Donbassenergo, Ukraine’s smallest thermal power producer,returned to the black in 2012 on the back of higherelectricity prices and sales and a reduction in its averagefuel costs, according to IFRS results approved March 20 bythe company’s annual general shareholders meeting.
The genco’s gross margin increased 12pp year-onyearin 2012, to 13.5%, yet the company decided tocreate a Hryvna 242 million ($30 million) reserve fordoubtful debts, which reduced EBITDA by the equivalentamount and was the main reason behind weaker thanexpected financials overall, according to Dennis Sakva,utilities analyst at Kiev-based brokerage Dragon Capital.

Ukraine’s plans to privatize Centrenergo, one of the tworemaining state-controlled thermal power plants, later this year, look to have all but ended after a fire seriously damaged the genco’s major power plant.

Given Vuhlehirska’s relative size and high fuel efficiency, the accident is extremely negative for Centrenergo, Dennis Sakva, utilities analyst at Kiev-based brokerage Dragon Capital, said in an April 2 equity research note.

Ukraine’s government opened a new round of talks with the International Monetary Fund on Wednesday on a $15 billion loan to help it service foreign debt repayments set to peak at about $9 billion this year.

The second visit since January by a mission from the IMF, which has been pressing Ukraine to pursue unpopular policies at home, takes place as Kiev has been able to tap more receptive international debt markets to meet some of its finance needs.Ukraine has to date signed seven loan deals with the Fund, and money owed to the IMF itself accounts for about two-thirds of the sum due for repayment this year.

"I think in the near future the Ukrainian government will be able to tap the market with a new Eurobond issue to the amount of $1-2 billion," Elena Belan, chief economist of brokerage Dragon Capital, said.

Once known almost exclusively as a natural gas trader, Ukrainian multimillionaire Dmytro Firtash now has a strong foothold in chemicals. Since President Viktor Yanukovych ascended to the presidency in 2010, Firtash’s control over the domestic production of mineral fertilizers has reached near-monopolistic levels.

The six chemical plants specialize in producing ammonia, carbamide and ammoniac nitre. Tamara Levchenko, senior analyst at Kyiv-based investment bank Dragon Capital, says that 80 percent of the ammonia and 70 percent of the carbamide produced are exported. But 70 percent of ammoniac nitre remains in Ukraine because it is a traditional Soviet-era farming technology.

“The authorities are likely to continue enjoying very favorable conditions on external credit markets and will place Eurobonds to refinance the upcoming payments”

The state of the NBU gold and currency reserves at the end of February shows low demand for the currency, especially among the population.

“A balance of foreign exchange interventions in February was lower than expected (USD 0.3-0.4 billion), in this case, as in January, the regulator did not sell the U.S. dollars, but only the euros. Insignificant volumes of foreign currency purchases in the past month show that devaluation expectations of the population are still low,” the rbc.ua quoted Olena Bilan, chief economist of the investment company Dragon Capital.

The banking sector is once again in the spotlight, squeezed by a wobbly economy and saddled with toxic debt.

Most recently, Ukraine’s financial system has joined the list of International Monetary Fund concerns, with ongoing problems over non-performing loans, the lender’s country director Max Alier said at the Dragon Capital Investor Conference in Kyiv on Feb. 27.

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The International Monetary Fund’s mission to Ukraine has come and gone, and will return in March.

Experts, however, expect a deal no sooner than the end of April, when the end of the heating season will make raising gas tariffs – a key IMF demand – politically easier. According to Olena Bilan, macro analyst at Dragon Caital, the lack of major redemptions until end-April (only $0.5 billion are due by that date), means talks and tough decisions could be further postponed