DTEK Energy coal mining drops 7.3% in 11M19

Ukraine’s leading
coal and power holding DTEK Energy (DTEKUA) produced 20.42 mmt of ROM coal in
11M19, Concorde Capital calculated based on sector-wide data provided by
Interfax-Ukraine on Dec. 13. This is 7.3% less yoy. In November alone, the
holding mined 1.97 mmt of coal, which is 7.1% less yoy and 4.1% more compared
to October (on an average daily basis).

Total official
mining of steam coal in Ukraine decreased 9.3% yoy to 22.81 mmt in 11M19, with
DTEK’s share in the total rising to 90% from 88% a year ago.

Alexander
Paraschiy: Despite
the negative mining statistics for 11M19, DTEK Energy has managed to boost its coal mining
gradually since August.
While in 8M19, the holding produced coal that was just enough for its internal
consumption, over the last three months it was able to produce about 1 mmt more
coal concentrate than it consumed, we estimate.

This was not only a
result of boosted coal mining, but also a consequence of falling use of hard
steam coal (due to the reduced output of DTEK’s thermal power plants in
September-November). The current stockpile of coal at DTEK’s power plants
(about 1.4 mmt) and the current level of coal output looks enough for the
holding to get through the winter season without needing to purchase hard coal.

We are sticking to our forecast that DTEK Energy will
produce 22.5 mmt of ROM coal in 2019 (which
will be 6.5% less yoy). We are also keeping our neutral view on DTEKUA bonds.