DTEK Energy coal mining falls 7% in 7M21

Ukraine’s leading coal and power holding DTEK Energy
(DTEKUA) produced 9.76 mmt of ROM coal in 7M21, Concorde Capital calculated
based on sector-wide data provided by Energy Ministry. This is a 7.3% decline
yoy. On a like-to-like basis (adjusting for the mine that DTEK discontinued
operating), the holding’s mining increased 0.8% yoy in 7M21. Recall, in
January, DTEK Energy terminated a long-term lease agreement regarding
Dobropillia Coal and transferred all its assets under government control.

In July alone, DTEK Energy mined 1.36 mmt of ROM coal,
which is 24.7% less yoy (and 20.0% less yoy on a like-to-like basis) and 7.7%
less than in June (on a daily average basis).

In other news, Energy Minister Herman Halushchenko
told Interfax-Ukraine on Aug. 30 that Ukraine will need to import about 3.5 mmt
of steam coal to go through the upcoming heating season. The plans to import
coal from the U.S. were previously announced by DTEK and Centrenergo (CEEN UK).
Recall, DTEK imported  1.21 mmt of steam coal for its own needs in 1H21,
according to its recent quarterly update.

Alexander Paraschiy: In July, DTEK Energy significantly increased its consumption of hard
steam coal (to 1.3 mmt, which was 1.8x more m/m and 1.2x more yoy) so that coal
use was no longer covered by its internal mining (July’s mining implies less
than 1.0 mmt of marketable coal). If the company did not increase its mining in
August, it would continue to be not self-sufficient in hard steam coal (August
consumption would be about 1.03 mmt, we estimate). The need to import coal,
amid high global coal prices, is likely to be a key factor that will inflate
DTEK Energy’s costs later this year. However, given the recent trends on
Ukraine’s wholesale market (power prices went up in early August) we continue
to expect that DTEK’s margins will improve in 2H21.