DTEK power generation falls 2% in 2017

Ukraine’s leading coal and power holding DTEK Energy
(DTEKUA) generated 39.86 TWh of electricity in 2017, a 1.6% yoy decrease,
according to nationwide data provided by the Energy Ministry on Jan. 31. Its
coal-fired thermal power plants (TPPs) generated 36.33 TWh in 2017, or 1.9%
less yoy, with the decline occurring largely in the output of power units
burning scarce anthracite coal (down 42% yoy to 6.41 TWh). At the same time,
its power units burning hard steam coal boosted their generation 15% yoy to
29.93 TWh in 2017.

DTEK’s combined heat & power plants improved power
production 2.6% yoy to 3.53 TWh.

In 4Q17 alone, DTEK Energy generated 11.22 TWh of
electricity, or 1.7% less yoy (but up 5.6% qoq), with output of
anthracite-burning units falling 41% yoy.

Total power generation in Ukraine increased 0.5% yoy
to 150.33 TWh in 2017, while generation by TPPs fell 9.9% yoy to 44.96 TWh.
DTEK Energy’s share in power generation by TPPs reached 81% in 2017, rising
from 74% a year before. DTEK Energy’s share in Ukraine’s total power generation
remained at 27% in 2017.

Alexander Paraschiy: DTEK’s 2017
results are slightly below our estimate of flat yoy power production, which we
attribute to an unusually warm December that limited power demand in Ukraine.
With 2017’s annual production and power rate results in hand, we estimate DTEK
Energy generated about UAH 18.3 bln in EBITDA in 2017 (about USD 700 mln, flat
yoy in U.S. dollar terms), which is slightly more than our previous estimate of UAH 17.7-18.0 bln.

The official power balance for 2018, prepared by the
Energy Ministry, foresees a 8.6% yoy rise in power generation by Ukrainian
TPPs, which implies DTEK will show comparable growth in its output. Most likely,
the holding’s EBITDA will remain flat yoy in USD terms in 2018. So far, we
retain our optimistic view on DTEKUA bonds.