DTEK generation volumes, power price rise in 1Q17

Ukraine’s leading coal and power holding, DTEK Energy (DTEKUA), increased electricity production 4.8% yoy to 10.28 TWh in 1Q17, Concorde Capital estimated based on sector-wide data provided by Energobiznes. Its eight thermal power plants located on the government-controlled territory of Ukraine generated 8.86 TWh of electricity, which is 5.3% more yoy. The increase was only due to higher electricity production by its power plants burning hard steam coal (+9.0% yoy to 6.69 TWh), while the units burning scarce anthracitic coal decreased generation 3.2% yoy (to 2.47 TWh). The average price of the electricity sold by DTEK’s thermal power plants amounted to UAH 1466/MWh in 1Q17, we caclulate, which is 54% more yoy.

In March 2017, DTEK Energy generated 2.62 TWh of electricity, which is -16% yoy and -23% m/m. The decline was caused by decreases in the output of hard-coal-burning plants (-11% yoy and -22% m/m) and anthracite-burning plants (-35% yoy and -36% m/m).

Alexander Paraschiy: It seems that first quarter of 2017 will be pretty strong for DTEK in terms of financial performance, even though the holding lost the ability to deliver its coal from the occupied regions of Donbas in the middle of the quarter. So far, it looks like DTEK’s ability to generate solid profits will remain in 2Q17 as well, even though its power generation volume will significantly decrease due to the idling of some anthracite-burning power plants. The average price of electricity of DTEK’s power plants in April was close to UAH 1700/MWh, we estimate, which is more than in 1Q17. We keep our positive view on DTEKUA Eurobond, which trades now at slightly below 90% of par.