DTEK Energy power generation falls 5% in 2018

Ukraine’s leading coal and power holding DTEK Energy
(DTEKUA) generated 37.94 TWh of electricity in 2018, Concorde Capital
calculated based on sector-wide data provided by the Energy Ministry. This is a
4.8% decrease yoy on like-to-like basis, but 0.6% above the ministry’s plan.

Total power generation in Ukraine increased 2.7% yoy
to 154.41 TWh, with DTEK Energy’s share being 24.6%.

Power generation at DTEK’s thermal power plants declined
1.9% yoy to 35.65 TWh in 2018, as coal consumption fell 2.1% yoy to 17.97 mmt.
In particular, the holding reduced its consumption of anthracite coal (which is
not mined in Ukraine any more) by 31% yoy to 2.10 mmt, and raised its
consumption of hard steam coal (produced by DTEK Energy’s mines) by 3.6% yoy to
15.88 mmt. Power generation at DTEK’s combined heat and power plants fell 35%
yoy to 2.29 TWh, which is mostly the result of the discontinued operation of
two large Kyiv-based plants by DTEK’s Kyivenergo since August 2018.

In December alone, DTEK Energy generated 4.16 TWh of
electricity, which is 14% more yoy.

Alexander Paraschiy: The
holding’s 2018 power generation was 2.5% above our forecast. According to the
Energy Ministry’s initial plan for 2019, issued in October, DTEK Energy is
going to generate 38.0 TWh of electricity this year. This would be a 5.5% yoy
increase, excluding Kyivenergo production.

Most likely, the holding’s actual output will be
slightly smaller than planned in 2019, implying 2-3% growth yoy. DTEK Energy
will continue to reduce its consumption of imported anthracite coal and
continue to convert its power units to burning hard steam coal this year. This,
as well as the possible introduction of a deregulated electricity market as of
July, should improve the company’s EBITDA in 2019, up from about UAH 26.0 bln
in 2018.