DTEK raises power and coal exports, decreases power generation in 1H13

Обзоры по компаниям и отраслям 06.09.2013 Ukraine’s leading coal and power holding DTEK (DTEKUA) reported flat yoy production of coal in 1H13 at 20.0 mmt. Its power generation declined 5.2% yoy to 24.3 TWh, while the amount of power bought for distribution increased 29% yoy to 30.0 TWh. Its export activity showed spectacular growth in 1H13 with coal exports rising 43% yoy to 2.1 mmt and power exports increasing 15% yoy to 4.9 TWh. The holding announced in its September 5 operating update that it will release 1H13 financials on September 17. Alexander Paraschiy: The company’s operating results are of no surprise, with growth in its key segment again owing to non-organic factors. What surprised us positively was the growth in coal exports. The higher export revenue should be welcomed by holders of DTEK’s USD-denominated bonds. DTEK’s coal output remained flat yoy in 1H13 only because of the consolidation of one Ukrainian and three Russian mines this year. DTEK’s organic coal output decreased 3% yoy, by our estimates. The result is still much better than Ukraine’s coal sector statistics: -6.3% yoy in 1H13. The reason for the increase in power distribution also has non-organic roots. The decline in DTEK’s power output is a consequence of an overall decline in domestic power demand (-3.6% yoy in 1H13) and the partial offsetting of thermal production by cheaper hydro generation. Among DTEK’s generating assets, the steepest decline in output was demonstrated by Kyivenergo (KIEN UK, -30% yoy in 1H13) and Dniproenergo (DNEN UK, -11% yoy). The biggest mover was Zakhidenergo (ZAEN UK), which improved output 5% yoy on increased demand for electricity in EU countries (+26% yoy to 2.8 TWh in 1H13). EU countries increased purchases of Ukrainian electricity since 2Q12, after DTEK received an opportunity to buy it from the wholesale market for export at a good discount (refer to our news from April 4, 2012). The latter was also a reason for DTEK’s power export growth. Based on the provided results, we expect DTEK will report UAH 41.1 bln net revenue in 1H13 (+7% yoy), EBITDA of UAH 8.8 bln (+12% yoy) and net income of UAH 2.5 bln (+3% yoy).