Eesti Energia Group results for Q1 2019
The sales revenues of Eesti Energia Group amounted to EUR 282.6 million in the first quarter of 2019 (+23.6% year-on-year). Group EBITDA reached EUR 83.8 million (+9.1% year-on-year). The Group's net profit equalled EUR 9.5 million in the first quarter of 2019 (-76.6% year-on-year).
The revenue growth of Eesti Energia in the first quarter of 2019 was driven by the electricity segment on the back of higher electricity prices. Shale oil operations also showed good performance as sales volumes grew. On annual basis distribution segment’s results are affected by the cut in the distribution tariff which was implemented in January 2019. Reported EBITDA of the Group rose compared to the first quarter of 2018 even though in 2018 the Group received liquidated damages of EUR 7.7 million related to the delay in the delivery of the Auvere power plant. The higher price of CO2 emissions had its effect on the EBITDA as the growth was more modest than the growth in Group’s revenues. Net profit declined on yearly basis as the acceptance of the Auvere power plant in last year’s second half means that we have higher depreciation expense and longer capitalise other costs related to Auvere. Net profit was also affected by income tax expense related to the dividends which in last year were announced in the second quarter, this year in the first quarter.
Eesti Energia's sales revenues from electricity increased by 49% year-on-year to EUR 157 million. The Group's average electricity sales price equalled 56.4 EUR/MWh in the first quarter (+31.8% year-on-year). Electricity sales volume decreased by 5.6% year-on-year to 2.5 TWh as our wholesale electricity sales fell, while our retail sales volumes increased, mostly related to the electricity sales on the Polish market. Electricity generation fell 17% to 2.2TWh due to higher CO2 costs that affect directly our oil shale based electricity production. In addition there were unplanned maintenance works in the Auvere power plant. The production of electricity from renewable and alternative sources reached an all time high of 552 GWh. The increase is due to the acquisition of Nelja Energia which increased our installed wind capacity from 111MW to 398MW, and also weather conditions were favourable in Q1 2019.
EBITDA from the electricity segment totalled EUR 48.5 million (+49.4%). Higher market price of electricity had a positive impact on EBITDA compared to the first quarter of 2018. However, higher cost of CO2, rise in fixed costs mainly due to the acquisition of Nelja Energia by Eesti Energia’s subsidiary Enefit Green and increased electricity purchasing costs had a negative contribution.
Eesti Energia's revenues from the distribution segment totalled EUR 62.6 million (-11.4% year-on-year). The decrease in revenues was caused by an average distribution tariff cut of 8.4% which took place in January 2019. Distribution volume fell to 2.0 TWh (-2.9% compared to Q1 2018). The average distribution sales price declined to 31.3 EUR/MWh (-8.8%) due to a cut in distribution tariff in January 2019. Distribution EBITDA totalled EUR 19 million (-27.1%) as the main factor was the lower average sales price due to a cut in tariffs.
Shale oil segment
The Group's revenues from shale oil sales amounted to EUR 29.5 million, up by 35.0% year-on-year. The shale oil segment was supported by both increasing prices as well higher volumes, although hedges made from earlier periods from lower price levels held back some of the gain. Eesti Energia's average shale oil sales price equalled 329 EUR/tonne in the first quarter (+14.1% year-on-year). Shale oil sales volume totalled 102 thousand tonnes showing +21.9% improvement on an annual comparison level. EBITDA from shale oil increased by 55.6% year-on-year to EUR 13.1 million. In the same way as growth in revenues, EBITDA was also driven by better market prices and higher sales volumes, but also better operational reliability gave its impact to the EBITDA of shale oil segment.
EBITDA from Group's other products and services totalled EUR 3.1 million in the first quarter of 2019, compared to EUR 9.8 million in the same period last year. The previous year's result included EUR 7.7 million in liquidated damages related to the Auvere power plant.
The Group's capital expenditure totalled EUR 21.5 million in the first quarter (a fall of EUR 14.1 million, -39.7% year-on-year). The decrease is mostly related to the Auvere power plant where we no longer have the associated investments as the power plant has been accepted.
Financing, credit ratings and dividends
Eesti Energia's liquidity position is on an improving path. The cash and cash equivalents held by the Group totalled EUR 141.2 million at the end of March 2019, an increase of EUR 79.7 million from the end of 2018. During the quarter refinancing operations were carried out to consolidate the debt that was acquired with the acquisition of Nelja Energia in November 2018 to Enefit Green, Eesti Energia’s subsidiary. For this, the Group’s fully owned subsidiary Enefit Green took into use bank loans signed in December 2018 with SEB and Swedbank in the amount of EUR 260 million. As a result of the refinancing operations Eesti Energia’s average interest rate declined from 2.18% to 2.03%. The Group has access to a total of EUR 300 million of revolving credit facilities from OP Corporate Bank and from SEB. At the end of the first quarter 2019 the Group's net debt amounted to EUR 981 million.
Eesti Energia's net debt to EBITDA ratio stood at 3.4x at the end of Q1 2019, in line with the 3.5x financial policy target. Eesti Energia is rated BBB (negative) by Standard & Poor's and Baa3 (stable) by Moody's.
Eesti Energia's shareholder has approved a dividend payment of EUR 57.0 million to be paid in 2019. On top of this income tax of EUR 14.3 million will be paid.
It is expected that in 2019 Eesti Energia's sales revenue will grow (defined as at least 5% growth). EBITDA and capital expenditures are also estimated to grow (at least 5% growth) compared with 2018.
Eesti Energia will publish its second quarter results on July 30, 2019.
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 2.5 TWh for Q2-Q4 of 2019 (at average price of 43.0 EUR/MWh) and to 0.5TWh for 2020 (at average price of 38.7 EUR/MWh). For shale oil, the hedge positions totalled 247 thousand tonnes for Q2-Q4 of 2019 (at average price of 273 EUR/tonne) and 281 thousand tonnes for 2020 (at average price of 303 EUR/tonne).
The Group's position in CO2 emission allowances for 2019 amounts to 10.4 million tonnes at an average price of 11.4 EUR/tonne (including forward transactions, free emission allowances received as investment support and the surplus of unused allowances from previous periods). The position for 2020 amounts to 0.7 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.