28 October 2011
DTEK (DTEKUA), Ukraine’s largest non-state coal and power producer, announced it opened a USD 500 mln credit line from Sberbank, nominated in Russian rubles. These funds will primarily be used to finance M&A projects in coal and energy, DTEK’s CFO Vsevolod Starukhin said yesterday in a press release.Yegor Samusenko: This credit facility is among the largest raised by DTEK and is equal in size to its only outstanding bond issue. We believe DTEK will use the line to finance both coal and power asset acquisitions from the state: DTEK is bidding for a 45% stake in Zakhidenergo (ZAEN UK), 25% stake in Kyivenergo (KIEN UK), and 49-year concession rights for Rovenkiantracit and Sverdlovantracit coal mines. We believe there will be low competition for all these companies, implying DTEK’s M&A financing needs close to the starting prices or USD 823 mln. Within the last month, DTEK has opened three credit lines totaling USD 971 mln. It had cash of USD 249 mln on the books at the end of 1H11. With another USD 200 mln in cash from third quarter operating activities, according to our estimates, we believe the company has sufficient cash for the anticipated acquisitions. We note, however, that DTEK has not opted to issue another Eurobond, though this option has been discussed by management in the past. We interpret this as a signal that DTEK is not satisfied with the cost of the public debt (coupon of 9.5%, current yield spread of 9.2%/9.5%) and is not likely to tap the market with further issues in the nearest future.