DTEK Energy decreased revenue 38%, EBITDA 42% in 2020

Ukraine’s leading coal and power holding DTEK Energy
generated UAH 47.24 bln net revenue in 2020, according to its abridged
financial report released March 1. This is a 38% yoy decline, which was a
result of decreased production and prices, as we conclude from the company’s
operating update. Namely, DTEK’s supply of generated electricity decreased 16%
yoy (to 23.8 TWh), while achieved electricity prices fell 21% yoy (to UAH
1.30/kWh, net of VAT, duties and balancing market margin). The company’s sale
of raw coal and coal concentrate decreased 17% yoy to 13.1 mmt, as its mining
of ROM coal fell 16% yoy to 18.8 mmt in 2020.

DTEK Energy’s EBITDA reached UAH 9.34 bln in 2020,
Concorde Capital estimated, which is a 42% decline yoy. Below EBITDA, its four
key cost items each exceeding UAH 7 bln (depreciation, losses on financial
instruments impairment, ForEx losses and finance costs) led to UAH 19.13 bln
net losses in 2020, down from a positive bottom line of UAH 1.84 bln a year
before.

The holding’s operating cash flow before working
capital changes declined broadly in line with EBITDA, down 46% yoy to UAH 9.43
bln, while net cash flow from operations decreased 28% yoy to UAH 4.02 bln in
2020. DTEK Energy decreased its capital expenditures 38% yoy to UAH 3.13 bln
last year.

Its total debt increased 32% yoy to UAH 59.57 bln at
the end of 2020 and net debt increased 29% yoy to UAH 57.96 bln. In this way,
the holding’s net debt to EBITDA ratio worsened to 6.2x at the end of 2020,
from 2.8x a year ago. Accounting for DTEK Oil & Gas expected contribution
to DTEK Energy’s debt decline (USD 425 mln), the holding’s net debt to EBITDA
ratio is 4.9x.

Alexander Paraschiy: In line with our estimates, DTEK
Energy’s EBITDA exceeded its guidance of UAH 8 bln, revealed in July. Moreover,
the company’s results imply its 4Q20 EBITDA was the best quarterly result since
the launch of the new wholesale energy market in July 2019, even though coal
and electricity prices were not the highest in the quarter. This suggests DTEK
Energy is efficient in cost optimization and in adjusting to new market rules.
In 2021, we expect further progress in cost optimization as the holding got rid of a large mining asset.
This, as well as some expected improvement in coal and power prices at the
market, allows us to forecast an increase of the holding’s EBITDA this year, as
well as the improvement of its mid-term debt sustainability. Meanwhile, its key
task is to complete the initiated debt restructuring.