DTEK GenCos repeat weak P&L in 1Q16

Power GenCos DTEK-Zakhidenergo and DTEK-Dniproenergo continued to produce negative EBITDA as evidenced in their 1Q16 quarterly results reported on April 25.

In particular, Zakhidenergo (ZAEN UK) reported negative UAH 727 mln in EBITDA (deeper in red by 20% yoy) on net revenue of UAH 3,088 mln (down 18% yoy, on a 28% yoy decrease in power output). Dniproenergo (DNEN UK) posted UAH 98 mln in negative EBITDA, which was an improvement from last year’s negative result of UAH 862 mln. Dniproenergo’s revenue increased 33% yoy to UAH 2,390 mln in 1Q16, which was mainly a result of a 41% yoy increase in its power price (to UAH 982/MWh).

DTEK’s biggest miner, Pavlohradvuhillia, reported a 14% yoy increase in net revenue to UAH 5,606 mln in 1Q16, on a 10% yoy increase in coal sales to 3.86 mmt. Its EBITDA decreased 20% yoy to UAH 559 mln. Net of undisclosed “other operating costs,” its EBITDA amounted to UAH 1,669 mln, thus having covered the operating losses of DTEK’s two GenCos.

Alexander Paraschiy: It’s hard to read the financial results of DTEK’s GenCos without tearing up, though it’s worth keeping in mind that the companies’ reporting is meaningless, as it includes some inflated coal costs. Neither are the results meaningful for Pavlohradvuhillia, which is reporting billions in other operating losses per quarter. All this suggests DTEK’s profit centers are located somewhere outside these public joint stock companies.

With average electricity prices generated by DTEK having increased by about 24% yoy in 1Q16, we estimate the holding was able to slightly improve its operating profit last quarter. It’s also set to report better results in 2Q16, when an increase in the retail electricity price for households since March will secure higher selling power prices for producers like DTEK.