Donbasenergo EBITDA margin improves to 25% in 3Q18

The net revenue of power GenCo Donbasenergo (DOEN UK)
advanced 53% yoy to UAH 4,573 mln in 9M18, according to its Oct. 30 regulatory
filing. The surge in its top line occurred due to a 97% yoy jump in power
supply to the wholesale market (to 2.31 TWh), which was partially offset by a
22% yoy plunge in the average electricity price. As a result of less beneficial
power pricing this year, the company’s EBITDA slid 35% yoy to UAH 735 mln in
9M18. At the same time, the company’s bottom line improved to UAH 540 mln in
9M18 from UAH 21 mln a year before.

In 3Q18 alone, the company’s net revenue rose 15% yoy
to UAH 1,773 mln (solely due to 15% better pricing of its electricity), EBITDA
improved 13% yoy to UAH 443 mln and net profit climbed 2% yoy to UAH 342 mln.

Alexander Paraschiy: Contrary to our expectations,
Donbasenergo managed to improve its EBITDA margin to 25% in 3Q18, from 10% in
1H18. This is definitely a positive trend driven by factors not yet apparent.
(Our understanding is that the company should have incurred higher costs due to
the need to import 100% of its coal, as well as higher global coal prices.) So
far, we remain skeptical about the future growth of Donbasenergo value.