DTEK Energy coal mining falls 2% in 4M19

Ukraine’s leading coal and power producer DTEK Energy
(DTEKUA) produced 7.59 mmt of raw coal in 4M19, or 2.3% less yoy, according to
Concorde Capital calculations based on sector-wide data provided by
Interfax-Ukraine. Total production of steam coal in Ukraine decreased 5.4% yoy
to 8.58 mmt in 4M19, with DTEK’s share rising to 88% from 86% a year before.

In April alone, DTEK Energy produced 1.80 mmt of coal,
which is 10.0% less yoy and 9.0% less compared to March, on a daily average
basis. The decline was fueled by a 8.9% m/m reduction in mining by
Pavlohradvuhillia to 1.50 mmt.

Alexander Paraschiy: The 4M
decline in DTEK’s coal mining more or less corresponds to the Energy Ministry’s
updated plan for Ukrainian coal-fired thermal power plants cutting their power
generation this year by 2.5% yoy. That said, we see DTEK Energy likely showing
a smaller coal production result this year than we initially expected (up 1-2%
yoy). Now we see the holding’s 2019 coal output will be at the level of the
previous year, or slightly below. However, this does not change our bullish
view on DTEKUA Eurobonds, which have solid prospects for appreciating provided
the company resolves its outstanding debt issue in the short term. That should
should trigger its credit rating upgrade.