bullish on DTEKUA bonds.