DTEK Renewables increases revenue, EBITDA 1.6x in 2020

Ukraine’s leading producer of green energy DTEK
Renewables (DTEREN) generated EUR 254.5 mln of net revenue in 2020, according
to its May 27 report and presentation. This is a 57% increase yoy in EUR terms.
The key growth driver was a 71% yoy increase in power generation, caused by
capacity additions. Meanwhile, its average achieved electricity price decreased
8% yoy due to the revision of green tariffs in Ukraine
in 2H20.

The company’s EBITDA increased 64% yoy to EUR 231.6
mln and free cash flow turned to a positive amount of EUR 104.9 mln in 2020
(from negative EUR 168.3 mln in 2019, which was a result of large CapEx in the
period). DTEK Renewables’ debt decreased 9% yoy to EUR 685.0 mln as of
end-2020.

The company accumulated EUR 146 mln equivalent of
receivables from the state market operator Guaranteed Buyer as of end-2020, of
which EUR 37 mln were receivables for November-December 2020 (fully repaid in
2021) and EUR 109 mln were receivables for April-July 2020 (of which 28% has
been repaid in 2021 year-to-date). According to the company, the level of
settlement for electricity purchased by Guaranteed Buyer is close to 90% in
2021.

The company also reported that it will construct a new
wind power plant, Tiligulska, with capacity of 500 MW, by 3Q22.

Alexander Paraschiy: The
company’s 2020 EBITDA turned out to be slightly more than we expected (EUR 226
mln), which is mostly the result of a higher than we expected decrease of
operating expenses. In the year 2021, we expect DTEK Renewables’ EBITDA will
decrease by about 7% yoy to EUR 216 mln mostly due to a decrease of the average
electricity price. If the company completes the construction of Tiligulska WPP
by the end of 3Q22 and starts operating it at full capacity in 4Q22, its EBITDA
will increase by about 16% yoy to EUR 250 mln in 2022.

The key risk for Ukraine’s green power producers,
namely the poor payment discipline of Guaranteed Buyer, seems to be not an
issue in 2021. Year-to-date, Guaranteed Buyer paid UAH 25.7 bln to the green
power producers by paying 85% for the electricity it purchased in 2021 and
repaying about UAH 9.8 bln of the debt it had accumulated in 2020. The rest of
the debt accumulated in 2020 (about UAH 16.1 bln) is very likely to be repaid
from state-guaranteed green bonds that a state company may issue in 2H21.
Clarity in the resolution of the 2020 debt issue, however, does not guarantee
that the problem with payments won’t arise any time in the mid-term.

In any case, we expect such possible troubles in the
mid-term won’t affect much the liquidity and solvency of DTEK Renewables. We,
therefore, remain bullish on DTEREN bonds which currently offer about 8.9% YTM
in Euro.