Iseteenindus

Eesti Energia Group results for Q2 2020

30.07.2020

The sales revenues of Eesti Energia Group amounted to EUR 168.0 million in the second quarter of 2020 (-17.8% year-on-year). Group EBITDA was EUR 54.8 million (-13.0% year-on-year). The Group's net profit equalled EUR 7.0 million in the second quarter of 2020 (-25.8% year-on-year).

Group financials

The revenue of Eesti Energia in the second quarter of 2020 decreased mainly due to lower electricity market prices and smaller sales volumes of the electricity segment carrying the trends from the first quarter. Distribution segment’s sales revenue decreased slightly as the consumption volumes fell, but thanks to operational efficiencies EBITDA stayed stable on a yearly basis. The decrease in shale oil sales revenue and EBITDA is attributable to lower market prices and a smaller sales volume. Other products and services contributed positively to both revenues and EBITDA. Reported EBITDA profit of the Group fell compared to the second quarter of last year mostly due to the poor performance of the electricity segment. Net profit declined on yearly basis mainly due to the lower EBITDA.

Electricity segment

Eesti Energia's sales revenues from electricity declined by 31% year-on-year to EUR 72 million. The Group's average electricity sales price equalled 45.5 EUR/MWh in the second quarter (-14.7% year-on-year), while the quarterly average market electricity price for Estonian Nord Pool area declined to 28.8 EUR/MWh (-32.6% year-on-year). Electricity prices overall in the Nordics were at low levels due to higher than usual levels of the Nordic water reservoirs in Norway and Sweden. Electricity sales volume decreased by 8.4% year-on-year to 1.7 TWh. Wholesale electricity sales slightly increased and amounted to 0.2TWh (+3.8% year-on-year), while retail sales volumes decreased to 1.5TWh (-9.6% year-on-year). Retail sales volumes declined on a yearly comparison in Estonia, Poland, Finland, Latvia while in Lithuania volumes increased. Electricity generation fell 46.0% to 0.6TWh due to low electricity market price in combination with high CO2 prices that affected directly our oil shale based electricity production. EBITDA from the electricity segment totalled EUR 8.0 million (-75.0%). Lower market price of electricity had the biggest negative impact on EBITDA together with gain on derivatives compared to the same period of last year, but also lower volumes had its effect.

Distribution segment

Eesti Energia's revenues from the distribution segment totalled EUR 50.1 million (-0.8% year-on-year). The decrease in revenues was caused by fall in consumption volumes as the distributed volume was 3.4% lower than a year ago. The average distribution sales price slightly increased from 32.8 to 33.7 EUR/MWh as a result of bigger share of household consumption. Distribution EBITDA totalled EUR 23.0 million (-0.04% year-on-year) as the negative effect from lower distributed volumes was outweighed by decreased electricity costs for network losses.

Shale oil segment

Eesti Energia's revenues from shale oil sales amounted to EUR 25.7 million, down by 19.3% year-on-year. Shale oil sales volume totalled 85.7 thousand tonnes (-24.2% year-on-year). Shale oil sales volume and revenue decreased year on year, mainly due to a significant decline in the oil market prices. Because of the decrease in oil prices, contractual shale oil sales volumes were reduced to the minimum contractual delivery volume. Production quantity was lower at 85.9 thousand tons (-8.1% year-over-year) due to different maintenance schedules compared to last year’s second quarter as some maintenances were brought earlier to take advantage of the low price environment. 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 205.9 EUR/tonne (-42.4% year-on-year) due to lower oil market prices. Group’s average shale oil sales price including the impact of derivative transactions was at 299.6 EUR/tonne (+6.5% year-on-year). EBITDA from shale oil operations decreased by 8.0% year-on-year to EUR 9.2 million. Positive impacts to EBITDA came from derivative gains and lower fixed costs. Lower average sales price excluding gain on derivatives together with lower volumes had a negative effect on the EBITDA.

Other segment

EBITDA from Group's other products and services totalled at EUR 14.6 million in the second quarter of 2020, compared to a loss of EUR 2.1 million in the same period last year. The biggest impact came from gas sales and sale of excess CO2 positions related to heat production.

Capital expenditure

The Group's capital expenditure was EUR 28.1 million in the second quarter (-30.1% year-on-year). Investments to the electricity distribution network made up the largest share of investments, EUR 19.7 million (-3.6% year-on-year). There were no notable bigger investments during the quarter, with most of the capital expenditure breakdowns showing decline in annual comparison.

Financing, credit ratings and dividends

The cash and cash equivalents held by the Group totalled EUR 134.4 million at the end of June 2020. As of 30 June 2020, the Group had access to a total of EUR 540 million of bank loans, from which revolving credit facilities amounted to EUR 295 million and a long-term loan agreements signed with the European Investment Bank in the amount of EUR 245 million. At the end of the second quarter 2020 the Group's net debt amounted to EUR 976 million. During the quarter, the owner of the company increased share capital with an equity injection of €125m. According to the decision of the annual general meeting dividends will not be paid this year.

Eesti Energia's net debt to EBITDA ratio stood at 4.5x at the end of Q2 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.

Eesti Energia is rated BBB- (stable) by Standard & Poor’s and Baa3 (stable) by Moody’s.

Outlook

There is no change in the outlook compared to the first quarter of 2020. 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 third quarter results on October 29, 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 0.4 TWh for Q3-Q4 of 2020 (at average price of 38.5 EUR/MWh). The Group's hedge positions for electricity retail sales amounted to 1.2 TWh for Q3-Q4 of 2020 (at average price of 40.4 EUR/MWh) and 2.3TWh for 2021 (at average price of 36.7 EUR/MWh). For shale oil, the hedge positions totalled 175.3 thousand tonnes for Q3-Q4 of 2020 (at average price of 314.8 EUR/tonne) and 283.5 thousand tonnes for 2021 (at average price of 314.9 EUR/tonne).

The Group's position in CO2 emission allowances for Q3-Q4 2020 amounts to 2.6 million tonnes at an average price of 17.6 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 Q2 financial results will take place on 30 July 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 & Treasury
Eesti Energia AS
Phone +372 465 2885
rasmus.noormagi@energia.ee