DTEK Energy power generation falls 4%, distribution falls 5% in 1H16

The power plants of Ukraine’s leading coal and power
holding DTEK Energy (DTEKUA) supplied 16.84 TWh of electricity in 1H17, a 4.2%
yoy decline, according to an operating update of DTEK Group released on Aug. 1.
Excluding the Zuyivska Power Plant (located on the occupied territory), which
DTEK no longer controls as of mid-March, DTEK Energy generated 16.1 TWh in
1H17, or flat yoy.

DTEK Energy’s power distribution companies transmitted
21.79 TWh of electricity in 1H17, or 4.6% less yoy. The decline is mostly the
result of DTEK’s lost control over its grids located on the occupied territory
of Donbas.

DTEK Energy’s coal mining in Ukraine amounted to 13.4
mmt (up 4.6%) in 1H17, which coincides with our calculations based on sector-wide
data in mid-July. The mines that DTEK still controls
increased their production 19% yoy to 11.6 mmt.

DTEK Energy’s electricity export surged 40% yoy to 3.1
TWh. Its coal imports was 0.66 mmt in 1H17 (zero in 1H16), of which 0.47 mmt
were supplied from DTEK-related Russian mines.

DTEK Group’s other divisions (not consolidated by
Eurobond issuer DTEK Energy) performed as follows in 1H17: coal mining in
Russia increased 31% yoy to 1.36 mmt, natural gas production grew 7% yoy to 835
mcm (about 27,200 boepd), and renewable power generation fell 7% yoy to 0.28
TWh.

Alexander Paraschiy: The operating data provides no surprise to us. We maintain our
forecasts that in 2017 DTEK Energy will generate about 38 TWh of electricity
(gross), or 7% less yoy; and it will mine 24.9 mmt of coal in Ukraine (15% less
yoy). We also maintain our forecast of DTEK Energy’s 1H17 EBITDA at UAH 10.7
bln (rising 3.3x yoy) and our bullish view on DTEKUA Eurobonds.