DTEK Energy EBITDA rises 11% in 2018

EBITDA at Ukraine’s leading coal power holding DTEK
Energy (DTEKUA) rose 10.6% yoy to UAH 26.63 bln (USD 979 mln) in 2018, according
to its presentation released on Apr. 19. Its EBITDA from continued operations
amounted to UAH 24.89 bln (USD 915 mln), which is also 10.6% higher yoy. The
company’s revenue of UAH 90.79 bln was in line with a preliminary report published on Mar. 4,
while its bottom line of UAH 4.84 bln was slightly lower than preliminary
reported (UAH 5.20 bln).

DTEK Energy reported it reduced its debt portfolio by
9.3% yoy to USD 2.01 bln as of end-2018. Of its total debt amount, the company
has yet to complete restructuring on USD 0.11 bln. Most of the company’s debt
matures in 2023 (USD 1.10 bln) and 2024 (USD 0.70 bln).

Alexander Paraschiy: The
company’s EBITDA turned out to be better than we estimated, based on the
company’s preliminary report (UAH 25.0 bln) and better than upper bound of our forecast (UAH 26.0 bln).
The start of this year looks positive for DTEK Energy as prices of electricity sold
by Ukrainian thermal power plants to the wholesale market were almost 10%
higher in 1Q19. That should enable DTEK to enhance its operating profit, at
least in 1H19.

The second half of the year, however, could be more
challenging. The planned July launch of a deregulated wholesale market (which
should benefit DTEK) is very likely to be postponed, while the existing pricing
of electricity supplied by DTEK’s thermal power plants (under the so-called
Rotterdam Plus approach of coal pricing, which benefits
DTEK) could be cancelled under the new president. All in all, we remain neutral
on DTEKUA Eurobonds and continue to consider the company as most exposed to
political risks in the Ukrainian Eurobond universe.