TIDM96DB
RNS Number : 8959G
Eesti Energia AS
29 July 2021
Eesti Energia Group results for Q2 2021
The sales revenues of Eesti Energia Group increased to EUR 241.1
million in the second quarter of 2021 (+43.5% year-on-year). Group
EBITDA was EUR 40.8 million (-25.5% year-on-year). The Group's net
loss was at EUR 10 million in the second quarter of 2021 compared
to previous year's net profit of EUR 7 million.
Group financials
The performance dynamics in the second quarter of 2021 were
quite similar to the trends witnessed in the first quarter, despite
EBITDA and net profit declining in annual comparison for which
there were very specific reasons. As we saw in the first three
months of 2021, the revenue of Eesti Energia in the second quarter
increased mainly on the back of higher electricity market prices
and better sales volumes of the electricity segment. Distribution
segment's sales revenue also rose as the electricity consumption
volumes have grown on the back of recovering economic activity.
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 decreased compared to last year's same period by 14.0
million euros (-25.5% year-on-year) as last year's second quarter
result included profits of 13.7 million euros from the sale of
excess CO2 emissions.
Impact of hedge transactions to Group financials
2021 second quarter EBITDA result was significantly influenced
by unrealised gains of derivative transactions - these are the
market-to-market valuation of the hedge transactions done in
accordance with the Group's hedging strategy. However, some of the
hedge transactions do not fall under the IFRS hedge accounting
framework, thus affecting the Profit and Loss statement with
unrealised gain figures. Most of the Group's hedge transactions are
covered with the IFRS hedge accounting framework, thus affecting
the Profit and Loss statement only when the final settlements of
the hedge transactions occur. The impact from the unrealised gains
of derivative transactions to EBITDA profit amounted to EUR -2.2
million with EUR -7.1 million from oil instruments (naphtha
derivatives), EUR -2.8 million from gas instruments and EUR +7.7
million from electricity instruments. This means that had there
been no unrealised gain impacts from derivative transactions, the
quarterly EBITDA figure would have been EUR 2.2 million higher.
Electricity segment
Eesti Energia's sales revenues from electricity increased by
75.2% year-on-year to EUR 126 million. The Group's average
electricity sales price equalled 57.7 EUR/MWh in the second quarter
(+29.2% year-on-year), while the quarterly average market
electricity price for Estonian Nord Pool area increased to 54.5
EUR/MWh (+89.3% year-on-year). After last year saw the lowest
electricity prices since 2010, prices in the first half of this
year have been at their highest level for the last couple of years,
with monthly average electricity price for June in Estonia broke
the all-time high figure with 71.68 EUR/MWh. Electricity sales
volume grew by 19.5% year-on-year to 2.1 TWh. Although wholesale
electricity sales fell from 2020 second quarter levels 8%, the
major share of the electricity sales volume goes to retail which
increased by 0.36TWh on an annual basis (+23% year-on-year).
Electricity generation during the second quarter rose by 45.3% to
0.9TWh on the back of favourable electricity market prices.
Renewable energy generation grew on an annual basis to 0.4TWh
(+32.6% year-on-year) due to increased biomass usage at the
traditionally oil shale fired power plants. Less favourable wind
conditions compared to last year held back wind energy production,
as electricity produced from wind energy production units was 29GWh
lower from last year's second quarter levels.
EBITDA from the electricity segment amounted to EUR 19.9 million
(+78.8% year-on-year). 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. As
mentioned in the first quarter, perhaps the most significant events
in the first six months of 2021 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.
Distribution segment
Eesti Energia's revenues from the distribution segment totalled
EUR 52.4 million (+5.1% year-on-year). The increase in revenues can
be traced down to the growth in the distributed volumes (+7.2%
year-on-year) which grew to 1.6TWh . The average distribution sales
price declined slightly to 32.9 EUR/MWh (-2.0% year-on-year) as
last year's second quarter average tariff increase was explained by
the consumption shift towards household clients who have higher
average tariffs, while this year we have seen economic activity
recovering with the tariffs returning to the pre-pandemic levels.
Distribution EBITDA totalled EUR 27.2 million (+11.2% year-on-year)
as the lower fixed costs together with better volumes had the
positive effect.
