Eesti Energia's quarterly results were influenced by the restructuring of large-scale energy production

31.10.2019

In the third quarter, Eesti Energia increased its turnover and tripled its production of renewable energy, but the longer-than-planned maintenance of Auvere Power Plant and the large-scale energy production restructuring had a negative impact on the result.

Turnover of the energy group increased to EUR 206 million in the third quarter, up three per cent compared to last year. EBITDA was 42.1 million euros, down 28% in a year. Net profit decreased by EUR 20.4 million and the net loss of the third quarter was EUR 9.5 million.

"The result was negatively impacted in particular by the prolonged maintenance work on Auvere Power Plant and the restructurings in large-scale energy production. Negative impact of the third quarter was only due to the production of oil shale electricity. All other business areas were profitable and rather exceeded expectations,” said Andri Avila, CFO and Member of the Management Board of Eesti Energia.

The Auvere plant produced approximately 300 gigawatt-hours of electricity less than planned. As a result, total electricity production was significantly lower and revenue was lost. "At the same time, depreciation and interest expenses for Auvere Power Plant alone totalled EUR 10 million in the third quarter," Avila explained.

General Electric, carrying out the work in Auvere under warranty, has promised to finish the maintenance of the plant by mid-fourth quarter. During the warranty period, according to the contract, losses shall be compensated by the main contractor with whom relevant negotiations are ongoing.

The second extraordinary factor was the adjustment of large-scale energy production processes and staff numbers to match market conditions. In doing so, the company took into account the state’s expectation to ensure the capacity to generate electricity at the level of average Estonian consumption until 2023. The fund to help people who lost their jobs and other measures cost over EUR 4 million.

"Our cost base is now optimized to meet the changed market situation and it is adapted to new production volumes," Avila said. This year’s nine-month profit of Eesti Energia is 9.4 million euros.

In the third quarter, Eesti Energia generated 951 GWh of electricity, that is 56 percent less than in the same period last year. The decrease in production volumes was mainly due to the higher price of CO2 emission allowances, which increased by 43 per cent to the level of 26.9 euros per ton. The decrease in electricity production volumes resulted from the decrease in oil shale based electricity production.

In contrast, renewable electricity production more than tripled to 241 GWh in a year. The share of electricity produced from renewable and alternative sources was 41 percent of the total production as a quarterly average.

Retail electricity sales increased 18 percent to 1698 GWh, mainly at the expense of the Lithuanian and Polish markets. Over the year, oil shale production increased nine percent to 113,000 tons and sales revenue increased 36 percent to 28 million euros.

Sales of network services remained at the previous year's level, but due to the rate drop at the beginning of the year, the sales revenue decreased by 3.6 million. This money remained additionally in the hands of consumers.

In the third quarter, Eesti Energia invested a total of 34.4 million euros. Power network investments accounted for 18.5 million euros and renewable energy investments for nearly four million euros. As an indicator of economic activity, there were nearly 950 new connections to the network in the quarter, which is by a third more than last year.

In the third quarter, the company contributed EUR 22 million as various fees and taxes to the state treasury.