DTEK: Operating results show fraction of holding

EK (DTEKUA) reported a 19% yoy increase in coal mining in 2011 to 22.9 mmt, and 7% yoy growth in electricity production to 33.0 TWh in an operations update released yesterday. Growth in mining output was attributed mainly to the consolidation of the Dobropolyeugol mine in 2011, while the power production figures are organic and include only Vostokenergo and Dniproenergo. The company also reported 6% yoy growth in power purchases from the wholesale market for local market resale to 14.0 TWh and 4.2x yoy growth in power export to 5.1 TWh.

Key DTEK operating data

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                                            2011 reported       2011E      consolidated*
                                                units  yoy    units  yoy      % of Ukraine
———————————————————————
Steam coal mining, mmt          22.9  19%     35.0  82%           61%
Electricity production, TWh       33.0   7%     55.3  80%           29%
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* Including new acquisitions in Dec. 2011 – Jan. 2012 (Zakhidenergo, Kyivenergo, Sverdlovantracit, Rovenkiantracit)
Source: DTEK, Concorde Capital estimates

Alexander Paraschiy: DTEK’s 2011 operating results do not tell the truth about the holding’s size as over the last two months DTEK has increased its business by more than 50% in both its coal and electricity segments. In December 2011 – January 2012 alone, the company consolidated controlling stakes in electricity generator Zakhidenergo (ZAEN UK), integrated utility Kyivenergo (KIEN UK) and electricity distributor Donetskonlenergo (DOON UK), and assumed operating control over the two largest state mines, Rovenkiantracit and Sverdlovantracit. With these new assets likely to be consolidated in 2012, the holding is set show a 1.6–2.0x increase in electricity output, electricity distribution and coal production in 2012.