Dniproenergo raises 2011 bottom line 1.5x yoy

Dniproenergo (DNEN UK) increased its net income 51% yoy in 2011 to UAH 286 mln (USD 36 mln), Interfax reported yesterday. Gross revenue rose 39% yoy to UAH 8.5 bln (USD 1.06 bln), implying net margin grew 1 pp yoy to 4.1%. The company attributed this slight increase in profitability to a higher increase in electricity prices (+26% yoy) than production costs (+21% yoy).

Alexander Paraschiy: This year DTEK is going to obtain full operating control over Dniproenergo via the privatization of a 25% stake in the company, and the holding will continue setting Dniproenergo’s fuel costs (via the supply of its own coal to the company). Because the state is going to retain a 25% stake in Dniproenergo, we see little motivation for DTEK to allocate profits in the company. We therefore believe Dniproenergo’s net margin will remain below 5% in the mid-term.