DTEK Energy temporarily shuts mines, aims to restructure debt in two months

Ukraine’s leading coal and power company DTEK Energy
(DTEKUA) has decided to halt temporarily as of Apr. 20 its coal mining operations
at Pavlohrad Coal, its biggest and only operational coal company, DTEK Group
CEO Maxim Tymchenko told an online press briefing on Apr. 14. He said that such
a measure is needed to save costs amid the tough situation on the energy and
coal markets in Ukraine. Recall, in late March, DTEK Energy reported on the closure of two smaller coal mining assets.

Pavlohrad Coal is Ukraine’s biggest producer of steam
coal. In 2019, it mined 18.2 mmt of ROM steam coal, or 73% of Ukraine’s total.

Meanwhile, DTEK Energy expects to complete its debt
restructuring in 1.5-2 months, Tymchenko said on Apr. 14. He also said that
DTEK Renewables (DTEREN), an asset of DTEK Group, is not going to initiate debt
restructuring talks, providing there will be no radical changes in the
regulation of renewable energy.

Alexander Paraschiy: The
consumption of hard steam coal by DTEK Energy’s thermal power plants fell 31%
yoy in 1Q20. In March, the decline was 27% m/m and 36% yoy, which is a
consequence of reduced demand for electricity due to the coronavirus lockdown
and a seasonal increase in the supply of renewable energy. In the first two
weeks of April, consumption dropped further by about 15% m/m. That statistics
show that a temporary shutdown of coal mining by DTEK is a reasonable solution.

For the future, DTEK will likely revise its coal
mining plans and not reopen its smaller mines, for cost-cutting purposes. It
seems like the situation on the energy market won’t be beneficial for DTEK’s
thermal power plants in the short-term future. Meanwhile, we look forward to
seeing more information from DTEK Energy on the process of negotiations with
its creditors, as well as its outlook on operations and the regulatory
environment.