Donbasenergo gets UAH 4.6 bln CapEx-related income approved

Ukraine’s state power regulator (NERC) approved on November 28 an additional surcharge to Donbassenergo’s (DOEN UK) power tariff that will raise additional net revenue of UAH 4,566 mln at consumers’ expense, the Interfax-Ukrayina news agency reported on December 9. The company will receive the surcharge revenue in equal monthly installments (USD 49.63 mln) over 92 months, starting this month. The funds will be used to service loans that the company raised to cover its UAH 6.81 bln project for the reconstruction of power unit #6 at the Slaviansk Thermal Power Plant (as approved by the government on June 5, 2013). The project aims to construct a new power unit in place of the demolished unit #6, with a total capacity of 660 MW with two coal-fired CFB boilers.



Earlier this year, the company received another surcharge at a total value of UAH 1.13 bln, split into equal installments over 70 months. It was approved for by the NERC to finance the reconstruction of its 7th power unit at the same Slaviansk station.



Alexander Paraschiy: Just next year, the company will receive additional revenue from two special markups totaling UAH 786 mln, a sum that exceeds the company’s 2012 EBITDA by more than three times (and it exceeds the amount paid for the privatization of the company’s 60.8% stake at UAH 719 mln). Even if the company’s usual business will not be profit-making, this surcharge will generate (after-tax) profit per share of UAH 24.9, which is close to the current price per share of DOEN (UAH 27.5). As traditionally required by the state budget, companies with at least 25% in state hands (which includes Donbasenergo) should pay at least 30% of their income in dividends. So the company should be a generous dividend payer in 2015.



Meanwhile, record-high dividends are expected from this year’s 30% distribution of profit, as stipulated by the company’s privatization conditions. In 9M13, the company’s EPS was UAH 27.3, and in 4Q13 it will generate UAH 3.1/share in profit just from the two approved surcharges. If the company is not able to hide its profit in 4Q13, its 2014 dividend yield could exceed 30%, which supports our bullish view on the Donabsenergo investment case.



Interestingly, total additional revenue that the company will receive (from Ukraine’s power consumers) to finance its two projects will amount to UAH 5.7 mln, which is 4.8x higher than the implied equity value of the Donbasenergo privatization deal in August 2013.

Источник: Конкорд Капитал