DTEK coal mining declines 18% yoy in 3Q14

Coal mining at DTEK (DTEKUA), Ukraine’s leading coal and power producer, fell 7% yoy to 27.3 mmt in 9M14, according to preliminary output data from the Energy Ministry, as cited by the Interfax-Ukrayina news agency on Oct. 6. Output at its anthracitic coal mines (all located in the area occupied by Russian-terrorist forces) plunged 19% yoy to 10.7 mmt, while other assets, located on the area controlled by the Ukrainian government, boosted output 3% yoy to 16.6 mmt.



In 3Q14 alone, output by DTEK’s anthracitic coal miners plunged 52% yoy to 2.0 mmt, with the biggest decline reported at Komsomolets Donbasa Mine (-65% yoy to 330 kt), which was idle in August and September. Mines located in the occupied territory managed to boost their coal output to 602 kt in September from their August low of 422 kt, though still having produced 54% less yoy. Miners of gas-coal, located in government-controlled areas, increased their output 7% yoy to 6.1 mmt in 3Q14.



Alexander Paraschiy: Reduced coal mining in the occupied locations of Donbas is a minor problem for the holding, as these volumes can be theoretically substituted by imported coal to satisfy the needs of DTEK’s power-generating units. The core problem for DTEK is its inability to deliver its coal from its easternmost mines to power plants due to damaged railroad infrastructure, which means its mines are building up inventories. DTEK reported on September 11 that its stocks of coal in the occupied territory have reached 1 mmt.



If coal deliveries aren’t resumed, we estimate DTEK will accumulate monthly new stockpiles of sellable coal of about 0.5 mmt, which would “lock in” each month at about USD 25-30 mln in working capital. That’s a significant portion of the USD 400 mln in operating cash flow before working capital changes to be generated in 2H14, we estimate. Once the situation in Donbas improves, DTEK will be able to destock and unlock this working capital, though the timing of that is not clear at the moment.

Источник: Конкорд Капитал