DTEK Energy decreases coal mining 13% in 9M21

Ukraine’s leading coal and power producer DTEK Energy
(DTEKUA) mined 12.31 mmt of ROM coal in 9M21, Concorde Capital calculated based
on sector-wide data provided by Energy Ministry. This is 13.1% less yoy and
3.8% less yoy on a like-to-like basis (adjusting for the mine that DTEK
discontinued operating). Recall, in January, DTEK Energy terminated a long-term
lease agreement regarding Dobropillia Coal and transferred all its assets under
government control.

In September alone, the company produced 1.33 mmt of
ROM coal, which is 11.9% more than in August (on daily average basis) and 25.1%
less yoy (11.5% less yoy on like-to-like basis).

DTEK Energy reported on Oct. 5 that its annual plan is
for mining of 17 mmt of ROM coal. To achieve this result, the company is
planning to launch eight new longwalls at its mines. It commissioned 22 new
longwalls in 9M21, including one in September.

Alexander Paraschiy: The
company’s annual plan assumes it will increase coal mining in the last three
months of 2021 to 51 kt per day, which is 15% more than in September and in
9M21, and 18% more yoy. The plan looks ambitious, but not impossible, providing
new longwalls will be more productive.

Meanwhile, DTEK Energy’s 9M21 mining results do not
look encouraging as it means the company produced only 90% of its internal use
of hard steam coal. Moreover, its self-sufficiency in own hard steam coal fell
to 80% in 3Q21, meaning the holding will have to use more imported coal at
inflated prices. Such cost increases, however, seems to have been more than
compensated by better power prices in Ukraine: baseload prices increased 24%
qoq and 29% yoy in Ukraine in 3Q21. That said, we remain optimistic about the
company’s significant improvement of fundamentals in 2H21 and are bullish on
DTEKUA bonds.