DTEK Energy decreases coal mining 13% in 10M21

Ukraine’s leading coal and power producer DTEK Energy
(DTEKUA) mined 13.70 mmt of ROM coal in 10M21, Concorde Capital calculated
based on sector-wide data provided by Energy Ministry. This is 13.2% less yoy
and 3.0% less yoy on a like-to-like basis (adjusting for the mine that DTEK
discontinued operating). Recall, in January, DTEK Energy terminated a long-term
lease agreement regarding Dobropillia Coal and transferred all its assets under
government control.

In October alone, the company produced 1.39 mmt of ROM
coal, which is 7.9% more than in September (on daily average basis) and 13.9%
less yoy (but 4.6% more yoy on like-to-like basis).

Meanwhile, DTEK Energy reported on Nov. 3 that it
mined “over 1.4 mmt” of coal in October. In the same report, it confirmed its
mining guidance of “almost 17 mmt” of ROM coal in 2021. To achieve this result,
the company is planning to launch six new longwalls. It commissioned 23 new
longwalls in 10M21, including two in October. This slightly contrasts with its
data provided in early October, when it reported on 22 longwalls commissioned
in 9M21, including one in September.

Coal mining of ROM steam coal in Ukraine reached 18.28
mmt in 10M21, which is 3.5% more yoy. The total mining of steam and coking coal
increased 2.2% yoy to 24.13 mmt.

Alexander Paraschiy: DTEK
Energy’s annual plan assumes it will increase coal mining in the last two
months of 2021 to 54 kt per day, which is 21% more than in October. The plan
looks increasingly impossible, meaning that the “almost” word is important in
the guidance. We see the company as producing no more than 16.5 mmt of ROM coal
this year. In any case, DTEK Energy will remain 80% self-sufficient in coal in
late 2021, which will allow it to benefit from increased electricity prices and
being not very sensitive to increased costs of imported coal.

With no visible increase of coal production, as well
as hardships with its imports, the risk of coal shortages at Ukrainian thermal
power plants is growing. As of Nov. 12, Ukrainian thermal power plants only had
406 kt of coal stockpiles. This is 82% less yoy, and covers just 5-6 days of
electricity production. This means the stability of Ukraine’s electricity
system remains under risk.