DTEK power generation falls 8% yoy in January

The power plants of DTEK Energy (DTEKUA) generated 3.95
TWh of electricity in January, according to sector-wide information provided by
the Energy Ministry. This is 8% less yoy and 19% below the ministry’s plan as
stipulated by the Energy Balance for 2018.

The power plants of other generation companies performed
better yoy and above plan in January: Centrenergo (CEEN UK) produced 0.97 TWh
(up 8% yoy) and Donbasenergo (DOEN UK) produced 0.36 TWh (up 38% yoy). But due
to DTEK’s under-performance, all Ukrainian thermal power plants generated 2.8%
less power yoy and 14.2% below their January plan, or 4.76 TWh. Total power
generation in Ukraine (including hydro and nuclear) was 14.62 TWh, or 3.4% less
yoy and 2.7% below plan.

Alexander Paraschiy: The
forecasted average electricity price at the wholesale market was based on a
higher share of expensive power generated by coal-fired thermal plants. In this
way, the average forecasted price is artificially inflated, which is beneficial
for companies like DTEK. Whenever the actual share of thermal power plants in the
total power mix is below the ministry’s plan, they can expect a higher
individual power price (as compared to plan) given that the average power price
in the sector is in line with the ministry’s forecasts. In this way, companies
like DTEK are able to achieve a higher price for their electricity, as compared
to plan.

That said, we expect DTEK Energy’s power plants
will underperform in 2018 to produce about the same amount of power as in 2017,
while they have a chance to get a higher increase in the average power
price  than foreseen by the plan (up 16% yoy). So far, we remain neutral
about DTEKUA bonds.