DTEK publishes 9M18 operating update

Integrated coal and power holding DTEK Group published
on Nov. 12 its operating update for 9M18, which includes the operations of
Eurobond issuer DTEK Energy (DTEKUA). The holding reported on a 4.9% yoy
decrease in coal mining to 19.99 mmt (up 4.5% yoy on like-to-like basis),
including a 3.8% yoy increase of mining in Russia (not consolidated by DTEK
Energy) to 2.28 mmt. The group exported 0.34 mmt of coal from Russia to third
countries (-41% yoy) and boosted coal deliveries from its Russian mine to Ukraine
by about 70% yoy to 1.2 mmt.

The group supplied to the wholesale market 25.12 TWh
of generated electrcitiy in 9M18, or 6.5% less yoy. Its renewable energy
sources (not consolidated by DTEK Energy) boosted power supplies 7.0% yoy to
0.48 TWh. Its combustion fuel sources supplied 24.65 TWh, or 6.7% less yoy (and
4.0% less yoy on like-to-like basis,
according to Concorde Capital calculations).

DTEK Energy’s grid companies transmitted 32.23 TWh of
electricity in 9M18, or 1.4% more yoy. DTEK’s electricity export increased 6.7%
yoy 4.32 TWh in the period.

The group’s gas production unit (not consolidated by
DTEK Energy) mined 1.24 bcm of natural gas in 9M18, or 0.4% more yoy.

Recall, in March 2017, DTEK Energy lost control over
two large mining companies and one thermal power plant in Ukraine’s occupied
territory of Donbas.

Alexander Paraschiy: There is little surprise in DTEK’s operating data as most of it was
available from the reports of Ukraine’s Energy Ministry before the release. As
we estimated earlier, we see DTEK Energy’s coal mining in Ukraine will reach 24.1-24.3 mmt in 2018 (up 5.4%-6.1% yoy on like-to-like basis) and its gross power generation will reach
37.5 TWh (about 6% less on
like-to-like basis). We retain our neutral view on DTEKUA Eurobonds.