Donbasenergo 2014 profit plunges, April AGM offers exit opportunity

Power GenCo Donbasenergo (DOEN UK) reported a USD 100.9 mln net profit in 2014, according to its EGM announcement released on March 19. The result implies a 81% yoy plunge in its bottom line for the full year and a UAH 624 mln net loss in the last quarter of 2014. In 9M14, the company reported a net profit of UAH 725 mln, a 12% gain yoy. The electricity generator’s 2014 EPS is UAH 4.27, and with the required dividend payment rate of 30% (as with any company with a large state stake), it will have to pay at least UAH 1.28 in DPS, promising a dividend yield of 5.5%.

The company’s AGM, scheduled for Apr. 24, includes questions of profit distribution and approval of significant deals. The latter agenda item allows shareholders to put their shares to the issuer at the market price prior to the AGM announcement (estimated at UAH 24.45/share). To be eligible to sell their shares, shareholders have to attend the meeting and vote against the approval of significant deals.

Alexander Paraschiy: With the escalation of warfare in Donbas last summer, Donbasenergo turned from the most profitable, dividend-rich company in the Ukrainian universe to a nearly dead company. One of its two major assets, Sloviansk Thermal Power Plant (TPP), was heavily damaged by artillery in late June 2014.

The other, Starobesheve TPP that is located on the separatist-occupied territory of Donbas, is suffering from government restrictions on paying the plant for produced electricity. It’s further suffering from attempts by terrorists to confiscate this asset from Donbasenergo (see our March 16 news). The AGM of the company (to be held in Kyiv) might be the last chance for shareholders to exit this highly risky company at a good price.