DTEK Energy power generation falls 2% yoy in January

Ukraine’s leading coal and power holding DTEK Energy
(DTEKUA) generated 3.85 TWh of electricity in January, Concorde Capital
calculated based on sector-wide data reported by the Energy Ministry. This is
2.4% less yoy. However, on a like-to-like basis – excluding the generation data
of Kyiv-based power plants (which DTEK has not controlled since August 2018) –
the holding has boosted its power generation 10.5% yoy.

DTEK’s thermal power plants (TPPs) produced  3.80
TWh of electricity in January, which is 10.8% more yoy, with all eight plants
demonstrating yoy growth in generation. The key contributors to the growth were
Kurakhivska TPP (up 18.7% yoy) located in eastern Ukraine and Ladyzhynska TPP
(up 11.0% yoy) located in central Ukraine. DTEK’s TPPs increased consumption of
hard steam coal by 16.0% yoy to 1.73 mmt in January, while their consumption of
anthracite coal dropped 19.5% yoy to 0.21 mmt, which is a result of the plants’
gradual conversion from burning scarce anthracite.

Ukraine’s total production of electricity rose 4.0%
yoy in January to 15.21 TWh, while all TPPs combined boosted generation 4.1%
yoy to 4.95 TWh.

Alexander Paraschiy: January’s
cold weather created high demand for electricity in Ukraine, boosted production
growth, and led to power plants outperforming the Energy Ministry’s production
plans. In particular, DTEK Energy outperformed the state’s January plan for it
by 8.6%.

These developments lead us to upgrade our forecast of
DTEK Energy’s power generation in 2019 to 3%-4% yoy growth from 2%-3% estimated
previously. We remain neutral on DTEKUA Eurobonds, keeping in mind that the
company is among the most sensitive to politics (i.e. elections) in Ukraine’s
fixed income universe.