DTEK power generation rises 8% yoy in 1Q18

Ukraine’s leading coal and power holding DTEK Energy
(DTEKUA) generated 11.12 TWh of electricity in 1Q18, Concorde Capital
calculated based on sector-wide data provided by the Energy Ministry. This was
an 8.1% yoy gain (on a like-to-like basis), but falling short of the ministry’s
quarterly plan by 3.1%. DTEK’s thermal power units burning hard steam coal
boosted their power generation 28% yoy to 8.17 TWh, while generation at units
burning scarce anthracite coal plunged 40% yoy to 1.49 TWh. DTEK Energy heat
and power plants generated 1.46 TWh in 1Q18, or 2.8% more yoy.

In March alone, DTEK Energy’s power plants generated
3.71 TWh of electricity, which is 41.3% more yoy (on a like-to-like basis) and
6.9% higher than February.

All Ukrainian thermal power plants generated 13.19 TWh
in 1Q18, or 0.7% above plan, mostly due to the overperformance of power plants
of state company Centrenergo (CEEN UK) and private company Donbasenergo (DOEN
UK). Total power generation in Ukraine increased 3.9% yoy to 43.10 TWh in 1Q18,
or 3.0% above the plan.

Alexander Paraschiy: DTEK’s
March power generation surge was the result of abnormally cold weather, which
inflated demand for electricity. Another factor explaining boosted monthly
output was the low comparison base: in March 2017, DTEK’s power plants suffered
from interrupted supply of anthracite coal from the occupied territories of
Donbas due to a blockade of railway connections as of mid-February and a trade
blockade imposed by the state that month.

Despite the spectacular March results, we continue
to expect that DTEK’s power plants will produce the same amount of power this
year as in 2017. Also, we expect that DTEK Energy’s consolidated EBITDA will be
weaker yoy in 2018. We remain neutral on DTEKUA Eurobonds.