DTEK Energy revenue rises 19%, EBITDA triples in 1H17

Revenue of Ukraine’s leading coal and power holding
DTEK Energy (DTEKUA) rose 19% yoy to UAH 67.68 bln in 1H17, according to its
release of abridged unaudited results on Aug. 30. Its EBITDA surged 3.1x yoy to
UAH 9.66 bln, while its bottom line remained negative at UAH 1.00 bln in 1H17
(up from negative UAH 8.14 bln a year before). The key contributor to the
holding’s 1H17 losses was UAH 3.91 bln in charges related to the loss of control over its assetsin the occupied territory.

The holding’s operating cash flow before working
capital changes improved 2.6x yoy to UAH 10.91 bln, while net cash flow from
operations improved 30% yoy to UAH 4.16 bln. DTEK Energy spent UAH 3.18 bln for
investments in fixed assets (46% yoy rise) and repaid UAH 3.62 bln in debt in
1H17.

Its gross debt decreased 8% YTD to UAH 65.09 bln, and
its net debt fell 5% YTD to UAH 60.65 bln as of end-June. Its Net Debt-to-LTM
EBITDA ratio was 2.50x as of end-June, compared to 3.57x as of end-2016.

Alexander Paraschiy: The
holding’s 1H17 results are slightly less than we initially estimated (UAH 10.7
bln), but they are generally in line with our expectation that EBITDA growth
should have more than tripled. DTEK’s 2H17 results will be less spectacular,
particularly due to expected smaller yoy coal and power output, as well as
higher fuel costs of its power plants due to a need to import more coal.

Nevertheless, it looks like DTEK will be able to
outperform our estimate of its full-year EBITDA of USD 511 mln (or about UAH
14.0 bln). We confirm our bullish view on DTEKUA Eurobonds.