DTEK Group cuts power generation, coal mining 6% in 9M17

Coal mining at DTEK Group, the parent company for DTEK
Energy (DTEKUA), fell 5.8% yoy to 21.0 mmt in 9M17, according to its operating
update released on Nov. 29. It supplied 26.86 TWh of generated electricity, a
6.1% drop yoy. The group halved yoy coal exports to third countries (outside
Russia and Ukraine) by 0.58 mmt. DTEK’s gas E&P subsidiary produced 1.24
bcm of natural gas in 9M17, a 2.9% yoy rise.

The assets currently consolidated by DTEK Energy mined
16.94 mmt of coal (a 10.5% yoy rise) and supplied 26.41 TWh of generated
electricity (-6.4% yoy) in 9M17. DTEK Energy’s grid companies transmitted 31.78
TWh of electricity (a 5.3% yoy drop). It increased power exports from Ukraine
45% yoy to 4.04 TWh. It imported 1.34 mmt of coal to Ukraine in 9M17, up from
0.01 mmt a year ago. Part of the imported coal (0.53 mmt) came from a related
Russian mine.

Alexander Paraschiy: There is
little new information in DTEK’s operating update, except the exact amounts of
coal imports and exports. The provided data suggests that DTEK’s Russian coal
mine is still continuing to supply most of coal outside Ukraine, even though
DTEK’s Ukrainian power plants suffer from a deficit of anthracite’s coal. That
makes sense only in case DTEK’s Russia-mined coal gets better pricing elsewhere
than the coal that DTEK has to import from South Africa and the U.S. 

In any case, we confirm
our EBITDA estimate of DTEK Energy at UAH 17.7-18.0 bln in 2017. We remain
bullish on the holding’s Eurobonds. We also warn that key risk for DTEK Energy
now is on the regulation side – its well-being in early 2018 will depend much
on the ability of Ukrainian power brokers to unfreeze the work of the NERC, Ukraine’s power sector regulator.