DTEK Group releases 1Q17 operating results
8 June 2017
Ukraine’s leading coal and utility holding DTEK Group, which encompasses Eurobond issuer DTEK Energy (DTEKUA) and several other assets, released its 1Q17 production report on June 7. The holding mined 8.36 mmt of coal in 1Q17 (16% yoy growth), sold 10.07 TWh of electricity generated (3% yoy growth) and distributed 11.98 TWh of electricity in its grids (-1% yoy).
DTEK Energy, which does not include the Russian mines of DTEK Group any more, mined 7.76 mmt of coal in 1Q17 (14% yoy growth). Its generation division (which does not include renewables) sold 9.90 TWh of electricity in 1Q17 (3% yoy growth). This amount includes about 0.57 TWh of production by the Zuyivska power plant, control of which DTEK has lost since mid-March. DTEK Energy’s thermal power plants located on the government-controlled territory of Ukraine sold 8.05 TWh of electricity in 1Q17 (5% yoy growth) at average rate of UAH 1,458/MWh (53% yoy growth, we estimate).
Also, DTEK Group reported on the production of 418 mcm of natural gas in 1Q17 (10% yoy growth). Its gas production business is not a part of DTEK Energy.
Alexander Paraschiy: Of the above results, the most important numbers for DTEK Energy are the results of its power generation division. As we can see, power production by DTEK was still increasing in 1Q17 despite the state-imposed trade blockade and coal deficit that emerged in late February. Instead, the trade blockade prompted the power sector regulator to raise achieved electricity prices for thermal power plants, which resulted in higher DTEK profitability in 1Q17.
The 2Q17 production results will be much worse for DTEK, mainly because its has lost one power plant and two of its eight remaining thermal power plants are idle due to a lack of coal since the beginning of the quarter. At the same time, the decline in power generation will be partially compensated by slightly higher electricity prices (in April and May, the achieved prices of DTEK power plants were close to UAH 1,650-1,700/MWh, or 10-16% higher than in 1Q17). So far, we remain bullish on DTEKUA bonds.
