Coal mining at DTEK Energy falls 14% in 9M20

Ukraine’s leading coal & power producer DTEK
Energy (DTEKUA) produced 14.18 mmt of ROM coal in 9M20, or 14% less yoy,
according to a sector-wide report provided by the Energy Ministry. In September
alone, the company produced 1.77 mmt of coal, which is 1.9% more yoy and 2.1%
less m/m, on a daily average basis. Aggregate coal mining in Ukraine slid 8%
yoy to 21.03 mmt in 9M20, with the decline at state-controlled mines at 25%
yoy.

Recall, DTEK Energy initiated debt restructuring talks in late March,
with no apparent progress in negotiations with its creditors, so far. It also
faced problems with demand for some portion of its coal mined, which forced it
to suspend coal mining at two companies –
that it leases from the state – in April-July. DTEK is also seeking now to terminate its long-term lease agreement of its Dobropillia
mine, whose coal-mining capacity is excessive for DTEK’s
internal needs.

Alexander Paraschiy: The holding
returned to 58-60 kt in daily coal mining as two minor companies of DTEK recovered
in July after 3.5-months of idling. With such an output level maintained till
the year end, DTEK Energy is likely to mine about 19.7 mmt of ROM coal, which
would be 12% less yoy and in line with the holding’s plan revealed in its
July’s presentation to selected creditors.

Most likely, DTEK Energy will be able to get rid of
one or two of the mining assets that it is currently leasing from the state, as
has been preliminary agreed upon with the
government. That
will result in further decline of the holding’s coal mining next year, by at
least 10%. Meanwhile, wholesale prices at the new electricity market in Ukraine
do not look favorable for DTEK, as average prices for 20 days of October (at the
day-ahead and intra-day markets) were 5% lower compared to September and 10%
lower than a year ago.