Energy Market Overview, April 2016

09.05.2016

Sander Randver

Market Analyst

Cable malfunctions, maintenance work, low hydro reserves and poor weather raise power exchange prices in April

In this edition of the Market Overview, we recap the changes in electricity prices in April and examine the factors behind the changes.We’ll also take a closer look at the fluctuations in the price of crude oil, the exchange rates of the euro and the dollar, and carbon prices, and introduce the most important news from the Baltic states’ markets in April.

As an added bonus this time, we have video content! Because May is Green Energy Month, we’re inviting all customers to join the plan, automatically entering them into a prize drawing. We will also talk about how we are giving back to the environment and our Christmas pledge, which we kept with the Large Business Customer Services, planting 2,000 young pine trees in Narva open cast.

Read more about the topics below

  • Average Nord Pool market price rises in Estonia, Latvia, Lithuania and Finland »

    The average market price on the Nord Pool electricity exchange in April for Estonia was 29.73 €/MWh, which is EUR 0.32 higher than the average price in March. In general, the market price of electricity in the Baltics has stabilised after the very high price level of January. The market price of electricity in Latvia experienced a somewhat greater increase in April, going from 29.87 €/MWhin March to EUR 30.71 per megawatt-hour in April. As the NordBalt connection was out of service for an extended period, Lithuania had the highest electricity prices in the Baltics in April. The price of 33.03 €/MWh was 7.21% or EUR 2.78 higher than the month before. The price of electricity in Finland in April was somewhat lower than it was in the Baltics - 27.25 €/MWh, which was EUR 0.16 higher than in March.

    Looking at these average prices, it should be noted that these are the arithmetic mean electricity prices in April. The monthly average price of the electricity actually consumed by each customer may vary, as the price of electricity is different on each market. Thus the average price of electricity for each customer depends on when the electricity was consumed.

    Area Average
    €/MWh
    Change compared to
    previous month
    Minimum Maximum
    Nord Pool Estonia 29,73 1,09% 14,93 51,5
    Nord Pool Finland 27,25 0,59% 14,93 51,5
    Nord Pool Latvia 30,71 2,81% 14,93 51,5
    Nord Pool Lithuania 33,03 7,21% 14,93 95,08

    Electricity prices in April were impacted by malfunctions in the NordBalt and Estlink power cables and restrictions in service, low hydro energy reserves, maintenance scheduled for power plants, and unstable weather. The lower availability of hydro power meant higher market prices in the Baltics as well. In connection with low hydro reserves, April saw extensive scheduled maintenance performed in hydroelectric plants across the Nordics.

    Maintenance was performed on the unit no. 1 of the Olkiluoto nuclear power plant in Finland, which raised the price of electricity somewhat in Finland for two weeks. Maintenance on unit no.2 was planned for 8 to 17 May. Unfortunately, malfunctions and scheduled maintenance occurred in both EstLink 2 and NordBalt cables in April. Lithuania bore the brunt of this fact, with electricity prices constantly higher than in the other Baltic states.

    According to Elering, electricity flows took place in the ordinary manner - mostly from Finland to Estonia and from Estonia to Latvia. In the Finland-Estonia and Estonia-Latvia direction, over 60% of the capacity provided to the market was used in the last month. The number of hours at full capacity in the Finland-Estonia direction was 287 and on the Estonia-Latvia direction, 125.

  • May is Green Energy Month - sign a renewable energy agreement and enter a drawing for an electric bike! »

    In May, we’re marking Green Energy Month - we’re focusing on environmentally friendly power generation and encouraging your company, too, to try out Green Energy. Several hundred Eesti Energia business customers and several thousand residential consumers are currently using Green Energy as their service plan.

    In May, your company can sign a Green Energy contract with regular price! In addition, we will give to the one company with Green Energy contract an supercool electric bike by Scott! Campaign rules (in Estonian) »


    To enter into an agreement, contact your large business account executive at Eesti Energia.

    Why companies have chosen Green Energy electricity contract?

    Take a look at the videos, where clients on Eesti Energia, such as Telia, Ergo, Fortaco, Akzo Nobel and Kroonpress explain, why their companies have signed Green Energy electricity conracts and how they have used Green Energy label in their marketing.

    What does Green Energy mean?

    Green Energy is an electricity product that uses 100% renewable sources. Precise track is kept of the amount of Green Energy consumed and generated so that the volume of power consumed by Green Energy subscribers would always be linked to the volume of power generated from renewable sources. That means that renewable energy is generated at specific times to cover the volume agreed upon in Eesti Energia’s agreement with the customer.


    Why might a company choose a Green Energy power agreement?

