Centrenergo
Industry: Energy
Share for privatization: 78,289%
GENERAL OVERVIEW
Centrenergo is a 78.3% state-owned company that generates electricity in industrially advanced regions of Ukraine, including Kyiv (Trypilska), Kharkiv (Zmiivska), and territory under control in Donetsk region (Vuhlehirska). It consists of three combined heat-and-power plants (CHPs) with total production capacity of 7,690 MW and a maintenance company “Remenergo”, which is in charge of equipment repairs for CHPs. Centrenergro facilities account for about 15% of total power generated in Ukraine. In 2016, 78.3% of company’s shares were transferred to State Property Fund. The company is audited by Baker Tilly since 2014. The company has a supervisory board that consists of five people, including three representatives of the State Property Fund, and two representatives of other shareholders.
OPERATING OVERVIEW
In 2018, Centrenergo generated 20% of power produced by all CHPs in Ukraine. The company’s installed capacity only reached 31% which implies significant potential for increasing market share. In 2019 Centrenergo decreased the average tariff from 1.9 to 1.3 UAH/kWh. In the last five years, the company has changed the mix of raw materials it uses. Initially, 39% of company’s generating capacity were gas-fired and 61% were coal-fired. 45% of the company's total generating capacity was operating on anthracite, and therefore highly dependent on it. In 2014 due to military conflict in the sourcing region, it became in short supply, which resulted in decrease of electricity output and search for substitution options starting from 2017. As of 2019, the company successfully became independent from anthracite. As of 2018, the company employs 6,765 workers, and from 2017 to 2018 the number of employees mostly remained unchangeable, while average monthly salary increased by 15%.
OPERATING SUMMARY | 2017 | 2018 | 2019 |
Output (GWh) | 6 284 | 8 685 | 10 155 |
Growth (%, y-o-y) | -36% | 38% | 17% |
Tariff (UAH/kWh) | 1.93 | 1.85 | 1.66 |
Growth (%, y-o-y) | 61% | -4% | -10% |
Average Monthly Salary (UAH) | 12 221 | 14 094 | 15 786 |
Number of Employees | 6 832 | 6 765 | 6 697 |
FINANCIAL OVERVIEW
While revenue grew by 33% in 2018 as compared to 2017, the cost of sales increased by 68% in the same period. This resulted in Gross margin of 3% in 2018 as compared to 23% in 2017. The main stream of revenue comes from the production and sale of electricity (UAH 14,509m or 99% of total revenue in 2018). The twofold increase in COGS as compared to revenue resulted in net income decrease by 74%. (499m UAH in 2018 and 1,891m UAH in 2017).
INCOME STATEMENT (m UAH) | 2017 | 2018 | 2019 | 2020 |
Revenue | 10 919 | 14 509 | 15 133 | 20 584 |
COGS | 8 390 | 14 108 | 15 965 | 20 518 |
Gross Profit | 2 529 | 401 | (831,6) | 65,5 |
EBITDA | 2 748 | 1 037 | (1 770) | 451 |
Depreciation | 296 | 310 | 316 | 269 |
Operating Profit | 2452 | 727 | (2 086) | 182 |
Net Financial Income / (Loss) | (105) | (110) | (112) | (181) |
Profit/(Loss) Before Taxes | 2 347 | 617 | (2 198) | 0,987 |
Corporate Income Tax | (456) | (118) | 219 | 60 |
Net Income/(Loss) | 1 891 | 499 | (1 979) | 61 |
Dividends paid | 201 | 1 383 | - | 242 |
The book value of assets decreased by a UAH 1.65b (-16.4% y-o-y) to UAH 8.42b in 2018 driven by a UAH 1.71b decrease in current assets (30% of total assets), which were mainly comprised of inventories (43%) including fuel (72%), accounts receivable (36%), cash & cash equivalents (18%) and other current assets (3%) and by a UAH 69m increase in fixed assets (70% of total assets), which represented by PP&E (88%) including specialized machinery and equipment (53%), buildings and facilities intended for electricity production (34%) and vehicles (13%), and other fixed assets (12%). On the liabilities side, current liabilities decreased by UAH 835m (-32% y-o-y) to UAH 1.77b in 2018, represented 71% of total liabilities and consists of accounts payable (72%) and other current liabilities (28%). Non-current liabilities made up the remaining 29% of total liabilities and consists of provisions (84%), deferred tax liabilities (10%) and other non-current liabilities (6%).
BALANCE SHEET (m UAH) | 2017 | 2018 | 2019 | 2020 |
Total Assets | 10 074 | 8 423 | 8 970 | 10 568 |
Fixed assets | 5 849 | 5 916 | 5 860 | 5 733 |
PP&E | 5376 | 5 203 | 5 025 | 4 888 |
Investment Property | - | - | - | - |
Current Assets | 4 225 | 2 508 | 3 110 | 4 834 |
Inventories | 2 203 | 1 083 | 1 863 | 523 |
Accounts Receivable | 904 | 908 | 919 | 2 740 |
Cash & Cash Equivalents | 1 075 | 465 | 56 | 1 225 |
Total Liabilities & Equity | 10 074 | 8 423 | 8 970 | 10 568 |
Total Liabilities | 3 188 | 2 488 | 5 309 | 6 851 |
Accounts Payable | 1 720 | 1 281 | 3 968 | 5 049 |
Short-term Debt | 2 613 | 1 778 | 4 514 | 5 876 |
Long-term Debt | 575 | 710 | 795 | 976 |
Equity | 6 886 | 5 936 | 3 661 | 3 716 |
RATIOS | 2017 | 2018 | 2019 | 2020 |
Sales Growth (%, y-o-y) | 2% | 33% | 4% | 36% |
EBITDA Growth (%, y-o-y) | 132% | -62% | -271% | 125% |
Net Income Growth (%, y-o-y) | 389% | -74% | -497% | 103% |
EBITDA Margin (%) | 25.17% | 7.15% | -12% | 2.19% |
Net Income Margin (%) | 22.54% | 3.54% | -13% | 0.30% |
ROE (%) | 27.46% | 8.41% | -54% | 1.64% |
ROA (%) | 20.27% | 5.40% | -22% | 0.58% |
Debt/Equity (%) | 46% | 42% | 145% | 184% |