DTEK Energy EBITDA improves in 1H21

The EBITDA of Ukraine’s leading coal and power holding
DTEK Energy (DTEKUA) reached USD 109 mln (about UAH 3.03 bln) in 1H21,
according to the company’s presentation released on Sept. 17. This is a 1% yoy
decline in USD terms. Meanwhile, in UAH terms, the company’s EBITDA increased
by about 8% yoy to UAH 3.15 bln, Concorde Capital estimated based on the
company’s financial report. Key factors that led to the increase of EBITDA were
higher power output and better achieved electricity price, which allowed the
company to improve its revenue. DTEK Energy’s net revenue increased 15% yoy to
UAH 23.51 bln. Meanwhile, its inflated coal purchase costs (up 3.9x yoy to UAH
2.57 bln) and increased natural gas prices affected its margins (EBITDA margin
decreased to 12.9% in 1H21, from 14.5% a year before, according to the
company’s presentation).

DTEK Energy’s 1H21 operating loss improved to UAH 0.67
bln (from UAH 7.63 bln a year before) and net loss improved to UAH 0.71 bln
(from UAH 15.32 bln a year before). Its cash from operations before working
capital changes decreased 20% yoy to UAH 2.39 bln, while net cash generated
from operations improved 30% yoy to UAH 1.46 bln. Its use of cash for PP&E
purchase increased 64% yoy to UAH 1.98 bln.

The company’s total debt as of end-June amounted to
USD 1,715 mln, of which USD 1,645 mln is obligations on Eurobonds. The company
is yet to restructure its debt of USD 13 mln par value.

At its conference call the same day, DTEK Energy’s
management stated that it is going to import about 1.6 mmt of coal in 2H21 to
prepare for the upcoming heating season (coal import was 1.2 mmt in 1H21 and
0.5 mmt in 2H20). Its own production of consumable coal is expected at 7.0 mmt
in 2H21 (up from 6.0 mmt in 1H21). The management said the company’s TPPs are
enjoying better power pricing now (about UAH 1.7/kWh in September, up from
average UAH 1.42/kWh in 1H21).

Alexander Paraschiy: DTEK
Energy’s results look better than can be concluded from its abridged results published in August.
We continue to expect the company to be able to improve its P&L in 2H21 as
better electricity prices on the market should offset expected inflation of power
generation costs related to the increased use of purchased coal. That said, we
see room for DTEKUA bond prices to improve.