Iseteenindus

Eesti Energia Group audited results for financial year 2016

14.03.2017

Sales revenues of Eesti Energia Group amounted to EUR 742.1 million in the 2016 financial year, which constitutes 4.5% decline compared to 2015. Group EBITDA reached EUR 327.3 million (+23.2% y-o-y) being the highest ever annual EBITDA for Eesti Energia. The Group’s net profit totalled EUR 171.0 million (a growth of EUR 130.5 million compared to 2015).

Financial results

Despite a difficult market environment at the beginning of the year, the second half of the year was much favourable and Eesti Energia ended the financial year 2016 with robust results (including some one-off positive items). In particular, the fourth quarter was very strong.

The decrease in the Group’s sales revenue is primarily attributable to lower gains from hedge positions, both for electricity as well as shale oil. Eesti Energia’s electricity sales revenues decreased by 1.9% to EUR 348.8 million. There was a 13.5% decline in average sales price for electricity (including the effect of hedges) but this was balanced by higher production and sales volumes (+16.3%). Revenues from shale oil amounted to EUR 67.0 million (-34.8%), primarily driven by lower gains from hedge positions. Revenues from distribution grew by 4.3% to EUR 252.7 million due to increase in the volume of distributed electricity.

Group EBITDA grew to the highest ever level of EUR 327.3 million, supported by the electricity and distribution segment and some one-off impacts. EBITDA from electricity equalled EUR 118.0 million (+15.6%), where larger sales volumes helped to offset the negative effect of lower gains from derivatives. EBITDA from the shale oil segment totalled EUR 7.8 million (down by 40.2 million from 2015), primarily due to lower gains from derivatives. Distribution EBITDA grew to EUR 112.6 million due to the impact of higher volumes.

EBITDA from the remainder of the Group’s products and services totalled EUR 88.9 million, including a number of one-off items. Firstly, the result includes the positive impact of EUR 68.6 million from liquidated damages payable to the Group by GE related to the construction of the Auvere power plant. GE has agreed to pay liquidated damages related to unearned revenue which has been caused by the delay in final commissioning of the power plant. The effect of these liquidated damages has been reflected in the Group’s EBITDA in the fourth quarter of 2016 but will be paid out by GE based on an agreed payment schedule until July 2017. There may be additional liquidated damages paid for the time until final completion of the power plant as it continues working below full design capacity. Secondly, the Group also got a positive one-off effect of EUR 14.2 million from retroactive change in environmental charges, recorded in the second quarter results.

Key performance indicators

The Group’s electricity sales volume increased in 2016 and amounted to 9.0 TWh (+16.3% compared to 2015). Retail sales accounted for 6.2 TWh (+5.5%) and wholesale for 2.8 TWh (+51.4%) of the total. Wholesale grew as a result of higher electricity prices on Nord Pool and better competitiveness of our electricity production assets, both owing to lower market price of CO2 and lower cost of oil shale. Eesti Energia’s combined retail market share in the three Baltic countries totalled 26% (-0.6 percentage points compared to 2015).

The volume of electricity distributed by the Group increased by 4.4% to 6.6 TWh on account of weather, favourable economic conditions and better monitoring of unmetered consumption.

The Group’s shale oil sales volume declined by 4.2% to 302 thousand tonnes, as it temporarily scaled back production for a period of time during the first part of the year when oil prices were at their lowest levels.

Capital expenditure

The Group’s capital expenditure declined to EUR 141 million in 2016 (-42.7%). Majority of the capex (EUR 107 million) was spent on upgrading the distribution network. Other maintenance type of investments made up another smaller share. The final payment for Auvere power plant is still due to be made as the required upgrade of filters defers the acceptance of Auvere power plant from the contractor GE. Meanwhile the power plant continues operating at modes and loads where emissions are in compliance with requirements.

Financing, credit ratings and dividends

The Group’s liquidity buffer remained at a very healthy level as the end of the year, including EUR 223.3 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 717 million as at the end of 2016. Net debt has been declining over the past years and in combination with a solid EBITDA level this translates into net debt to EBITDA ratio of 2.2x at the end of 2016. The Group maintains its financial policy target of net debt to EBITDA of maximum 3.5x. The Group’s financial leverage declined to 30%.

Eesti Energia is rated BBB (negative) by Standard & Poor’s and Baa3 (stable) by Moody’s.

We currently expect that Eesti Energia will pay dividends in the amount of EUR 47 million in 2017 but the final amount is still due to be approved by the shareholder.

Outlook

We expect that in 2017 our sales revenue and capital expenditures will increase and EBITDA will decrease compared with 2016. Excluding the positive impact of the liquidated damages related to the Auvere power plant (68.6 million euros) and the retrospective reduction of the resource charge rates (14.2 million euros) on 2016, EBITDA for 2017 is expected to remain at similar level as in 2016.

Eesti Energia will publish its Q1 2017 results on April 28, 2017.

Eesti Energia has a hedging programme in place to hedge the price risk of electricity, CO2 and oil.

The Group’s hedge positions for electricity (including financial hedges as well as fixed price contracts with retail clients) amounted to 4.7 TWh for 2017 (at average price of 35.4 EUR/MWh) and to 0.9 TWh for 2018 (at average price of 33.6 EUR/MWh). For shale oil, the hedge positions totalled 287 thousand tonnes for 2017 (at average price of 237 EUR/tonne) and 180 thousand tonnes for 2018 (at average price of 253 EUR/tonne).

The Group’s position in CO2 emission allowances for 2017 amounts to 9.1 million tonnes at an average price of 5.6 EUR/tonne (including forward transactions, free emission allowances received as investment support and the surplus of unused allowances from previous periods). The position for 2018 amounts to 2.2 million tonnes, consisting of free allowances to be received as investment support.

More information on the financial results of Eesti Energia Group is available at Eesti Energia homepage.

Kadri Haldre
Head of Investor Relations and Treasury
Eesti Energia
Tel +372 715 2887
kadri.haldre@energia.ee