DTEK power generation falls 13% in 2M19

Ukraine’s leading coal and power holding DTEK Energy
(DTEKUA) generated 6.42 TWh of electricity in 2M19, Concorde Capital calculated
based on sector-wide data reported by the Energy Ministry. This is a 13.4% drop
yoy, or a 2.0% decline on a like-to-like basis (excluding Kyiv-based power
generation assets that DTEK does not operate anymore). Ukraine’s aggregate
power generation increased 0.7% yoy to 28.51 TWh in 2M19.

In February alone, DTEK Energy produced 2.57 TWh of
electricity, which is 26% less than in January on an average daily basis.

Compared to the ministry’s electricity production
plan, DTEK underperformed by 16% in February and by 3% in 2M19.

Alexander Paraschiy: The
significant reduction of power generation among all Ukrainian thermal power
plants in February enabled them to enjoy a well-visible increase in their
average achieved price for electricity. The average power price for all thermal
plants in Ukraine reached UAH 2,167 per MWh in February, which is 16% more than
January and 23% more yoy. That said, despite their reduced power output, DTEK
and other Ukrainian operators of thermal power plants will enjoy exceptionally
good profitability in 1Q19.

Based on recent production results, we are
downgrading our estimate of DTEK’s power generation in 2019 to 2% growth yoy on
a like-to-like basis (from 3-4% previously), while keeping our positive view of
DTEK’s operating profit growth this year. Meanwhile, taking into account
increased political risks for DTEK Energy (which are related to the likely
victory of Volodymyr Zelenskiy at the presidential elections), we are keeping
our neutral view on DTEKUA Eurobonds.