DTEK’s Ukraine coal mining figures improve in 10M15

Production of steam coal at the Ukrainian mines of leading coal and power producer DTEK (DTEKUA) fell 25% yoy to 22.39 mmt in 10M15, we estimated, based on statistics provided by Interfax-Ukraine. This is a visible improvement to its -27% yoy drop in mining in 9M15.

The production of scarce anthracite coal by DTEK, which remains the only Ukrainian miner of this coal, dropped 68% yoy to 3.73 mmt in 10M15.

In October alone, DTEK’s Ukrainian mines produced 2.38 mmt of steam coal, which is a 10% decline yoy (and 8% decline m/m, in average daily terms). October output of anthracite coal decreased 28% yoy and 6% m/m (in average daily terms) to 0.57 mmt. Ukraine’s total production of steam coal decreased 38% yoy to 26.4 mmt in 10M15. The share of DTEK in Ukraine’s total output amounted to 85% in 10M15, up from 70% a year before.

Alexander Paraschiy: While showing a reduction in their output, DTEK mines produce enough coal to satisfy the demands of the holding’s power plants. DTEK still might face a need to import anthracite coal (used by three of DTEK’s nine power plants), which is only mined on the occupied territory of Donbas. Despite the cease-fire, the company still has limited capacity to move coal from there. However, as stockpiles of anthracite at all Ukrainian power plants is 4x higher yoy as of now, imports of this coal look much less critical, as compared to the last season. In turn, we expect lesser coal import needs will allow DTEK to improve its profitability and liquidity in 2H15.

The key problem for DTEK remains its high market share in the domestic coal industry. Being nearly a monopoly producer of all steam coal in Ukraine, DTEK continues to suffer from regulations on effective coal prices imposed by the state electricity sector regulator. Thus far, DTEK has not able to agree on any revision of coal prices, as compared to last year, which limits the holding’s ability to boost its profit.

Источник: Конкорд Капитал