FY 2016

 

 

Audited consolidated financial results

of DTEK Energy for 2016

Company’s key financial indicators for the reporting period:

Revenues made UAH 128,056 million

Net loss amounted to UAH 6,695 million

Capex amounted to UAH 6,135 million

Taxes paid in amount UAH 13,059 million

 

Kyiv, 28 April 2017

DTEK Energy has announced the results of the audited consolidated financial statements for 12 months of 2016 that ended on 31 December 2016.

1. Overview of the financial results*

The net loss as of the end of 2016 made UAH 6.7 bln.

The Company paid UAH 13.1 bln to the national and local budgets in 2016.

The production cost increased in absolute terms by 28.0%, or UAH 24.7 bln, compared with 2015. The increase was caused by both higher output in all of the company’s businesses and growth of expenses caused by higher prices for process fuel, equipment and consumables, railway costs and environment contamination charges.

In 2016, the Company increased the capital expenditure by 51.1%, or UAH 2,074 mln, vs. 2015. In 2014-2015, the company was forced to streamline its capital expenses: only half of the target capex was invested in operations. Any further decrease in investment would have critically affected the production performance and would have resulted in higher equipment failure rates at the thermal power plants and declined coal production caused by untimely development of longwall faces and significant equipment deterioration. The growth of the capital investments in 2016 allowed us to sustain and scale up production.

Furthermore, DTEK Energy continued to operate with large debts owed by the state enterprise Energorynok for the electricity produced by its thermal power plants. As of 31 December 2016, the total debt of Energorynok amounted to UAH 6.7 bln.

*In September 2016, operating company DTEK Energy transferred Rostov Mines under the direct control of DTEK strategic holding company. This transaction was carried out as part of the restructuring of the DTEK Energy's loan portfolio aimed at balancing the possibilities for the development of enterprises and servicing of loans.  The financial and production indicators of Rostov Mines have not consolidated in the financial statements of DTEK Energy since 1st of September 2016.

 

Debt liabilities

As of 31 December 2016, the company's borrowings were UAH 56,848 mln.

Following deterioration in the market environment and political situation in Ukraine since late 2014 the company experienced a number of financial and operational challenges, which resulted in inability to service its debt obligation. Within 2016, key focus was made at finding a sustainable long-term debt restructuring solution with its creditors.

In the beginning of 2016, all company’s guarantees in respect of a loan provided to Wind Power LLC for development of its pilot project in the construction of a wind power plant in the amount of EUR 215 million as of the beginning of 2016 were released following the reorganization strategy of the group, which involved separation of three new holding companies.

In 2016, the company entered into and completed a deleveraging plan with Sberbank of Russia, pursuant to which both parties agreed to transfer the ownership of JSC Mine Office Obukhovskaya, JSC Donskoy Anthracite and LLC Sulinanthracite (together, the "Rostov Mines")  to a new  holding company owned by DTEK B.V. The financial indebtedness of USD 400 mln owed by the company to Sberbank of Russia was transferred together with the Rostov Mines.

At the end of 2016 the new senior Notes for USD 1,275 million with final maturity on 31 December 2024 replaced the USD 750 million 7.875% senior Notes due April 2018 and the USD 160 million 10.375% senior Notes due March 2018. USD 300 million out of the new Notes to be exchanged for bank debt in 2017 in line with an exchange offer launched in December 2016 pursuant to which 98% of the Bank Lenders by value bound themselves to the restructuring heads of terms proposed by the Group.

On 29 March 2017, the Group restructured a significant portion of its bank borrowings by way of signing an Override agreement. The maturity dates were extended to 2023. All events of default under the previous bank agreements were waived. The company expects to sign separate new agreements with similar terms and conditions as in the Override agreement with the other lenders in nearest future.

 

2. Key performance indicators of DTEK Group

Indicators

Unit

2016

2015

Change,

(+/-)

Change,

(+/-)

Coal production

ths tonnes

30,737.4

28,692.0

+2,045.4

+7.1

Coal processing:

 

 

 

 

 

ROM coal processing

ths tonnes

23,207.5

19,965.8

+3,241.7

+16.2

Coal concentrate production

ths tonnes

14,691.0

12,279.4

+2,411.6

+19.6

Electricity generation (net output)

mln kWh

39,462.6

37,650.1

+1,812.5

+4.8

Electricity transmission by networks

mln kWh

45,809.2

45,086.4

+722.8

+1.6

Electricity exports

mln kWh

3,983.9

3,555.1

+428.8

+12.1

Coal exports*

ths tonnes

1,158.0

1,387.1

-229.1

-16.5

Coal imports

ths tonnes

222.2

404.1

-181.9

-45.0

* Including trading operations outside of Ukraine.

 

 

Coal production and preparation

In 2016, the Company’s miners produced 30.7 million tonnes of coal, which is 7.1% more than in 2015. This allowed the coal preparation plants to increase the volumes of run-of-mine coal enrichment and concentrate production to 23.2 and 14.7 million tonnes, respectively.

Main factors that influenced the performance indicators:

From January to May 2016, the United Energy System of Ukraine (UES) saw a surplus of the generating capacities, which caused the thermal generation to reduce the demand for high-volatile steam coal grades. In the second half year, due to a decreased output by the nuclear power plants on the back of the growing energy consumption, the UES experienced a shortage of the capacities. Since June DTEK Pavlogradugol and DTEK Dobropolyeugol increased production of high volatile steam coal grades. In the second half of the year, its growth amounted to 17.6%, or 1.7 million tonnes, compared with the first half. In their turn, from June, the DTEK Energy's TPPs worked at increased load. This, in particular, helped offset the decline in nuclear power generation and prevent electricity shortages in the united energy system of Ukraine.

