Eesti Energia Group unaudited results for 2020 financial year
The sales revenues of Eesti Energia Group amounted to EUR 833.7 million, -10.0% year-on-year, in the financial year of 2020. Group EBITDA was EUR 213.6 million (-17.8% year-on-year). The Group's net profit was at EUR 19.3 million (-45.5% year-on-year).
The smaller sales revenue and EBITDA of Eesti Energia in 2020 compared to 2019 are attributable to the Electricity segment, where the low electricity prices as a result of warmer than usual weather, record high Nordic hydro reservoir levels, and smaller electricity consumption as a result of the Covid-19 had the most effect. The high CO2 emission allowance prices made the year challenging for oil shale fired electricity production units. On the other hand oil production, distribution and renewable assets (renewables are included under the Electricity segment) performed well demonstrating year-on-year improvement in both sales and profits.
Eesti Energia's sales revenues from electricity declined by 24.1% year-on-year to EUR 360 million in 2020. The Group's average electricity sales price excluding derivative impact was at 48.2 EUR/MWh (-9.7% year-on-year). As a comparative figure, the 2020 annual average market electricity price for Estonian Nord Pool area declined to 33.7 EUR/MWh (-26.6% year-on-year). The Group’s average electricity sales price decreased to a lesser extent compared to the market average due to controllable electricity production aimed at peaks hours and retail sales that are with higher margins. Electricity sales volume totalled at 7.8TWh for the 2020 (-9.3% year-on-year). Electricity generation fell to 3.8TWh (-31.4% year-on-year) as a direct result of lower generation from oil shale based electricity production units due to low electricity and high CO2 prices. On a positive note, renewable electricity production increased to 1.5TWh (+18.4% year-on-year) thanks to larger use of biomass (waste wood) at oil shale based electricity production units, and favourable wind conditions together with the good reliability of renewable assets. EBITDA from the electricity segment constituted EUR 53.4 million (-59.8% year-over-year) mostly due to lower volumes and weaker electricity prices. On the positive side fixed costs were lower than in 2019, but this was not enough to compensate the negative effects from the before mentioned factors.
Eesti Energia's revenues from the distribution segment amounted to EUR 217.7 million in 2020 (-0.7% year-on-year). The distributed volume was at 6.7TWh (-2.5% year-on-year), while higher average distribution sales price of 32.5 €/MWh (+1.8% year-on-year) helped to ease the effect from lower volumes. Average distribution sales price increased in 2020 as a result of the Covid-19 pandemic as the consumption shifted from corporate customers with lower tariffs to residential clients with higher tariffs. Distribution EBITDA totalled EUR 87.6 million (+9.9% year-on-year) in 2020 as positive impacts from lower electricity costs for network losses and lower maintenance costs outweighed the negative effect from lower distributed volumes.
Shale oil segment
Eesti Energia's revenues from shale oil sales amounted to EUR 138.1 million (+10.2% year-on-year), with shale oil sales volume rising to 461.2 thousand tonnes (+5.8% year-on-year). Full year oil production rose to 451.7 thousand tons (+2.1% year-on-year). Throughout the year, 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 from derivative transactions decreased to 253.9 EUR/tonne (-27.0% year-on-year) due to lower oil market prices. Group’s average shale oil sales price including the impact of derivative transactions was at 299.4 EUR/tonne (+4.1% year-on-year). EBITDA from shale oil operations grew to EUR 53.8 million (+17.5 year-on-year). Positive impacts to EBITDA came from derivative gain and higher sales volume.
EBITDA from Group's other products and services totalled at EUR 18.7 million in 2020, compared to a profit of EUR 1.5 million in 2019. The biggest positive impacts came from increased retail gas sales and from a CO2 sale transaction concluded in the second quarter of 2020.
The Group's capital expenditure amounted to EUR 188.0 million (+38.3% year-on-year) in 2020. Investments to the electricity distribution network made up the largest share of investments, EUR 95.4 million (+14.6% year-on-year) with now ca 70% of the distribution network being weather-proof. Renewable investments increased on an annual basis due to investments into the Tootsi windfarm project.
Financing, credit ratings and dividends
As of the end of 2020, cash and cash equivalents held by the Group totalled EUR 166.9 million. As of 31 December 2020, Eesti Energia had access to a total of EUR 520 million of bank loans, from which revolving credit facilities amounted to EUR 275 million and a long-term loan agreements signed with the European Investment Bank in the amount of EUR 245 million. In 2020, the owner of the company increased share capital of the Company with an equity injection of €125m. In the month of November, Eesti Energia redeemed a 106 million Eurobond with a coupon of 4.50% issued back in 2005 from existing cash resources and revolving credit facilities. According to the decision of the annual general meeting no dividends were paid in 2020. Eesti Energia’s net debt was at EUR 847 million, nearly a quarter of a billion euros less than at the end of 2019.
Eesti Energia's net debt to EBITDA ratio stood at 4.0x at the end of Q4 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- (negative) by Standard & Poor’s and Baa3 (stable) by Moody’s.
It is the management’s expectation that in 2021 Eesti Energia's sales revenue, EBITDA and investments will likely grow (defined as at least 5% growth) compared to 2020 numbers.
Eesti Energia will publish its audited 2020 annual report on April 8, 2021.
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 0.1 TWh for 2021 (at average price of 49.0 EUR/MWh). The Group's hedge positions for electricity retail sales amounted to 2.2 TWh for 2021 (at average price of 34.2 EUR/MWh) and 1.8TWh for 2022 (at average price of 33.5 EUR/MWh). For shale oil, the hedge positions totalled 349.6 thousand tonnes for 2021 (at average price of 297.9 EUR/tonne) and 277.8 thousand tonnes for 2022 (at average price of 270.0 EUR/tonne).
The Group's position in CO2 emission allowances for 2021 amounts to 2.4 million tonnes at an average price of 21.6 EUR/tonne (including forward transactions, free emission allowances received as investment support and the surplus of unused allowances from previous periods).
The unaudited annual report of Eesti Energia and the investor presentation is available at Eesti Energia's web site.
Investor call discussing the 2020 unaudited financial results will take place on 26 February 2021, 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.