DTEK grows 1.6-2.6 times yoy in 1Q12

DTEK (DTEKUA), the integrated Ukrainian energy holding, reported a solid increase in operations in 1Q12, fuelled mainly by non-organic growth. Coal mining grew 1.8x yoy to 10.2 mmt on consolidation of two state-controlled mining assets taken under concession agreements in late 2011. Consequently, DTEK’s share in Ukraine’s total steam coal output reached 67%. Electricity output reached 14.8 TWh (up 1.6x yoy) due to the consolidation of Zakhidenergo (ZAEN UK) and Kyivenergo (KIEN UK). DTEK’s share in Ukraine’s fossil-fuel power output reached 57%, and share of aggregate power output in Ukraine reached 28% in 1Q12. The holding’s power distribution segment, which added Kyivenergo and Donteskoblenergo (DOON UK), grew in size 2.6x yoy.

Alexander Paraschiy: We expect the consolidated revenue of DTEK will increase 1.8x yoy in 1Q12, while its bottom line will see a much smaller bump, mainly being dragged down by the acquired electricity distributors. This is not the end of non-organic growth for DTEK – we expect another 1.9x qoq (and about 5x yoy) growth in the company’s power distribution segment in 2Q12, after it starts consolidating newly acquired Dniprooblenergo (DNON UK) and Krymenergo (KREN UK). Again, the effect of the new acquisitions on the company’s bottom line will be rather limited. Instead, we expect the key profit-driving segment for DTEK will be coal mining and trading, where the holding has undisputable market power.