The miners of DTEK Pavlogradugol made a significant contribution to the coal production growth, as their productivity in 2016 was as high as 100.3 tonnes/person per month.

The increased production at DTEK Komsomolets Donbassa, DTEK Rovenkyanthracite and DTEK Sverdlovanthracite Mines allowed the growth of power generation by DTEK Dniproenergo’s plants, where lump-sized coals from those mines are used.

In 2016, these enterprises supplied 4.8 million tonnes of anthracite and lean coal to the Company’s thermal plants, which was 49%, or 1.7 million tonnes more than in 2015.

Key projects in 2016:

The production capacity of the plant for preparation of run-of-mine coal increased to 7 million tonnes per year. Implementation of the project allowed us to stop using a sludge pit, and this will have a positive impact on the environmental situation in the region.

The ventilation shaft commissioning has opened an access to industrial reserves of coal equal to 19 million tonnes. This shaft will also be used to transport people and materials, thus reducing the time of miners' stay underground by 2 hours per shift.

Tunnellers of the Samarska Mine have driven through the largest West Donbas geological fault — the Bohdanivskyi Fault. This fracture discontinues the coal seams: the depth difference between the parts is about 300 meters vertically. Later, three more workings will be driven through the Bohdanivskyi Fault, which will allow developing a mine field with reserves of 10 million tonnes of coal.

 

Electricity Generation

In 2016, DTEK Energy's thermal power plants generated 39.5 billion kWh of electricity, which is 4.8% higher than the output in 2015.

Main factors that influenced the performance indicators:

From October 2015 to May 2016, the United Energy System of Ukraine had a capacity surplus. However, from June through September, baseload power generation decreased considerably, on the back of an increase in consumption. Therefore, in the second half of the year, DTEK Dniproenergo, DTEK Skhidenergo and DTEK Zakhidenergo increased electricity production by 27%, or 4.4 billion kWh, compared to the first half-year. DTEK Dniproenergo contributed most to the power supply growth by increasing the electricity output in July-December by 53.6%, or 2.5 billion kWh.

Key projects in 2016:

Since 2012, during the modernization of any Company's generating units, their electrostatic precipitators were upgraded so as to achieve dust emission levels required in accordance with Directive 2001/80/EC.

 

Power transmission over networks

In 2016, 45.8 billion kWh of electricity were transmitted over the network by the Company's distribution enterprises, which is 1.6% more than in 2015.

Main factors that influenced the performance indicators:

Key projects in 2016:

 

Commercial activity

Coal and energy supplies

1.2 million tonnes of coal products were shipped to foreign markets, which is 16% lower than in 2015. Shipments are made mainly from the Mine Office Obukhovskaya.

The coal deliveries to industrial consumers in Ukraine grew 2.8 times - up to 2.6 million tonnes. This is due to an increase in production of anthracite and lean coal, and stabilization of shipments from the ATO zone at the level of 17 thousand tonnes a day, which allowed the Company to provide its thermal power plants with fuel and create a reserve for sale.

The Company supplied 4 billion kWh of electricity to foreign markets, which is 12.1% higher than in 2015.

Note

1)       The annual Financial Report of DTEK ENERGY B.V. and DTEK Finance PLC is available at:

http://www.rns-pdf.londonstockexchange.com/rns/7158D_-2017-4-28.pdf

http://www.rns-pdf.londonstockexchange.com/rns/7158D_1-2017-4-28.pdf

2)       The annual Financial Report of DTEK ENERGY B.V. and DTEK Finance PLC has been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.Hemscott.com/nsm.do

3)       The Financial report was also sent to FCA

 

Profile

DTEK is a strategic holding company that develops four business streams in the energy sector. DTEK's companies employ 75 thousand people. Maxim Timchenko is the Chief Executive Officer of DTEK.

DTEK companies produce coal and natural gas, generate electricity at the fossil-fuelled power plants and renewable energy power plants, supply heating and electricity to end consumers, and provide energy services. Four operating companies—DTEK ENERGY, DTEK Renewables, DTEK Oil&Gas, DTEK ESCO— directly manage production companies in each of the business streams.

DTEK's production indicators for 2016: the company produced 31.3 mln tonnes of coal, 1.6 bcm of natural gas, generated (supplied) 40.1 bln kWh of electricity, out of which 608.4 mln kWh came from the Botievo wind farm; and transmitted 45.8 bln kWh of electricity via the networks.

DTEK is part of the financial and industrial group System Capital Management (SCM). The shareholder of the group is Rinat Akhmetov.

For more information, visit: www.dtek.com

To learn about the social partnership projects in progress in the towns and cities of DTEK companies' operations and get a detailed status report on their implementation, visit www.spp-dtek.com.ua

For more information, please contact:

Oksana Nersesova

IR Manager

DTEK

Tel: +38 (044) 581 45 22

Email: ir@dtek.com

 

This press release may contain forward-looking statements related to the planned measures or future financial indicators of DTEK ENERGY. Words such as ‘anticipate’, ‘believe’, ‘estimate’, ‘expect’, ‘forecast’, ‘intend’, ‘may’, ‘plan’, ‘project’, ‘predict’, ‘should’ and ‘will’ or the negatives of these terms or variations of them and similar expressions are intended to identify such forward-looking statements. Accordingly, actual results may differ materially from those expressed or implied by the forward-looking statements. We undertake no obligation and do not intend to update these forward-looking statements to reflect events or circumstances occurring after this press release. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. By their nature, forward-looking statements are subject to numerous assumptions, risks and uncertainties. Such risks include concerns over the general economic status, environment and risks associated with doing business in Ukraine, significant technological and environmental changes in our sector, as well as many other risks specifically applicable to DTEK ENERGY and its business.

 

 

What do you know about the future of Ukraine's energy industry?

More details