Iseteenindus

Eesti Energia Group results for Q1 2020

05.05.2020

The sales revenues of Eesti Energia Group amounted to EUR 226.8 million in the first quarter of 2020 (-16.5% year-on-year). Group EBITDA was EUR 49.7 million (-40.6% year-on-year). The Group's net profit equalled EUR -2.0 million in the first quarter of 2020 (-121.1% year-on-year).

Group financials

The revenue of Eesti Energia in the first quarter of 2020 decreased mainly due to lower electricity market prices and smaller sales volumes of the electricity segment. Distribution segment’s sales revenue decreased as the consumption volumes fell, but thanks to operational efficiencies EBITDA slightly grew on a yearly basis. Shale oil operations showed good performance as sales revenue and EBITDA rose despite the turmoil on oil markets supported by derivative transactions concluded in the past in accordance with the Group’s hedging strategy. Reported EBITDA of the Group fell compared to the first quarter of last year mostly due to the poor performance of the electricity segment. Net profit declined on yearly basis as the lower EBITDA weighed in.

Electricity segment

Eesti Energia's sales revenues from electricity declined by 35.6% year-on-year to EUR 94 million. The Group's average electricity sales price equalled 45.9 EUR/MWh in the first quarter (-15.6% year-on-year), while the quarterly average market electricity price for Estonian Nord Pool area declined to 27.6 EUR/MWh (-42.1% year-on-year). This is the lowest Q1 electricity price since 2010 when the Estonian electricity market deregulation began. Electricity prices overall in the Nordics were at low levels due to extraordinary warm and windy winter, and higher than usual levels of the Nordic water reservoirs. Electricity sales volume decreased by 14.3% year-on-year to 2.2 TWh as our wholesale electricity sales fell to the level of 0.2TWh (-54.9% year-on-year) and retail sales volumes were at 2.0TWh (-4.2% year-on-year). Retail sales volumes declined on a yearly comparison in Estonia and Poland, whereas in Latvia and in Lithuania volumes increased. Electricity generation fell 56.5% to 1.0TWh due to low electricity market price that affected directly our oil shale based electricity production. EBITDA from the electricity segment totalled EUR 16.6 million (-65.8%). Lower market price of electricity had the biggest negative impact on EBITDA compared to the same period of last year, but also lower volumes had their effect.

Distribution segment

Eesti Energia's revenues from the distribution segment totalled EUR 59.8 million (-4.5% year-on-year). The decrease in revenues was caused by fall in consumption volumes as the distributed volume was 4.5% lower than a year ago. The average distribution sales price was at the same level of 31.3 EUR/MWh. Distribution EBITDA totalled EUR 19.1 million (+0.7% year-on-year) as the negative effect from lower distributed volumes was outweighed by smaller network losses which declined from last year’s Q1 figure of 4.02% to 3.9%.

Shale oil segment

Eesti Energia's revenues from shale oil sales amounted to EUR 34.8 million, up by 17.7% year-on-year. Shale oil sales volume totalled 102.5 thousand tonnes (+0.4% year-on-year), while production quantity was at 122.3 thousand tons (-2.2% year-over-year) due to different maintenance schedules compared to last year’s first quarter. The shale oil segment was supported by hedge transactions concluded in the past from higher price levels in accordance with the Group’s hedging strategy. Eesti Energia's average shale oil sales price excluding the impact of derivative transactions decreased to 297.7 EUR/tonne (-9.5% year-on-year) due to lower oil market prices. Group’s average shale oil sales price including the impact of derivative transactions rose to 339.3 EUR/tonne (+17.2% year-on-year), with derivative transactions resulting in a gain of 41.3 EUR/tonne in Q1 2020. EBITDA from shale oil increased by 30.2% year-on-year to EUR 17.0 million. Biggest positive impact to EBITDA came from derivative gains, while average sales price excluding derivatives declined and fixed costs were 1.6 million EUR higher as a result of bigger allocation of internal mining costs to the shale oil segment.

Other segment

EBITDA from Group's other products and services totalled EUR -3.0 million in the first quarter of 2020, compared to EUR 3.1 million in the same period last year. The biggest impacts came from lower heat sales and negative effect from gas related derivative transactions.

Capital expenditure

The Group's capital expenditure totalled EUR 68.7 million in the first quarter (+220.8% year-on-year). The increase is attributable to the purchase of the depleted Tootsi peat extraction site in the amount of EUR 43 million (excluding VAT). The acquisition of the land allows Eesti Energia to move on with the development of the Tootsi wind farm project to increase the renewable energy production capacity of the Group.

Financing, credit ratings and dividends

The cash and cash equivalents held by the Group totalled EUR 53.4 million at the end of March 2020. As of 31 March 2020, the Group had access to a total of EUR 325 million of bank loans, from which revolving credit facilities amounted to EUR 150 million and a long-term loan agreement signed with the European Investment Bank in the amount of EUR 175 million. At the end of the first quarter 2020 the Group's net debt amounted to EUR 1 176 million.

Eesti Energia's net debt to EBITDA ratio stood at 5.2x at the end of Q1 2020, 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. On 1 April, the owner of the company increased share capital with an equity injection of €125m, the adjusted 2020 Q1 net debt to EBITDA ratio would be 4.65x.

The annual general meeting has decided not to pay dividends this year.

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 revenue and EBITDA will decline (defined as at least 5% decline) compared to 2019 numbers. Capital expenditures are estimated to grow (at least 5% growth), however due to the current uncertain environment those plans will be specified in more detail in the coming months. Currently it is expected that increase will come from renewable development investments, while investments regarding oil shale sector are expected to decrease significantly in 2020. The oil shale related investments are expected to increase next year, as the investments regarding the new shale oil plant Enefit-280 will have a larger effect.

Eesti Energia will publish its second quarter results on July 30, 2020.

Eesti Energia conducts derivative transactions to hedge the price risk of electricity, CO2 and oil. The Group's hedge positions for electricity power production amounted to 0.6 TWh for Q2-Q4 of 2020 (at average price of 38.7 EUR/MWh). The Group's hedge positions for electricity retail sales amounted to 1.7 TWh for Q2-Q4 of 2020 (at average price of 36.5 EUR/MWh) and to 2.2TWh for 2021 (at average price of 35.5 EUR/MWh). For shale oil, the hedge positions totalled 233.7 thousand tonnes for Q2-Q4 of 2020 (at average price of 314.8 EUR/tonne) and 283.5 thousand tonnes for 2021 (at average price of 312.9 EUR/tonne).

The Group's position in CO2 emission allowances for Q2-Q4 2020 amounts to 3.4 million tonnes at an average price of 14.5 EUR/tonne (including forward transactions, free emission allowances received as investment support and the surplus of unused allowances from previous periods). The position for 2021 amounts to 0.9 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.

Investor call discussing the 2020 Q1 financial results will take place on 5 May 2020, at 11:00 London time, 12:00 Frankfurt time and 13:00 Tallinn time. Please register to participate. After registration you will be sent the details required to join the conference call.

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