DTEK initiates conversion of its anthracite-burning power plants

DTEK Energy (DTEKUA), Ukraine’s leading coal and power company, is going to modernize some of its power units that burn anthracitic coal to enable them to burn hard steam coal, CEO Maxim Tymchenko told the epravda.com.ua news site in an interview published on April 27. DTEK operates three power stations (out of a total of eight) that only burn anthracite coal. This type of coal was mined only in the occupied part of Ukraine – access to that coal was lost when the government initiated its trade blockade of occupied Donbas earlier this year.

DTEK has lost access to its own-mined anthracite (whose coal costs about UAH 1700/t, according to Tymchenko) and it now has to import anthracite at a higher price (UAH 2800/t). Therefore, converting from anthracite to hard coal makes sense financially, Tymchenko said.

This year, DTEK will shift two power units at Prydniprovska Power Plant (150 MW each) to hard coal, and next year it will convert the entire station from anthracite to hard coal, Tymchenko said. The holding is also considering shifting about half of the power units at Kryvorizka Power Plant to hard coal as well. The third one, Luhanska Power Plant, will continue burning anthracite coal, which will be delivered from Russian mines controlled by DTEK Energy’s parent group. Last year, Prydniprovska, Kryvorizka and Luhanska TPP contributed to DTEK’s total power generation 11%, 6% and 8%, respectively.

Alexander Paraschiy: The decision to shift some of its generating capacities to hard coal implies DTEK sees little chance to regain access to its coal mines located on the occupied part of Donbas. In this sense, the decision looks surprising. The conversion implies some additional costs for DTEK, but we do not expect the holding will exceed, or even approach, its CapEx limits agreed upon with creditors due to such projects. We remain bullish on DTEKUA bonds, also anticipating solid 2016 reults to be published today, which may trigger further bond price growth.