28 October 2014
Power GenCo DTEK-Zakhidenergo (ZAEN UK) reported a 10% yoy increase in its revenue (to UAH 3.15 bln) and 27% yoy increase in its EBITDA (to UAH 363 mln) in 3Q14, according to its quarterly report released on Oct. 24. Its bottom line worsened 6% yoy to UAH 106 mln, mainly on higher financial costs. Dniproenergo (DNEN UK), another power generation company controlled by the DTEK holding (DTEKUA), reported weaker results for 3Q14 as its revenue decreased 3% yoy, EBITDA fell 40% yoy and bottom line dropped 59% yoy in the quarter.
Alexander Paraschiy: The two companies’ different financial performance reflects upcoming issues with coal supplies at their power stations. In particular, two out of the three power stations of Dniproenergo are designed to burn anthracitic coal, which is currently a scarce resource in Ukraine, as all the coal mines producing anthracite are located on the territory of Ukraine that is occupied by Russian-terrorist forces.
On the other hand, all of Zakhidenergo‘s power stations are designed to burn the so called “gas coal,” which is predominantly mined on the territory of Ukraine controlled by the government. Given that the Ukrainian power sector regulator has increased the electricity rates for power plants consuming anthracitic coal as of October 2014 to enable them to import coal (at the expense of other power generators), we expect the 4Q14 operating profit of both Zakhidenergo and Dniproenergo to fall. The EBITDA of DTEK’s power-generating division, therefore, is very likely to significantly worsen in the second half of 2014