Ukraine electricity prices for TPPs reach record high in early March

The average achieved price of electricity supplied by all Ukrainian thermal power plants (TPPs) reached UAH 2,095/MWh (USD 78/MWh) in the first ten days of March, the operator of the wholesale electricity market reported on March 14. This is a record-high level and a 54% increase compared to the first ten days of February. The data represents the average price of 12 coal-fired TPPs, of which eight are controlled by DTEK Energy (DTEKUA).

The average price of electricity produced by TPPs was UAH 1,240/MWh (USD 48/MWh) in 2016, and was planned to be about UAH 1,300/MWh in 2017.

Alexander Paraschiy: The news is definitely encouraging for DTEK Energy, which is likely to see a much higher average achieved power price than was initially planned for 2017. As a fly in the ointment, the price hike was performed to compensate for a significant decline in electricity generation by TPPs. In particular, all Ukrainian TPPs sold to the wholesale market operator 709 GWh of electricity in the first ten days of March, which is a 50% decline m/m. The recent decline is a natural result of the blockade of coal supplies from the occupied regions of Ukraine and respective measures by the government to limit the capacity load of TPPs.

All in all, we see the trade blockade is already reshaping in Ukraine’s electricity sector. For DTEK, it will mean its power plants will have higher achieved electricity prices in 2017 than initially planned (and therefore higher profitability), but also smaller electricity output. We still expect that the total effect of these changes will cause DTEK Energy’s EBITDA to decline this year, compared to 2016. We remain cautiously neutral on DTEKUA Eurobonds.