Eesti Energia Group results for Q1 2016
Eesti Energia’s sales revenues reached 197.0 million euros in the first quarter of 2016, decreasing by 10.4% compared to the same period in 2015. Group EBITDA also declined in the first quarter and amounted to EUR 60.3 million (-31.4% y-o-y). Eesti Energia’s net profit totalled EUR 19.4 million (-64.5%) in Q1 2016.
The decline in the Group’s revenues was mainly related to lower revenues from electricity and shale oil sales, caused by the low price environment at the power and oil markets. Low market prices have also induced a reduction in sales volumes, especially in the shale oil segment. Eesti Energia’s electricity sales revenue totalled EUR 90.4 million (-9.6%). There was a substantial decline in shale oil revenues to EUR 7.0 million (-71.5%). Revenues from distribution grew to EUR 72.1 million (+8.2%) as cold weather in January had a positive impact on demand.
Group EBITDA declined mostly for the same factors as its revenues. EBITDA from electricity totalled EUR 27.3 million (-25.5%) as it was affected by negative margin and volume development and lower gains from hedge positions. Oil shale EBITDA declined to EUR 0.5 million (-96.4%, EUR -13.7 million), as a result of a drop in prices which affected both margins and sales quantities and more modest hedge positions. EBITDA from distribution grew to EUR 72.1 million (+8.2%), as a result of higher sales volumes. Additionally, the decline in Group’s EBITDA was affected by EUR 8.3 profit from the sale of CO2 allowances in Q1 2015 whereas we did not have a similar effect in 2016.
Key performance indicators
The Group’s electricity sales amounted to 2.0 TWh in Q1 2016 (-7.8% y-o-y), out of which retail sales accounted for 1.8 TWh (+13.9%) and wholesale for 0.2 TWh (-61.4%). In Q1 2016, the Group generated 2.2 TWh of electricity (-5.3%). The decline in generation volume was caused by low Nord Pool prices as well as changes to Eesti Energia’s bidding strategy, which were implemented from Q2 2015 with the aim of achieving higher sales prices and selling more during peak hours. The Group’s retail market share in the three Baltic countries combined totalled 27% (+0.7 percentage points compared to Q1 2015).
The volume of electricity distributed by the Group amounted to 1.9 TWh in Q1 2016 (+8.5% y-o-y).
Eesti Energia’s shale oil sales declined by 51% to 34.2 thousand tonnes due to low oil prices, as we decided to store some oil rather than sell it at the depressed prices that were seen at the beginning of 2016. We also produced less oil in the first quarter (66.5 thousand tonnes, -21.5%) as some maintenance works of the older Enefit140 plant that had been planned for 2016 were now done earlier in the year during the period of low prices.
The Group’s capital expenditure amounted to EUR 31.7 million in Q1 2016 (-39.5% y-o-y). Investments have been decreasing as many of Eesti Energia’s largest investment projects are being completed. Also maintenance capex into the mining subsidiary and power plants declined in the first quarter as we have been producing less and there is accordingly less need for investments. The largest share of the total capex spending was directed towards the distribution network (EUR 17.7 million).
Financing, credit ratings and dividends The Group’s liquidity position remained solid at the end of March 2016, including EUR 160.8 million of cash and equivalents, EUR 150 million of revolving credit facilities (with maturity in July 2020) and EUR 70 million undrawn investment loan from EIB.
The Group’s net debt totalled EUR 792.1 million as of March 31, 2016. As a result of declining EBITDA, the Group’s net debt to EBITDA ratio increased to 3.3x by the end of Q1 2016 (3.0x as at the end of 2015) but financial leverage remained stable at 33% (34% at the end of 2015).
The Group is rated BBB with a negative outlook by S&P and Baa3 with a stable outlook by Moody’s. The Management Board and Supervisory Board of Eesti Energia have proposed paying EUR 40 million as dividends in 2016. Income tax in the amount of EUR 10 million would be payable in addition to this amount. The amount of dividend has yet to be approved by the General Meeting.
The Group’s guidance for full year 2016 remains unchanged compared to our communication provided in February with 2015 annual report. Eesti Energia currently expects that in 2016 the Group’s sales revenues will decline by less than 5% in 2016 while EBITDA and capital expenditure will decline more than 5% in 2016 in year-on-year comparison. The Group’s results will increasingly be affected by market prices for oil and power, as our hedge positions roll off.
The Group’s hedge positions for electricity (including both financial hedges as well as fixed price contracts with retail clients) amount to 3.0 TWh for Q2-Q4 2016 (at average price of 36.2 EUR/MWh) and 1.7 TWh for 2017 (at average price of 35.3 EUR/MWh). Hedge positions for oil include 118 thousand tonnes for the remaining part of 2016 at an average price of 321 EUR/tonne.
The Group’s position in CO2 emission allowances for 2016 amounts to 12.0 million tonnes at an average price of 6.0 €/t (including forward transactions, free emission allowances received as investment support and the surplus of unused allowances from previous periods). The position for 2017 amounts to 3.1 million tonnes consisting mostly of free allowances received as investment support.
More information on the financial results of Eesti Energia Group is available at Eesti Energia homepage »