    • Using Green Energy helps conserve the environment and preserve a clean environment for generations to come. By buying Green Energy, you positively impact the development of power generation so that the environment around us is better cared for and natural resources used more responsibly. The most customers use Green Energy, the greater the share of renewable energy in power generation and the less carbon dioxide is emitted into the atmosphere.
    • You support renewable energy producers. It is important to generate power from renewable energy sources as it bolsters the country’s strength and independence. The more diversified and decentralised power generation is, the more secure the supply of electricity provided for consumers. Eesti Energia generates Green Energy or buying it from other power producers in Europe.
    • An example for others The Green Energy agreement is a way to show your clients and partners that you consider a clean environment important and do your part to keep it that way. You can notify customers and partners about the use of the Green Energy trademark.

    Read more about Green Energy »

  • The price of crude oil started rising in January, reaching its highest level, but could start falling again »

    The price of Brent crude continued rising in April. After a period of very low prices in January (USD 27.88 per barrel), the price of Brent crude reached yet another high, ending the month at USD 48.14 per barrel. The rise in crude oil prices was particularly notable because at a conference heled in Doha in mid-April, the world’s leading oil producers failed to reach agreement on regulating production. In spite of that, oil prices continued rising.

    Price-wise, the fact that no agreement was reached at Doha was also favourable as an agreement would have meant a greater price rice and volatility. In the first few days of May, the barrel price of crude oil fell sharply to USD 44.74. In part, this was due to poor industrial output figures from one of the world’s biggest oil importer, China.The fallout from the Doha meeting and oversupply of oil from the Middle East and North Sea were also felt.

  • The rising oil price bolstered the dollar in April; carbon prices increased over 15 percent »

    The constant rise in oil prices was of the key factors in the stronger dollar. The dollar started the month on the weak side (USD 1.1432 per euro). It gained against the euro up to the last week of April, reaching USD 1.1264. Poor industrial output figures from China, oversupply of oil and a drop in Australia’s central bank interest rates drove a significant decline in the dollar in the last week of the month, reaching a rate of USD 1.1569 to the euro, which for the European Union softens the rise in oil prices.

    Compared to March, carbon prices in the European Union rose 15.17 percent - EUR 4.95 - reaching EUR 5.70 per tonne. Carbon prices rose a whole EUR 0.94 from 25 to 27 April, as the EU’s leaders and international banks had discussed establishing a minimum price for CO2 quotas. In spite of the sharp rise, the carbon price fell back to its previous level over a few days.

  • Eesti Energia launches wholesale of a soil ameliorant marketed under the Enefix brand name  »

    In cooperation with the University of Life Sciences and large farms, Eesti Energia conducted extensive research into the effect of fly ash on soil. The findings confirm that a soil ameliorant made from fly ash improves uptake of nutrients, reduces spread of plant diseases and curbs moss growth.

    “Along with the Estonian University of Life Sciences and large farms, we studied how fly ash affects soil and yields.” We conducted experiments in different soils all over Estonia. Today we have confirmation from scientists and farmers regarding fly ash’s suitability and positive effects: grain yields increase and fertiliser uptake improves. Fly ash is also suitable for growing forest transplants,” said Eesti Energia’s Head of Energy Trading, Veiko Räim.

    Estonian University of Life Sciences Institute of Forestry and Rural Engineering senior research fellow Katri Ots said that from 2011 to 2015, the university tested how the soil conditioner affected the growth of coniferous trees. “In the course of the testing, we became convinced that the minerals in post-combustion oil shale are suitable for enriching fields and growing forest transplants as well as for accelerating growth of stands of trees in peat-rich soils and Christmas tree farms.”

    Marek Kruusla, agronomist with the Kaska-Luiga Farm in southern Estonia, said that the positive impact of fly ash could also be seen in harvest yields in their farm’s 80-hectare field. “The year before last, we spread fly ash and saw already the following year that plants were taking up the fertiliser better. We realised that we have to continue systematically liming fields with fly ash.”

    Compared to other ameliorants and soil conditioners, the advantages of fly ash are its high calcium carbonate content, which helps neutralise the pH level faster and thus increase availability of microelements. In addition, advantages of fly ash are its dryness, fineness, good solubility and high nutrient content. The fast acting effect and low expenditure per hectare of the soil conditioner helps keep fertiliser costs down.

    Eesti Energia can produce about 330,000 tonnes of soil conditioner per year and supply customers year-round. The fly ash from oil shale combusted in pulverised firing chambers has seen the most use as a soil conditioner. In the electricity production process, Eesti Energia separates the ultrafine high-calcium fly ash from smoke gases.The fly ash is harmless for the environment and ideal for use as agricultural lime. Thanks to its alkaline properties, the fly ash quickly neutralises acidic soils and raises the fertility of soil at the same time. Fly ash has been used to lime Estonian fields since the 1960s.

