DTEK's 9M14 production declines amidst military conflict in Eastern Ukraine

DTEK's 9M14 production declines amidst military conflict in Eastern Ukraine



10 грудня 2014 года
ICU

In its operational update released yesterday, DTEK reported that the company's production of coal declined 4.9% YoY to 28.8mt, electricity output dropped 7.1% YoY to 35.4bn kWh, and electricity transmission volumes fell 5.9% YoY to 40bn kWh in 9M14. The company's exports of electricity declined 6.7% YoY to 6.9bn kWh, while exports of coal grew 12% YoY to 3.6mt. DTEK's production of natural gas was 557.2MMcm for the same period. Therefore, in 3Q14, DTEK's production of coal declined 21% YoY and 20% QoQ to 8.1mt, production of electricity declined 20% YoY and 3% QoQ to 11.1bn kWh, electricity exports declined 8% YoY and 9% QoQ to 2.3bn kWh and coal exports declined 19% YoY and 39% QoQ to 0.9mt.

Investment implications: DTEK's cash position remains highly vulnerable to the military conflict in Eastern Ukraine and the hryvnia's devaluation. One of the coal production assets of DTEK, Komsomolets Donbassa (11% of DTEK's 1H14 coal output), remains idle since end-July due to the shelling threat, while DTEK's key producers of anthracite, Rovenkyanthracite and Sverdlovanthracite (34% of DTEK's 1H14 coal output), are located in the rebel-occupied territory and have to work mostly for their inventories. Deficit of anthracite threatens to undermine electricity production of Ukrainian TPPs, including those of DTEK. However, we think that the operational risks have not increased for DTEK significantly since September. On the contrary, DTEK's coal and electricity production started to grow in October. Any progress for stabilization in the region resulting from the Minsk talks which are scheduled for this week may increase DTEK's chances to further recover its operations.

Источник: ICU

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