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Concorde Capital Research: DTEK Energy initiates another debt restructuring

March 30, 2020 | Cbonds

Ukraine’s leading coal and power holding DTEK Energy (DTEKUA) reported on Mar. 27 it is “in the process of developing a standstill and debt restructuring proposal” on its Eurobond and certain bank debt. Because of that, the company won’t pay its quarterly coupon due Apr. 1 and interest on banking debt due Mar. 31, it reported. The payments will instead be made “in accordance with the terms of the proposal”.

Due to the state of emergency declared in Ukraine on Mar. 25, “DTEK Energy must take all required steps to maximize the concentration of resources in order to provide maximum support to the state and secure the energy supply in Ukraine," the company said, citing its CEO Dmytro Sakharuk. The state of emergency has been officially recognized as a force majeure event, the company stated. At the same time, it's not a default, Sakharuk said on Mar. 28, commenting on the decision to Interfax-Ukraine.

In other news, DTEK Energy reported on Mar. 27 that it has suspended the operation of two of its three coal mining assets, Dobropillia Coal and Bilozerska Mine. The assets mined 4.2 mmt of ROM coal in 2019, or 19% of DTEK Energy’s total. The decision was made due to “a systemic crisis in the energy sector, continuing imports of coal and electricity and the regular interference of politicians in the market,” the company said. Such a situation has led to reduced demand for Ukrainian coal, the company stated. It also complained about the decisions of the Ukrenergo state power dispatching operator, which has been forcing the power units of DTEK Energy to shut down despite existing contracts to sell produced electricity.

Recall, DTEK Energy completed the restructuring of most of its banking debt and Eurobonds in 2017, based on which it agreed to repay most of its existing debt in 2023-2024. Based on the company’s 1H19 presentation, it is scheduled to repay about USD 20 mln p.a. in 2020-2022.

Alexander Paraschiy: Taking into account that the company has no big debt repayments in the short term, the decision to default looks unexpected. It means DTEK Energy sees no prospects from the electricity market reform launched in July, which it had designed and lobbied. The reform, so far, indeed has given benefits to DTEK Energy as the average achieved electricity prices of its power plants collapsed (prices were 12%, 15% and about 30% less yoy in 3Q19, 4Q19 and 1Q20, respectively), while the company anticipated the opposite effect.

The recent moves suggest the company has little ideas on how to operate in the current market or how to amend its rules to DTEK’s benefit. We were sure DTEK would be able to make the needed adjustments, but now doubts have surfaced.

Company: DTEK Energy

Full company nameDTEK Energy BV
Country of riskUkraine
Country of registrationNetherlands


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