    The greater recycling of oil shale ash will help boost the value from oil shale and use the byproducts from generating energy in a clean and efficient manner. For more information and to watch a video about the Enefix soil conditioner, see www.enefix.eu.

  • Baltic news »

    Eesti Energia subsidiary Enefit SIA marks 10th year of operation

    Eesti Energia’s Latvian subsidiary Enefit SIA continues to hold a 15 percent market share, putting it second after the state energy company Latvenergo. The Enefit SIA power sales portfolio includes 28 local government units and large business customers from the private and public sector, including the city of Riga and the Latvian state television and radio broadcasting centre. In 2015, Eesti Energia sold electricity to a total of 14,000 points of consumption in Latvia.

    Eesti Energia selling its majority holding in the Jordan electricity project

    Eesti Energia will sell 45% of the shares in the Jordan oil shale power plant and quarry ot a company of Chinese origin, Yudean Group (Yudean) and remain a minority shareholder with 10 percent of the shares. According to the agreement signed on 6 May in China, the co-investor YTL International Berhad (YTL) will increase its holding from 30 percent to 45 percent and the existing minority shareholder Near East Investments will exit the project.

    “Estonia’s first export of oil shale related knowhow is becoming a reality. In the course of eight years of development, we have prepared for the establishment of an oil shale strip mine and construction of a power plant that will cover 10% of Jordan’s electricity needs. It is no less important that we have found investors for carrying out the USD 2.1bn project,” said the Chairman of the Eesti Energia Management Board, Hando Sutter.

    The total projected investment by Eesti Energia into the Jordanian electricity project from beginning to completion is close to USD 31 million.

    Eesti Energia posts net profit of EUR 19 million for the quarter

    The operating profit before depreciation in Q1 of 2016 was EUR 60 million, which is 31% less than last year. Net profit was EUR 19 million. The company’s turnover was EUR 197 million.

    Eesti Energia generated 2.2 terawatt-hours of electricity in the first quarter - 5% less than in the first quarter of 2015. The lower market price of electricity resulted in a drop in the group’s power output. “In the beginning of the year, the Nordbalt cable between Lithuania and Sweden went into operation, bringing cheap hydroelectric and nuclear power from Scandinavia to the Baltics. The cable’s effect on the lower electricity prices in Latvia and Lithuania could clearly be seen. At the same time, the NordBalt cable reduces load on the long-overburdened transmission lines between Estonia and Latvia and will allow more electricity to be imported to Latvia from Estonia,” said Eesti Energia CFO Andri Avila.

    The average price in the Estonian market area of the Nord Pool exchange was EUR 31.8 per megawatt-hour, which is 2% less than a year before. “In the case of electricity sales, it is positive that we have been able to grow sales by 31%. Sales have grown as a result of additional customers. In Latvia, Eesti Energia’s market share has grown to 15 percent and in Lithuania to 6 percent, as a whole in the Baltics, market share is 27 percent,” said Avila.

    Eesti Energia’s turnover dropped by 10% compared to the first quarter of 2015; and operating profit before depreciation by 31%. The decrease in operating profit before depreciation was due to lower sales of electricity and oil products and lower market prices.The comparison base last year was also impacted by transactions of a one-time nature.

    Launch of Latvia’s compulsory electricity purchasing system on hold

    The compulsory electricity purchasing system that was to have been launched in January will probably not go ahead until the European Commission approves Latvia’s principles for subsidising renewable energy.

    Estonia and Finland moving toward final investment decision on Balticconnector

    On 27 April, Elering announced that the developers of the Estonian-Finnish gas connection Balticconnector - Elering and Baltic Connector OY - submitted an application with the European Commission for receiving CEF co-financing for building the connector. This is a precondition for making a final investment decision.

    According to Elering, the project developers have, in productive cooperation, refined and updated the Balticconnector financing application, reflecting the latest organisational and legal developments. Additional technical and economic studies have also been prepared. In addition, the project’s Finnish developer has strengthened its organisational and financial capability and the project’s maturity level.

    Elering and the Finnish state-owned Baltic Connector Oy are applying to the European Commission for 75 percent of the 250 million euro price of the project. The European Commission previously allocated EUR 5.4 million for Balticconnector studies.

    Balticconnector, which will connect the Estonian and Finnish natural gas networks, is planned to be completed in 2019. The connector is the precondition for establishing a Finnish-Baltic gas market and will increase reliability of supply of gas throughout the region.

    Ott Licht becomes new head of Eesti Energia Technology Unit

    From 18 April, the new chairman of the board of Eesti Energia Technology Unit is Ott Licht, who has multifaceted business leadership experience in industrial and production enterprises. Licht worked in leading positions in Estonian AGA for 15 years and he was CEO of Viru Õlu for the last 10 years. The man he replaced at Eesti Energia, Toomas Põld, left the company in March to pursue private enterprise.

