DTEK Energy revenue increases 15%, EBITDA falls 30% in 1H21

Ukraine’s leading coal and power holding DTEK Energy (DTEKUA)
generated UAH 23.51 bln net revenue in 1H21, according to its report of
abridged financials. The key growth driver was revenue from electricity sold by
thermal power plants, which increased 32% yoy to UAH 16.46 bln, Concorde
Capital estimated. This was the result of a 14% yoy power output increase to
11.56 TWh, and a 15% yoy growth in the average achieved price to UAH 1.42/kWh.

The company’s EBITDA fell 30% yoy to UAH 2.26 bln in 1H21,
Concorde Capital calculated, and the EBITDA margin worsened to 10.1% from 16.6%
a year ago. Its operating cash flow before working capital changes fell 19% yoy
to UAH 2.43 bln. Its net cash from operating activities increased 30% yoy to
UAH 1.46 bln and cash use for the purchase of PP&E jumped 64% yoy to UAH
1.98 bln in 1H21. DTEK Energy’s net debt decreased 28% YTD to UAH 41.52 bln as
of end-June.

The company’s ROM coal mining decreased 4% yoy to 8.36
mmt and the sale of coal and concentratce advanced 1% yoy to 5.95 mmt in 1H21.
Coal imports for its own thermal power plants increased 3.7x yoy to 1.21 mmt.

In 2Q21 alone, DTEK Energy mined 3.98 mmt of ROM coal
(up 32% yoy), sold 2.67 mmt of coal and concentrate (up 22% yoy) and produced
4.19 TWh of electricity (down 16% yoy). Its average achieved electricity price
was UAH 1.44/kWh, which is 23% higher yoy and 1% higher qoq. Its 2Q21 revenue
was UAH 9.09 bln (up 19% yoy and down 37% qoq) and EBITDA was negative UAH 0.07
bln (vs. positive UAH 2.43 bln in 1Q21 and UAH 0.79 bln in 2Q20).

Alexander Paraschiy: The
company’s 2Q21 results bring a lot of surprises, including an increase in the
average achieved electricity price compared to the previous quarter (on the
wholesale market, prices were 1-18% lower qoq, depending on the segment). The
increase of the price DTEK achieved can be only partially explained by the
higher share of power output by its Burshtyn TPP (which sells its power at a
segment where prices are higher). Another surprise is its weak quarterly
EBITDA, which can be only partially explained by increased costs related to
coal imports at high prices.

In any case, the third (and possibly fourth)
quarter are likely to be much better for DTEK Energy, if the recent trend on
the wholesale electricity market continues. In particular, in August, a 60%-80%
m/m increase in prices was observed on the wholesale market, which is partially
explained by increased price caps since the beginning of the month. If the
current prices remain till the end of this year (which is not certain at the
moment), DTEK Energy would be able to significantly improve its EBITDA in 2H21
and show non-declining EBITDA for the full year of 2021. That said, we see room
for DTEKUA bond price increases in the next couple of quarters.