DTEK reports 9M14 operations, calls upon state to help solve energy crisis

Ukraine’s leading power holding DTEK (DTEKUA) released its 9M14 operating update on Dec. 9. Total coal mining decreased 4.9% yoy to 28.8 mmt in the period, according to the release. Mining at its Ukrainian assets dropped 8.3% yoy to 28.8 mmt, we estimate, meaning that mining at its Russian assets increased 1.4x yoy to 1.52 mmt. Electricity sales to the wholesale market fell 7.1% yoy to 35.4 TWh, mainly due to a decrease in power demand in Ukraine (-5.8% yoy). Its power transmission in networks decreased 5.9% yoy, in line with the nation’s consumption decline. Production of natural gas at its newly acquired company amounted to 0.56 bcm in 9M14, making it a leading private gas producer in Ukraine.



The company boosted coal exports 12% yoy to 3.6 mmt in 9M14, mainly owing to robust results in the first six months of the year. In 3Q14, coal exports fell – for obvious reasons – by 18% yoy to 206 kt. Moreover, the company started importing coal to Ukraine in 3Q14, in the form of 1.1 mmt of deficit grades. Some of the imported coal came from DTEK’s Russia-based mines.



In its comment on the results, the holding’s CEO Maxim Timchenko limited his comments to highlighting the problems that Ukraine’s energy system is facing right now. Ukrainian fossil fuel generation has never experienced such a crisis before, he commented, referring to the deficit of lean and anthracite grades of coal that is being experienced by half of the thermal power plants operating in Ukraine. Recall, these grades of coal are mined in Ukraine’s territories that are controlled by pro-Russian separatists. Timchenko called for “the consolidated efforts of business, society and state” to preserve the integrity of Ukraine’s power system.



Alexander Paraschiy: The update did not reveal just how deep the crisis is for the company and Ukraine’s energy system overall. We believe DTEK is doing its best to resume normal coal deliveries, being the most interested in supplies from those Ukrainian territories that are currently beyond the government’s control. We expect these efforts will pay off in the near future. We believe the state is also interested in “consolidating” its efforts with DTEK to solve the coal deficit problem.



Yet at the same time, the government is pursuing a policy of ensuring the well-being of state companies, even at the expense of private players like DTEK. Recall, the government obliged large gas consumers (including all DTEK assets) to purchase gas exclusively from state firm Naftogaz as of Dec. 1, 2014. This prevents DTEK’s gas production unit from supplying natural gas to its power stations.



The State Property Fund offered encouraging this morning for the holding in announcing the cancellation of the scheduled privatization of a 25% stake in Dniproenergo for a starting price of UAH 1.2 bln (USD 80 mln). Buying the minority stake would have been a waste of money for DTEK, which already controls 73% of the company and doesn’t need any more, for the moment.

Источник: Конкорд Капитал