DTEK Energy increases coal mining 9% m/m in November

Ukraine’s leading coal and power producer DTEK Energy
(DTEKUA) mined 15.16 mmt of ROM coal in 11M21, Concorde Capital calculated
based on sector-wide data provided by the Energy Ministry. This is 12.4% less
yoy and 1.7% less yoy on a like-to-like basis (adjusting for the mine that DTEK
discontinued operating in January).

In November alone, the company produced 1.46 mmt of
ROM coal, which is 8.5% more than in October (on a daily average basis) and
4.3% less yoy (but 12.9% more yoy on a like-to-like basis).

DTEK Energy confirmed on Dec. 14 its mining guidance
of “almost 17 mmt” of ROM coal in 2021. The company reported that it had
commissioned five new longwalls in November (bringing YTD result to 28 or 29).
Last month, it reported on its plan to launch six new longwalls in
November-December.

The mining of ROM steam coal in Ukraine reached 20.09
mmt in 11M21, which is flat yoy. The total mining of steam and coking coal in
the country increased 1.0% yoy to 26.62 mmt.

Alexander Paraschiy: The company
is increasing coal mining for the third month in row, which is encouraging.
Most likely, in December, we will again see an increase in coal production,
which will allow DTEK Energy to reach 16.6-16.7 mmt coal mining in 2021 (up to
0.8% more yoy on like-to-like basis). As coal prices remain high globally, investments
into mining increases should pay off quickly, so we are likely to observe a
further increase of DTEK’s coal mining next year. Based on coal mining and
consumption results by DTEK (we calculate, the company consumed 13.12 mmt of
coal in 11M21, and we see it will consume about 14.5 mmt in 2021), DTEK is
going to be self-sufficient in its coal by about 85% in 2021 and 80% in 4Q21.

We continue to expect the company’s 2021 EBITDA will
increase 22% yoy, as well as keep our bullish view on DTEKUA bonds. We continue
to expect that the political tensions between president Zelensky and DTEK’s
beneficiary owner Rinat Akhmetov are short-lived, so we see the current price
weakness of DTEK Energy’s bond as offering a better entry point.