Donbasenergo EBITDA worsens in 2Q16

Power generation company Donbasenergo (DOEN UK) reported UAH 2,666 mln in net revenue in 1H16, a 17% yoy rise, according to its July 25 regulatory filing. The only driver for revenue growth was a 25% yoy increase in power supply to 3.69 TWh. The company’s EBITDA decreased 15% yoy to UAH 143 mln in 1H16, mostly due to a 1.5x yoy increase in “other operating losses” to UAH 719 mln. Its profit before tax worsened 41% yoy to UAH 34 mln, while its bottom line turned to negative UAH 21 mln (from positive UAH 58 mln a year before).

The semi-annual result implies that in 2Q16, Donabsenergo’s revenue was UAH 925 mln (-47% qoq and -19% yoy) and EBITDA was negative at UAH 275 mln, decreasing from positive UAH 418 mln in 1Q16. Despite its weakened P&L, Donbasenergo managed to improve collections of receivables, whose balance decreased to UAH 2,464 mln as of end-June from UAH 2,733 bln as of end-March.

Alexander Paraschiy: Donbasnergo is the most troublesome and risky power GenCo in Ukraine, as its key asset, the Starobesheve thermal power plant (producing about two-thirds of the company’s total electricity in 1H16), is located in the occupied territory of the Donetsk region. Clearly, the decreased receivables is the best news from the company’s semi-annual report. As there is no valid information on the company’s activity in the occupied zone, and because payment discipline in the occupied region is uncertain (and there is a risk of equipment damage), it’s hard to expect Donbasnergo’s operational and financial performance will be stable in the near future.