DTEK Energy coal mining rises 5% in 2018

Ukraine’s leading coal and power holding DTEK Energy
(DTEKUA) produced 24.13 mmt of hard steam coal in Ukraine in 2018, Concorde Capital
learned from sector-wide data provided by the Energy Ministry on Jan. 18. This
is a 5.3% yoy increase (on  a like-to-like basis) but 0.7% below the
holding’s updated mining plan for the year, as well as slightly below
Concorde’s forecasted range of 24.2-24.3 mmt. The holding’s biggest mine
Pavlohradcoal produced 20.01 mmt of coal in 2017, which is 0.6% less yoy, while
its other two mining companies, combined, increased their output 49% yoy to
4.12 mmt.

Ukraine’s total mining of steam coal amounted to 27.48
mmt in 2018 (2.2% less yoy), meaning DTEK’s share in total production increased
to 88% last year from 82% in 2017.

In December alone, DTEK Energy produced 2.10 mmt of
steam coal, which is 4.2% less m/m (in average daily terms), but 0.7% better than
the ministry’s plan.

Recall, DTEK lost three of its six coal companies in
March 2017, all of which were situated on the occupied territory of Donbas
where anthracite and lean coal are mined. DTEK now controls three coal mining
companies located in the Donetsk and Dnipropetrovsk regions that produce hard
steam coal.

Alexander Paraschiy: With such coal output, DTEK Energy was self-sufficient with hard steam
coal in 2018. To remain self-sufficient this year, the holding should produce
24.5 mmt of coal (up 1.4% yoy), we estimate, which looks like an achievable
result. We maintain our neutral view on DTEKUA Eurobonds.