DTEK Energy decreases coal mining 16% in 2020, gets rid of state-leased mine

Ukraine’s leading coal and power producer DTEK Energy
(DTEKUA) mined 18.9 mmt of ROM coal in 2020, Concorde Capital calculated based
on sector-wide data provided by Ukraine’s Energy Ministry. This is 15.7% less
yoy and 4.0% short of the holding’s initial plan. In December alone, the
holding produced 1.6 mmt of ROM coal, which is 20.5% less yoy and 1.4% more m/m
(on daily average basis).

In other news, DTEK reported on Feb. 8 that it had
finished transferring Dobropillia Coal mine under the government control on
Jan. 26. As part of the deal, DTEK Energy repaid in full its lease arrears to
the government in the amount of UAH 231 mln, as well as sold to the newly
created state company all the mining equipment that had been purchased and
installed at the mine by DTEK. DTEK Energy has been leasing the mine from the
state since 2010. Last year, the mine produced 2.34 mmt of ROM coal, or 12% of
DTEKs total.

Alexander Paraschiy: With
termination of the lease of Dobropillia Coal, DTEK’s coal mining will continue
to decline, so the holding will not be self-sufficient in hard steam coal, at
least this year. At the same time, divestment of Dobropillia will allow the
holding to save on working capital (especially for the season of low demand for
coal) and focus on the development of its own coal assets.

DTEK’s decline in coal mining last year (the
holding’s share in steam coal mining in Ukraine is close to 90%), coupled with
the recent increase in demand for power due to low temperatures, has resulted
in a risky situation in Ukraine’s energy sector. In particular, as of the
morning of Feb. 10, six power plants of DTEK Energy that are designed to burn
hard steam coal have got coal stockpiles only enough to operate during 33 to 57
hours, based on Energy Ministry data. In addition to creating risks for the
stability of the energy system, low stockpiles limit the ability of DTEK power
plants to take advantage of producing and selling energy at peak prices in
February.