Eesti Energia Group results for Q1 2018

27.04.2018

The sales revenues of Eesti Energia Group amounted to EUR 228.6 million in the first quarter of 2018 (+6.2% year-on-year). Group EBITDA reached EUR 76.8 million (-11.2% year-on-year). The Group’s net profit equalled EUR 40.5 million in the first quarter of 2018 (-16.1% year-on-year).

Group revenue and EBITDA

The revenues of most Eesti Energia’s business segments grew in the first quarter on the back of higher electricity and shale oil prices and growing sales volumes. The results of the distribution segment are on annual comparison affected by the cuts in the distribution tariff which were implemented in the second half of last year. Reported EBITDA declined compared to the first quarter of 2017 but adjusting for the positive impact of the sell-down of the Jordan project in the first quarter of 2017 (EUR 9.2 million), EBITDA remained flat.

Electricity segment

Eesti Energia’s sales revenues from electricity increased by 3.5% year-on-year to EUR 105.6 million. The Group’s average electricity sales price equalled 41.4 EUR/MWh in the first quarter (+3.7% year-on-year). Increase in electricity market prices was not fully reflected in Eesti Energia’s average sales price due to hedge positions which had been entered into at lower price levels. Electricity sales volume increased by 1% year-on-year to 2.5 TWh. Including the full quantity of electricity from Auvere which is partly capitalised in the financial statements, electricity sales volume totalled 2.6 TWh (-1.9%).

EBITDA from the electricity segment totalled EUR 32.5 million (-13.2%). Higher market price of electricity and higher sales volume had a positive impact on EBITDA compared to the first quarter of 2017. However, higher cost of CO2, negative impact from derivative positions and higher fixed costs had a negative contribution.

Eesti Energia’s retail market share in the Baltic countries totalled 27% in the first quarter of 2018, up by 1 percentage point year-on-year.

Shale oil segment

The Group’s revenues from shale oil sales amounted to EUR 21.9 million, up by 19.0% year-on-year. The shale oil segment was supported by both increasing prices as well higher volumes. Eesti Energia’s average shale oil sales price equalled 261 EUR/tonne in the first quarter (+9.3% year-on-year). Shale oil sales volume totalled 84 thousand tonnes (+8.8%). EBITDA from shale oil increased by 49% year-on-year to EUR 8.4 million. In the same way as growth in revenues, EBITDA was also driven by better market prices and higher sales volumes.

Distribution segment

Eesti Energia’s revenues from the distribution segment totalled EUR 70.7 million (-0.8% year-on-year). Distribution volume grew to 2.1 TWh (+7.6%) on the back of colder weather and supportive economic conditions. However, the average distribution sales price declined to 34.3 EUR/MWh (-7.9%) due to the cuts in distribution tariffs in the second half of 2017. Distribution EBITDA totalled EUR 26.1 million (-8.7%) as lower average sales price was only partially compensated by higher distribution volumes.

Other segment

EBITDA from the rest of the Group’s products and services totalled EUR 9.8 million in the first quarter of 2018, compared to EUR 14.9 million in the same period last year. The previous year’s result included EUR 9.2 million from the financial close of the Jordan project which affects comparability.

Capital expenditure

The Group’s capital expenditure totalled EUR 35.6 million in the first quarter (an increase of EUR 9.6 million, +37.0% year-on-year). The increase was mostly related to Auvere power plant where GE successfully carried out some works for meeting payment milestones.

Financing, credit ratings and dividends

Eesti Energia’s liquidity position remains at a strong level. The cash and cash equivalents held by the Group totalled EUR 336.7 million at the end of March, an increase of EUR 38.0 million from the end of 2017. In addition, the Group has access to a total of EUR 150 million of revolving credit facilities from OP Corporate Bank and from SEB. The Group’s net debt amounted to EUR 546 million as at the end of the first quarter. Eesti Energia’s net debt to EBITDA ratio stood at 2.1x at the end of March.

Eesti Energia is rated BBB by Standard & Poor’s and Baa3 by Moody’s. The outlook for both ratings is stable now that Standard & Poor’s published their updated rating report in March.

Eesti Energia’s shareholder has approved a dividend payment of EUR 15.8 million for 2018. On top of this income tax of EUR 4.0 million will have to be paid.

Outlook

It is expected that in 2018 Eesti Energia’s sales revenue will grow (defined as at least 5% growth). Capital expenditures are also estimated to grow (at least 5% growth) whereas EBITDA is expected to decline (at least 5% decrease) compared with 2017. Excluding the positive impact of the liquidated damages related to the Auvere power plant (EUR 30.9 million) and the profit from the financial close of the Jordan project (EUR 9.2 million) in 2017, EBITDA for 2018 is expected to remain flat compared to 2017.

Eesti Energia will publish its second quarter results on July 27, 2018.

Eesti Energia conducts derivative transactions 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 2.6 TWh for Q2-Q4 of 2018 (at average price of 36.2 EUR/MWh) and to 1.0 TWh for 2019 (at average price of 33.2 EUR/MWh). For shale oil, the hedge positions totalled 222.7 thousand tonnes for Q2-Q4 of 2018 (at average price of 256.2 EUR/tonne) and 236.7 thousand tonnes for 2019 (at average price of 268.9 EUR/tonne).

The Group’s position in CO2 emission allowances for 2018 amounts to 8.7 million tonnes at an average price of 5.8 EUR/tonne (including forward transactions, free emission allowances received as investment support and the surplus of unused allowances from previous periods). The position for 2019 amounts to 0.2 million tonnes, consisting primarily of free allowances.

The full quarterly report of Eesti Energia along with an investor presentation is available at Eesti Energia’s web site.

Kadri Haldre
Investorsuhete ja Treasury juht
Tel +372 465 2887
kadri.haldre@energia.ee