DTEK’s Luhanska Power Plant again stops receiving coal

Luhanska Power Plant of DTEK Energy (DTEKUA) has not
received any anthracite coal on Nov. 12-13 since getting 2.36 kt in supplies on Nov. 11,
Concorde Capital has learned from daily information published by Ukraine’s
Energy Ministry. The Nov. 11 supply was the first delivery of coal since its
interruption as of Oct. 11. The interruption was initiated by the Russian side,
which blocked coal supplies from the Russia-based mine of DTEK via the only
available railway connection to the plant.

Coal stockpiles at the plant were 0.03 kt as of
end-Nov. 13, compared to the planned amount of stockpiles of 132.3 kt. Recall,
Luhanska Power Plant had to switch last week from burning
coal to natural gas, which is much more expensive. The Luhanska plant’s current
electricity price does not cover the costs of burning gas. On Nov. 12, DTEK
reported that coal deliveries were “partially restored.”

Alexander Paraschiy: As we noted, by burning natural gas at unchanged power rates,
Luhanska will generate USD 9-10 mln in losses monthly, which will be painful
for DTEK Energy. At this stage, it is hard to estimate how long the blockade of
coal supplies by Russia will last, as the clear economic gains for the Russian
side could be undermined by Kremlin intentions to pressure DTEK’s owner Rinat
Akhmetov to support Russian-oriented political forces. We still believe that
the blockade will be short-lived, but in the alternative case, DTEK will get an
adequate price for power produced by the Luhanska plant no later than January.
All in all, we remain neutral on DTEKUA Eurobonds.