Donbasenergo recovers after armed conflicts

Обзоры по компаниям и отраслям 08.07.2014 The infrastructure of the Sloviansk thermal power plant (TPP) of Donbasenergo (DOEN UK), located in the town of Mykolayivka that was recently freed from terrorists, was damaged by armed conflicts that lasted until July 5, the company reported. In particular, the TPP’s open distribution unit was completely destroyed and some damage was done to power lines and the power plant’s workshop building. Donbasenergo created an emergency group to renew the normal operation of Sloviansk TPP and restart production. The group will also work to recover power supply to the water channel that feeds Donetsk city with water. Energy Minister Yuriy Prodan estimated the cost of the station’s recovery is UAH 400 mln (44% of Donbasenergo’s market capitalization), according to an Interfax-Ukrayina news report from July 7. The station is most likely to restart its work next year only, according to Prodan. Most of the recovery costs will be covered by a special markup in power rates, he said. Alexander Paraschiy: As the boundaries of the anti-terrorist operation are changing, it seems like the worst is over for the power plants of Donbasenergo. The company is receiving large rate markups to cover the construction costs of the new power units at Sloviansk TPP, as well as the reconstruction of an old one. We believe that additional markups for post-conflict repairs can easily be obtained. It’s important that damage was limited to the station’s exterior and no power generation equipment suffered. The company’s other power plant, Starobesheve TPP, responsible for 72% of its total output in 2013, is located to the south of Donetsk city, outside the area controlled by terrorists and out of the zone of military operations, though very close by. There is low risk for Starobesheve if the current progress with the anti-terrorist operation continues or peace is achieved. We expect that Donbasenergo will remain the most profitable GenCo, due to its large price markups, and it will remain a hefty dividend payer.