DTEK Energy coal mining slides 0.2% in 7M18

Ukraine’s leading
coal and power holding DTEK Energy (DTEKUA) mined 13.36 mmt of hard steam coal
in 7M18, Concorde Capital calculated based on sector-wide data provided by the
Energy Ministry. This is 0.2% less yoy and 3.8% short of the ministry’s plan. In
July alone, DTEK Energy mined 1.94 mmt of coal (62.5 kt per day), which is 3.4%
more compared to June, 6.2% more yoy, but 11% short of plan.

Alexander
Paraschiy: To reach
its mining plan of 24.6 mmt in 2018, DTEK has to speed up coal production by
18% in the rest of the year, compared to 7M18, which does not look achievable.
Most likely, the holding will underperform by about 1.0-1.2 mmt this year.

That may lead to a
deficit of hard steam coal inside the holding, provided consumption of hard
steam coal by its thermal power plants will increase by 11% yoy or more in
2018. DTEK’s initial plan was to boost consumption of hard steam coal by 13%
yoy. By 7M18, it reported 11% yoy consumption growth.

In turn, that will
mean DTEK will have to increase its import of hard steam coal for internal use,
which may worsen the profitability of its power generation segment. At the same
time, the negative effect won’t be material – we still expect DTEK will
increase its key P&L parameters in 2018, confirming our neutral view on
DTEKUA Eurobonds.