Centrenergo announces tiny dividend, moderate CapEx program

Centrenergo (CEEN UK) shareholders, at an AGM on Friday, approved a dividend payout of 30% of 2011 net income and the same preliminary payout ratio for 2012. The 2011 dividends, payable by June 1, 2012, amount to UAH 10.6 mln or UAH 0.029 per share, implying a dividend yield of just 0.4%. Shareholders also accepted the 2011 financial report: revenues of UAH 7.18 bln (+27% yoy), EBITDA of UAH 391 mln (+73% yoy), and net income of UAH 35 mln (+3.7x yoy). The company announced plans to start a 19-month reconstruction of power unit #2 at the Trypilla TPP in November. Centrenergo secured UAH 650 mln in financing for the project from a state bank at a 15.45% rate. The company’s next large-scale modernization project, unit #1 of the Zmiiv TTP, is scheduled to start in 2014. Management is currently projecting a 1Q12 loss of more than UAH 200 mln, mainly due to sticky power tariffs and increased coal prices, but hope profitability will improve on a possible regulatory decrease in coal prices.

Alexander Paraschiy: Centrenergo’s 2011 results and 2012 outlook suggest its owner lacks the ability to effectively lobby the company’s interests. Its modernization program – with just a single power unit being reconstructed in two years – is a much more leisurely schedule than at DTEK-related companies; in addition, the interest rate on the loan looks high. Moreover, Centrenergo seems to be playing the role of scapegoat for the sector as a whole in loss-making 1Q12 – the company had to raise power output 40% yoy over the quarter, while other producers focused on the local market saw production fall 4% yoy.