DTEK TPPs enjoy record-high electricity rate in early October

The average price of electricity supplied by Ukraine’s thermal power plants (TPPs) amounted to UAH 1.63/kWh in Oct. 1-10, Concorde Capital learned from the regular reports of Energorynok, the operator of Ukraine’s wholesale electricity market. This is 29% more than the price recorded for September 2016 and 69% more than in September and October 2015. Of 12 TPPs operational in Ukraine (outside the occupied territory), eight are controlled by the biggest utility holding DTEK Energy (DTEKUA).

Alexander Paraschiy: The high rate of electricity is good not only for the free cash flow of DTEK Energy, but also should add some optimism to its bondholders. According to a DTEK press release dated Oct. 4, the holding will pay in late October in cash an additional 5% of the coupons accrued in Sept. 1–Oct. 28 (in excess of the earlier agreed upon 10%) in case the standstill is not terminated, and 5% more in case it enjoys favorable electricity rates. In particular, the latter payment will occur if the average electricity rate for all Ukrainian TPPs will be more than UAH 1.14/kWh (net of special surcharges) for June-October 2016. To make it happen, the average rate of electricity for Oct 11-31 should be above UAH 1.15/kWh, we estimate, – which now looks highly likely. This slight expected increase in the coupon payment, however, does not change our neutral view on DTEKUA notes.