DTEK could sell Russian mines

21 April 2016, Week 15 Issue 806

Ukraine’s DTEK is mulling selling its Russian assets, DTEK CEO Maksym Tymchenko told local weekly Zerkalo Nedeli on April 15.

This, he said, should make it possible for DTEK to slash its debt by US$436 million.

Tymchenko estimated DTEK’s total debt at less than US$3 billion, while the rating agency Fitch estimated it at US$2.4 billion in early March.

Speaking of DTEK’s Russian assets, Tymchenko said DTEK had invested US$100 million in its coal mines in Russia, and increased coal production there to 2.4 million tonnes from 350,000 tonnes. DTEK bought three mines in Russia’s southern Rostov Province in 2012.

Tymchenko said DTEK did not import coal from the Russian mines into Ukraine, but sold it in Russia and the EU.

This year, DTEK’s Rostov mines are expected to produce 2.6 million tonnes of coal, 60% of which will be sold in Russia, according to Tymchenko. DTEK has been in talks to restructure its Eurobonds. Tymchenko said an agreement with creditors was anticipated within six months.

Fitch in March downgraded DTEK’s long-term rating to “RD” (Restricted Default) from “C”, owing to DTEK being in payment default under several bank loans totalling 14.3 billion hryvnias (US$528 million).

Tymchenko explained DTEK’s default as having arisen from the war in Eastern Ukraine, low energy generation owing to decreased consumption, and the collapse of the Ukrainian national currency, the hryvnia, in 2014-2015.

He noted that while 95% of DTEK’s revenue was in hryvnias, most of its debt was dollar- and euro-denominated.

DTEK’s oil and gas production arm Neftegazdobycha also did not fare well last year, because its assets were frozen by the government for nine months because of an investigation into the disappearance of Neftegazdobycha’s former director, said Tymchenko.

DTEK, which is Ukraine’s largest private energy company, is the energy branch of SCM, the business conglomerate of Ukraine’s richest businessman, Rinat Akhmetov. His main business, the metals and mining conglomerate Metinvest, also defaulted recently.

Edited by

Richard Lockhart


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