Iseteenindus

Eesti Energia Group audited results for financial year 2019

28.02.2020

The sales revenues of Eesti Energia Group amounted to EUR 956.4 million in the 2019 financial year (+9.3% compared to 2018), while total revenues grew to an all-time record of EUR 1,018.5 million (+13.5% compared to 2018). Consolidated EBITDA totalled EUR 259.8 million (-8.2% compared to 2018). The Group’s net profit totalled EUR 23.2 million (-78.2% compared to 2018 financial year).

Group financials

Eesti Energia’s revenue was supported by strong retail sales of electricity and record shale oil production quantities on the back of growing market prices, while renewable energy production continued its increase. Performance of the distribution segment was affected by decreases in distribution tariffs in the beginning of 2019. The decline in the Group’s EBITDA was mainly due to distribution tariff cuts and high CO2 prices as a result of which oil shale electricity production decreased on a yearly basis.

Electricity segment

Eesti Energia’s sales revenues from electricity increased by 15.6% to EUR 505 million in 2019. The Group’s average electricity sales price excluding the impact of derivatives equalled 53.4 EUR/MWh in 2019 (+12.6% year-on-year), while the average Nord Pool Estonia electricity price declined to 45.9 EUR/MWh (-2.6% year-on-year). The Group’s electricity generation volume totalled 5.5 TWh in 2019 (-39.2% year-on-year). Eesti Energia’s electricity sales and generation volume were impacted by higher market prices of carbon emission allowances, and more extensive than anticipated maintenance works in the power plants, mainly related to the newest power unit Auvere. From the electricity generation volume, electricity produced from renewable and alternative resources constituted 36% in 2019, up from a level of 13% in 2018. Renewable energy production rose from 0.5 TWh in 2018 to 1.3 TWh in 2019, majority of the growth came from wind energy. Electricity sales volume amounted to 8.6 TWh (-3.1% year-on-year), whereas the retail sales saw increase to 7.5 TWh (+13.1% year-on-year) in accordance with the Group’s strategy while wholesale sales decreased to 1.1TWh (-50.3% year-on-year).

Annual EBITDA from the electricity segment slightly increased to EUR 132.8 million (+1.2% year-on-year). EBITDA growth was driven by better margins and gain on derivatives, while effect from lower overall volumes brought EBITDA lower.

Distribution segment

Eesti Energia’s revenues from the distribution segment amounted to EUR 219.3 million in 2019 (-8.9% year-on-year). Distribution volume totalled 6.9 TWh (-1.0% year-on-year) while the average distribution sales price declined to 31.9 EUR/MWh in 2019 (-8.0% year-on-year) due to cuts in distribution tariff in the beginning of 2019 on average by 8.4% as the allowed profitability, which is regulated by the Competition Authority, has decreased as a direct consequence of the low interest-rate environment created by the world’s central banks. EBITDA from the distribution segment equalled EUR 79.7 million (-20.0% year-on-year) due to the before-mentioned tariff cuts.

Shale oil segment

The Group’s revenues from sales of shale oil amounted to EUR 125.3 million (+10.8% year-on-year). The shale oil segment was supported by higher oil prices despite a mitigating effect from hedge positions that had been entered into at lower price levels compared to the current oil market price. Eesti Energia’s average shale oil sales price excluding the impact of derivatives equalled 348 EUR per tonne in 2019 (+5.2% year-on-year). Shale oil segment also benefitted from larger production and sales volumes. The Group’s annual oil production quantity of 442 thousand tonnes (+7.8% year-on-year) is the highest level ever achieved. Sales volume equalled 436 thousand tonnes (+11.0% year-on-year). EBITDA of the shale oil segment increased to EUR 45.8 million (+5.0% year-on-year), mainly due to higher oil prices and sales volume, while the effects from larger allocated costs and hedge positions held back some of the gain on the profit line.

Other products and services

EBITDA from the rest of the Group’s products and services totalled EUR 1.5 million in 2019, compared to EUR 8.7 million in 2018. The main reason for the reduction are the liquidated damages received from GE in 2018 related to Auvere power plant, as there were no corresponding payments in 2019. Heat sales decreased during 2019 by EUR 3.2 million, while pellet operations that were acquired together with Nelja Energia in November 2018 had a positive effect.

Capital expenditure

Eesti Energia’s capital expenditure totalled EUR 136 million (-30.1% year-on-year). Decrease in investments was due to the existence of Auvere power plant related sums in 2018, and also maintenance investments in the Large Scale Energy Production were lower as the oil-shale related electricity production together with mining operations saw less activity in 2019 compared to 2018. Investments into the distribution network continue to make up the largest share of the total capex, EUR 83 million.

Financing, credit ratings and dividends

The Group’s liquidity position remained solid at the end of the 2019. Cash and cash equivalents held by the Group amounted to EUR 34.6 million as at the end of the year. The Group also had access to EUR 250 million of revolving credit facilities from regional banks. Additionally, the Group signed a bilateral loan agreement with the European Investment Bank (EIB) in December 2019 in the amount of EUR 175 million. The loan signed with the EIB has an availability period of two years from signing.

Eesti Energia’s net debt to EBITDA ratio stood at 4.2x as at the end of 2018, higher than the 3.5x financial policy target of the company. The Group has outlined steps in its strategy to get back within the bounds of its financial policy metric. Eesti Energia is rated BBB- (stable) by Standard & Poor’s and Baa3 (stable) by Moody’s.

Outlook

It is expected that in 2020 Eesti Energia’s sales revenues, EBITDA and investments will grow compared to 2019 (defined as more than 5% growth). Eesti Energia expects to pay a dividend of EUR 23.2 million in 2020, on top of which income tax is also payable.

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 1.3 TWh for 2020 (at average price of 37.0 EUR/MWh) and to 1.4 TWh for 2021 (at average price of 36.0 EUR/MWh). For shale oil, the hedge positions totalled 351 thousand tonnes for 2020 (at average price of 315 EUR/tonne) and 272 thousand tonnes for 2021 (at average price of 312 EUR/tonne).

The Group’s position in CO2 emission allowances amounts to 4.3 million tonnes for 2020 at an average price of 15.85 EUR/tonne.

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

Rasmus Noormägi
Head of Investor Relations and Treasury
Eesti Energia AS
Tel +372 465 2885
rasmus.noormagi@energia.ee