    “Knowing the conditions in Ida-Viru County and bolstered by the confidence expressed by the Eesti Energia Group’s directors, I believe that the technology unit team and I will be able to give new life to the company and contribute to implementing goals that are important for the whole group,” said Licht. He added that after his first few days on the job and meeting the team, his first steps as head of the Technology Unit will be to map the company’s business growth perspectives and based on that, to launch sales.

    Eesti Energia Technology Unit offers a wide array of technology solutions in the field of energy and industry. The one-stop industrial projects service encompasses both design and manufacturing as well as maintenance of installed equipment.

    The company’s foreign project markets extend to over 40 countries around the world. The company has in the past produced industrial equipment for clients based in Scandinavia, Western Europe, Asia and America. Among other things, the Technology Unit produces steel structures for underwater oil and gas rigs.

    International symposium “Oil Shale 100” is major event in anniversary year

    Tallinn will host an international symposium, “Oil Shale 100”, on 20-21 September that will draw delegates from countries with oil shale processing operations and reserves from all over the world. The event is being held as part of the oil shale industry’s centennial year and it is being spearheaded by Eesti Energia, Tallinn University of Technology and the University of Tartu. Read more »

  • The Large Business Customer Services Department fulfilled a Christmas pledge made to customers: 2,000 young pine trees get a new lease on life at Narva open cast »

    In late April, the Large Business Customer Services Department kept its Christmas pledge and gave a new home to 2,000 young pine trees in Narva open cast.

    For several years now, Eesti Energia’s large customer account executives have given their customers something else in lieu of a Christmas present - a promise to do good for the environment. The Large Business Customer Services team, which planted 3,000 spruce seedlings in Anija Municipality in 2013, saved a natterjack toad habitat from destruction in 2014 and restored the Raadna recreational area by Lake Peipus in 2015, decided this year to do their part to recondition former industrial oil shale areas and plant pine trees there.

    The action, held on International Earth Day, drew 20 planters - besides the Large Business Customer Services department, marketing and communication and environmental service employees took part. Specialists from the State Forest Management Centre provided guidance to the workers to give the young trees the best possible start to their new life.

    Eesti Energia Head of Large Business Customer Services Artur Teesalu: “We can say with pride that the energy we produce has helped the Estonian economy develop and produced a sense of security for our large customers. But energy generation has had certain side effects and shale extraction has left a mark on some regions. It is because of this that we are pleased to give something back to the environment with our team - the 2,000 young pines that we planted will help accelerate natural renewal in our former industrial areas. Considering the past and thinking to the future, planting these pines gave us an even better feeling of being a part of Eesti Energia.

    Over the years, Eesti Energia has become one of the biggest forest developers in Estonia - the company has planted more than 13,000 hectares of forest since the 1960s. In addition to Narva open cast mine, the former industrial area of Aidu open pit mine was also afforested. The afforested former mining areas are mainly pine and birch, with alder stands to a lesser extent.

    Watch the video of the tree planting day:

    Did you know that...?

    … Narva opencast mine is today one of two mining companies within Eesti Energia Kaevandused. About 8 million tonnes of oil shale is mined a year in the opencast - that’s about half of the annual output of Eesti Energia Kaevandused. With a storied history behind them, the open cast’s specialists continue to maintain and develop mining technology - the simultaneous use of two draglines in one trench was picked as the group’s Highlight of the Year for 2014. The open cast is currently developing an underground mining project that is necessary for maintaining volumes and low production prices.

    … the first tonnes of oil shale at Narva open cast were produced around 1pm on 30 September 1970. The name of the new company was then announced publicly - Narva karjäär (Narva open cast)

    … the all-time oil shale production record at Narva open cast is 8.14 billion tonnes, set in 2013.

    … Narva open cast has three pits. In 2000, Narva and Sirgala pits were merged, and in 1987, Viivikonna and Sirgala were merged.

    … Wise Owl, Swallow, Lynx, and Narva Bear are the names of the excavators operating in Narva open cast.

The market overview has been prepared according to the current market knowledge of the Eesti Energia analyst. The information provided herein is based on public information and sources mentioned in the report. The overview is presented as informative material and on no condition as a promise, proposition, or an official prognosis of Eesti Energia. The opinions presented in the market overview are subject to change and the person presenting them reserves the right to make changes to them. Given the rapidly changing regulation of the electricity market, this market overview or information provided herein is not final and may not comply with situations that may arise in the future. The market overview does not create, end, nor change legal relations (including contracts). Eesti Energia is not liable for any expenses or damages which may occur in relation to the use of the information presented in this market overview.