Iseteenindus

Eesti Energia Group results for Q1 2021

04.05.2021

The sales revenues of Eesti Energia Group increased to EUR 297.3 million in the first quarter of 2021 (+31.1% year-on-year). Group EBITDA was EUR 72.4 million (+45.5% year-on-year). The Group's net profit amounted to EUR 26.5 million in the first quarter of 2021 compared to previous year’s net loss of EUR 2 million.

Group financials

The revenue of Eesti Energia in the first quarter of 2021 increased mainly on the back of higher electricity market prices and better sales volumes of the electricity segment. Distribution segment’s sales revenue rose as the consumption volumes grew due to more normal weather in the first quarter of 2021 compared to last year’s abnormally warm weather in the winter months. Shale oil operations showed good operational performance, but the sales revenue and EBITDA were held back by derivative impacts in accordance with the Group’s hedging strategy. Reported EBITDA of the Group increased from the first quarter of last year by nearly a half on the back of strong results from the electricity, distribution and other segment.

Electricity segment

Eesti Energia's sales revenues from electricity increased by 57.2% year-on-year to EUR 148 million. The Group's average electricity sales price equalled 56.1 EUR/MWh in the first quarter (+24,3% year-on-year), while the quarterly average market electricity price for Estonian Nord Pool area increased to 51.8 EUR/MWh (+87.7% year-on-year). After last year saw the lowest first quarter electricity price since 2010, prices in the first months of this year were at their highest level for the last couple of years. Electricity sales volume grew by 12.7% year-on-year to 2.5 TWh. Although wholesale electricity sales fell from 2020 first quarter levels 16%, the major share of the electricity sales volume goes to retail which increased by 0.3TWh on an annual basis (+12.7% year-on-year). Electricity generation rose by 33,6% to 1.3TWh on the back of favourable electricity market prices. Renewable energy generation fell on an annual basis by 11.3% due to worse wind conditions compared to last year. However, good availability of the renewable assets and increased electricity from biomass offered some solace. EBITDA from the electricity segment totalled EUR 33.1 million (+99,2%). Better volumes together with derivative effects had the biggest positive impacts on EBITDA compared to the same period of last year, while the margin impact effected negatively due to higher variable cost associated to the purchase of electricity amidst higher electricity market prices. Looking to the future, perhaps the most significant events during the quarter have taken place without a direct effect on the bottom line – we have witnessed an increased interest from Baltic corporate clients to establish long-term (up to 10 year) renewable electricity contracts with fixed prices to decrease their environmental footprint and hedge the price risk for the future. In the first three months of 2021 we have signed such contracts in the amount of 2TWh.

Distribution segment

Eesti Energia's revenues from the distribution segment totalled EUR 65.6 million (+9.7% year-on-year). The increase in revenues can be traced down to the growth in the distributed volumes (+9.5% year-on-year). The average distribution sales price was basically at the same level of 31.4 EUR/MWh (+0.2% year-on-year). Distribution EBITDA totalled EUR 23.7 million (+24% year-on-year) as the lower fixed costs together with better volumes had their effect.

Shale oil segment

Eesti Energia's revenues from shale oil sales amounted to EUR 35.0 million, increase of 0.7% year-on-year. Shale oil sales volume totalled 112 thousand tonnes (+10.9% year-on-year), while production quantity was at 125 thousand tons (+2.4% year-over-year). Hedge transactions concluded in the past from lower price levels in accordance with the Group’s hedging strategy held back sales revenue growth. Eesti Energia's average shale oil sales price excluding the impact of derivative transactions rose to 341 EUR/tonne (+12.9% year-on-year) on the back of recovering global oil prices. Group’s average shale oil sales price including the impact of derivative transactions rose to 312.7 EUR/tonne (-9.2% year-on-year), with derivative transactions resulting in a loss of 31.6 EUR/tonne in Q1 2021. EBITDA from shale oil decreased by 65.8% year-on-year to EUR 5.8 million. Although margin and volume impact together with lower costs had positive impact, the negative impacts of hedge transaction outweighed the positive ones. From the end of last year the Group started to hedge the smaller part of our production, the gasoline product, through the use of the naphtha derivatives. Since the gasoline hedges are not included in the hedge accounting framework, the market movements go through the profit and loss statement resulting in a loss of 7 million euros in the first quarter of 2021 as the global oil prices have been recovering in the last couple of quarters.

Other segment

EBITDA from Group's other products and services totalled EUR 9,7 million euros compared to a loss of EUR 3.0 million in the same period last year. The biggest impacts came from better heat and gas sales.

Capital expenditure

The Group's capital expenditure totalled EUR 32 million in the first quarter (-53.2% year-on-year). The decrease is attributable to the purchase of the depleted Tootsi peat extraction site for wind energy development in the amount of EUR 43 million (excluding VAT) in the first quarter of 2020. Without this item, the capital expenditure would have increased by nearly a quarter with most investments going to the electricity distribution network.

Financing, credit ratings and dividends

The cash and cash equivalents held by the Group totalled EUR 225.0 million at the end of March 2021. As of 31 March 2021, 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 first quarter 2021 the Group's net debt amounted to EUR 762 million.

Eesti Energia's net debt to EBITDA ratio stood at 3.2x at the end of Q1 2021, in line with the 3.5x financial policy target of the company. Although the management of the company and the supervisory board presented the annual general meeting to the decision to pay dividends of EUR 5.0 million, the annual general meeting has decided not to take dividends this year.

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

Outlook

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. The largest development investments will be made in the construction of a new oil plant and the development of the renewable energy portfolio.

Eesti Energia will publish its second quarter results on July 29, 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 Q2-Q4 of 2021 (at average price of 49.1 EUR/MWh). The Group's hedge positions for electricity retail sales amounted to 1.2 TWh for Q2-Q4 of 2021 (at average price of 31.6 EUR/MWh) and to 1.8TWh for 2022 (at average price of 33.6 EUR/MWh). For shale oil, the hedge positions totalled 262.2 thousand tonnes for Q2-Q4 of 2021 (at average price of 298.5 EUR/tonne) and 292.9 thousand tonnes for 2022 (at average price of 271.7 EUR/tonne).

The Group's position in CO2 emission allowances for Q2-Q4 2021 amounts to 2.7 million tonnes at an average price of 23.1 EUR/tonne (including forward transactions, free emission allowances received as investment support and the surplus of unused allowances from previous periods). The position for 2022 amounts to 0.1 million tonnes at an average price of 31.7 EUR/tonne.

The full quarterly report of Eesti Energia along with an investor presentation is available at Eesti Energia's web site.

Investor call discussing the 2021 Q1 financial results will take place on 4 May 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.

Rasmus Noormägi
Head of Investor Relations and Treasury
Eesti Energia AS
Tel +372465 2885
rasmus.noormagi@energia.ee