News

The sales revenues of Eesti Energia Group amounted to EUR 157.6 million in the third quarter of 2017 (-7.6% year-on-year). Group EBITDA reached EUR 54.1 million (+3.2% year-on-year). The Group’s net profit equalled EUR 16.2 million in the third quarter of 2017 (+21.9% year-on-year).

Financial results

The revenues of all Eesti Energia’s business segments declined in the third quarter. On a positive note, market prices for oil and power increased, but the Group’s production and sales quantities declined. Additionally, the Group’s distribution business implemented new lower tariffs from July.

Eesti Energia’s sales revenues from electricity declined by 8.1% year-on-year to EUR 79.7 million. The Group’s average sales price of electricity increased by 4.9% to 39.5 EUR/MWh but sales volumes declined by 14.4% to 2.1 TWh, which translated to overall lower revenues from electricity sales.

Revenues from shale oil declined by 22.5% to EUR 15.3 million. While market price for oil increased, the Group’s average sales price of shale oil remained at EUR 210 per tonne (-0.6% year-on-year) due to hedge positions which had been entered into at lower price levels than current market price. The quantity of shale oil sold declined by 22.0% to 73 thousand tonnes.

The year-on-year trends in electricity and shale oil segments were affected by power plant and oil plant maintenance schedules. In 2016 a larger share of regular maintenance was carried out in the first half of the year when the prevailing market prices were low. In 2017 the prices have normalised and the Group reverted to a more regular schedule and carried out maintenance works in the summer. Shutting down production units for maintenance affects production and sales quantities.

The sales revenues of the distribution segment declined by 4.4% to EUR 52.5 million. The quantity of electricity distributed increased by 3.8% but new tariff implementation from July caused 7.8% reduction in the average sales price of the distribution segment.

The factors behind EBITDA movements were similar to those driving the Group’s sales revenues. EBITDA from the electricity segment declined to EUR 18.0 million (-26.8% year-on-year). EBITDA from the shale oil segment amounted to EUR 2.9 million (+31.3% year-on-year). For both electricity and shale oil declining sales volume was the primary negative contributor to EBITDA while improved market price and margins moderated some of the volume effect. EBITDA from the distribution segment declined by 3.4% to EUR 27.3 million due to lower tariffs. EBITDA from the rest of the Group’s products and services equalled EUR 5.9 million, including EUR 8.8 million of liquidated damages payable to Eesti Energia in relation to the Auvere power plant.

Key performance indicators

The Group’s electricity sales volume decreased from 2.4 TWh to 2.1 TWh (-14.4%) in the third quarter. The decline mainly occurred on the wholesale side which totalled 0.7 TWh (compared to 1.0 TWh in the third quarter of 2016). Retail sales remained flat at 1.4 TWh. The Group’s electricity generation volume amounted to 2.1 TWh (-15.6% year-on-year) due to more maintenance scheduled for the summer this year compared to 2016. In 2016, an effort was made to carry out more maintenance in the first half of the year, as there was an expectation that generation margins would be better in the second half of 2016. Eesti Energia’s retail market share for electricity sales totalled 25% in Estonia, Latvia and Lithuania combined (-1 percentage point year-on-year).

The volume of electricity distributed by Group amounted to 1.4 TWh in the third quarter, posting growth of 3.8% year-on-year on the back of weather conditions and supportive economic conditions.

The volume of shale oil old by the Group amounted to 73 thousand tonnes in the third quarter (-22.0% year-on-year) as two large shipments were postponed from September to October. Additionally, the Group’s shale oil production was also somewhat lower at 71 thousand tonnes (-17.0%).

Capital expenditure

The Group’s capital expenditure was relatively stable in the third quarter and stood at EUR 35 million (+5.6% year-on-year). Majority of the capex (EUR 17.7 million) was dedicated to upgrading the distribution network. Other maintenance type of investments made up additional EUR 8.1 million. General Electric continues its works on the Auvere power plant which is expected to be finalised in Q4 2017.

Financing, credit ratings and dividends

Eesti Energia’s liquidity position remains at a strong level. The cash and cash equivalents held by the Group totalled EUR 307.9 million at the end of September, down by EUR 78 million from the end of June. In addition, the Group has access to EUR 150 million of revolving credit facilities (with maturity in July 2020). It has been decided that the Group is not going to draw the EUR 70 million undisbursed investment loan from EIB and the loan has now expired. In addition to regular debt service in the third quarter, the Group repaid early EUR 47.7 million of EIB loans which would have otherwise been due by 2019.

The Group’s net debt amounted to EUR 577 million as at the end of the third quarter. Eesti Energia’s net debt to EBITDA ratio stood at 1.6x at the end of September. The Group maintains its financial policy target of net debt to EBITDA of maximum 3.5x.

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

It is expected that Eesti Energia will pay dividends in the amount of EUR 47 million in 2017 as well as related income tax of EUR 11.8 million.

Outlook

The outlook for full year 2017 remains unchanged compared to the previous communication published with second quarter 2017 results. It is expected that in 2017 Eesti Energia’s sales revenue will slightly grow (defined as less than 5% growth). Capital expenditures are estimated to grow (more than 5% growth) whereas EBITDA is expected to decrease (more than 5% decrease) compared with 2016. Excluding the positive impact of the liquidated damages related to the Auvere power plant (68.6 million euros) and the retrospective reduction of the resource charge rates (14.2 million euros) in 2016, EBITDA for 2017 is expected to grow in 2016.

Eesti Energia will publish its full year 2017 results on February 27, 2018.

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 1.5 TWh for Q4 of 2017 (at average price of 34.8 EUR/MWh) and to 3.3 TWh for 2018 (at average price of 34.2 EUR/MWh). For shale oil, the hedge positions totalled 72 thousand tonnes for Q4 of 2017 (at average price of 238 EUR/tonne) and 297 thousand tonnes for 2018 (at average price of 256 EUR/tonne).

The Group’s position in CO2 emission allowances for 2017 amounts to 13.9 million tonnes at an average price of 5.6 EUR/tonne (including forward transactions, free emission allowances received as investment support and the surplus of unused allowances from previous periods). The position for 2018 amounts to 5.6 million tonnes at an average price of 3.6 EUR/tonne, consisting of free allowances to be received as investment support and forward transactions.

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