Ukraine thermal GenCo production falls 11% yoy in 1Q13

Electricity production at five coal-fired power generation companies (GenCos) declined 10.8% yoy to 19.52 TWh in 1Q13, Interfax reported, citing the Energy Ministry. A nuclear power producer showed a 5.4% yoy decline in output to 23.19 TWh, while hydro power production increased 58.6% yoy to 3.61 TWh. Ukraine’s total power production declined 4.8% yoy to 52.71 TWh in the quarter.

The biggest output decline among power GenCos was demonstrated by Centerenergo (CEEN UK), falling 17% yoy, while another local blue chip, Donbasenergo (DOEN UK), showed the smallest decline at -2.5%.

Alexander Paraschiy: The decrease in electricity production is explained by the warmer winter this year compared to the last year. The warmth and hefty snow and rainfalls (i.e. more water in the rivers) allowed cheap hydro power stations to deliver more electricity at the expense of more expensive thermal power producers (TPPs).

The recent disaster at Centerenergo’s Uglegorsk TPP is likely to change the pattern of power output in the next quarters, shifting growth in electricity output to Uglegorsk’s neighbors, which are the five power stations of Donbasenergo and Skhidenergo.

A 2.4 TWh yoy decline in thermal power output in the quarter caused a decline in steam coal use by power plants by about 1.2 mmt in 1Q13, thus raising the problem of coal oversupply on the domestic market. We estimate the supply of steam coal declined only 0.5 mmt in 1Q13.

While the decline in overall demand for coal from power plants will go on harming the Ukrainian coal market, we see the Uglegorsk disaster contributing to a significant reshaping of two subsegments of steam coal. In particular, demand for gas-grade coal (used at 7 out of 14 power stations, including the Uglegorsk TPP) will fall significantly, creating an enormous surplus. On the other hand, the market for anthracitic/lean coal (used by another 7 Ukrainian TPPs, including three out of five of Uglegorsk’s neighboring stations) will come closer to balance, benefiting the WSE-listed suppliers of this type of coal, Sadovaya (SGR PW) and Coal Energy (CLE PW).