DTEK Energy coal mining falls 4% in 5M21

Ukraine’s leading coal and power holding DTEK Energy
(DTEKUA) produced 6.72 mmt of ROM coal in 5M21, Concorde Capital calculated
based on sector-wide data provided by Energy Ministry. This is a 4.2% decline
yoy. On a like-to-like basis (adjusting for the mine that DTEK discontinued
operating), the holding’s mining increased 6.8% yoy in 5M21. Recall, in
January, DTEK Energy terminated a long-term lease agreement regarding
Dobropillia Coal and transferred all its assets under government control.

In May alone, DTEK Energy mined 1.23 mmt of coal,
which is 60% more yoy (and 64% more yoy on a like-to-like basis), but 5.7% less
m/m (on a daily average basis).

Total ROM coal output in Ukraine increased 16.8% yoy
in 5M21 to 12.79 mmt, which is 16.4% above the ministry’s plan. State mines
surged their output by 132% yoy to 2.58 mmt (and 29.4% more yoy on a
like-to-like basis).

Alexander Paraschiy: The yoy
surge in May’s output by DTEK is due to the low comparison base as the holding
had to stop operating some of its mines in April-May 2020 due to low
third-party demand for coal. This year, after DTEK spun-off Dobropillia, its
coal mining has become smoother, allowing the holding to optimize coal
production costs.

May is the second month in row when DTEK’s output of
ready to use coal (about 0.90 mmt) exceeds hard coal consumption by DTEK’s
power plants (0.70 mmt, based on the ministry’s data). The company is likely to
keep coal mining at the current level in the coming months in order to
accumulate coal stockpiles for the next heating season. We continue to expect
DTEK Energy’s 2021 coal mining will reach 17.5 mmt, which will be 6% less yoy.