Shale oil segment
Eesti Energia's revenues from shale oil sales amounted to EUR
32.0 million, increase of 24.4% year-on-year. Shale oil sales
volume totalled 102.9 thousand tonnes (+21.1% year-on-year), while
production quantity was at 96.7 thousand tons (+12.6%
year-over-year). The main reason for the increases is the low
comparison base - last year in the second quarter we decided to
delay some of the sales deliveries and moved our maintenances
earlier to the comparison period to take advantage of the low oil
price environment. Group's shale oil sales revenue growth was held
back by hedge transactions concluded in the past from lower price
levels in accordance with the Group's hedging strategy Eesti
Energia's average shale oil sales price excluding the impact of
derivative transactions rose to 357.8 EUR/tonne (+72.1%
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 310.5 EUR/tonne (+2.7% year-on-year), with
derivative transactions resulting in a loss of 47.3 EUR/tonne in Q2
2021.
EBITDA from shale oil decreased by 117% year-on-year to an
EBITDA loss of EUR 1.3 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 7.1 million euros
in the second quarter of 2021 as the global oil prices have been
recovering lately. Despite the shale oil segment posting an EBITDA
loss for the period, the management of the Group is satisfied with
the segment's organic result.
Other segment
EBITDA loss from Group's other products and services totalled at
EUR 4.9 million euros compared to a EBITDA profit of EUR 11.3
million in the same period last year. The biggest impact came from
the sale of excess CO2 emissions in the second quarter of last year
which resulted in a gain of EUR 13.7 million.
Capital expenditure
The Group's capital expenditure totalled EUR 54 million in the
second quarter (+90.4% year-on-year). The increase is attributable
to the higher electricity distribution network investments, and
increased development investments activity. From the development
projects, we made the first down payment for the wind turbines of
the 43MW wind park ( ilale II) developed in Lithuania in the amount
of EUR 4.0 million. The largest part of the development investments
went to the new oil plant Enefit282, EUR 12.9 million. The new oil
plant together with investments to traditional renewable capacities
such as wind, solar, are the cornerstones that will position the
Group in the best way possible for the future taking into account
today's global renewable and sustainable trends, but also the
expectations from its owner, the State of Estonia.
As part of the group's long term strategy, in early June we
announced our 2045 decarbonisation strategy. At the core of this
strategy is the new oil plant together with additional renewable
capacities which in future can help to turn the today's main
product of the oil plants from oil to chemicals used in every step
in our everyday lives, and using in turn old plastics instead of
oil shale as the main fuel to produce different chemical products.
On group level our target is to be carbon neutral by 2045, with the
2030 EU goals already achieved. More information on the
decarbonisation strategy can be found on our homepage under the
"Responsible energy" section, link here .
Financing, credit ratings and dividends
The cash and cash equivalents held by the Group totalled EUR
142.4 million at the end of June 2021. As of 30 June 2021, the
Group had access to a total of EUR 580 million of bank loans, from
which revolving credit facilities amounted to EUR 335 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
2021 the Group's net debt amounted to EUR 798 million. No dividends
shall be paid in 2021, as decided by the Annual General Meeting in
April 2021.
Eesti Energia's net debt to EBITDA ratio stood at 3.6x at the
end of Q2 2021, basically in line with the long term target of 3.5x
from the financial policy of the company. Eesti Energia's credit
rating are unchanged at BBB- (negative) by Standard & Poor's
and Baa3 (stable) by Moody's. Eesti Energia's financial policy is
aimed at maintaining investment grade credit ratings.
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 third quarter results on October
28, 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 Q3-Q4 of
2021 (at average price of 54.7 EUR/MWh). The Group's hedge
positions for electricity retail sales amounted to 0.6 TWh for
Q3-Q4 of 2021 (at average price of 24.9 EUR/MWh) and to 2.0TWh for
2022 (at average price of 34.1 EUR/MWh). For shale oil, the hedge
positions totalled 180.5 thousand tonnes for Q3-Q4 of 2021 (at
average price of 300.7 EUR/tonne) and 311.8 thousand tonnes for
2022 (at average price of 279.8 EUR/tonne).
The Group's position in CO2 emission allowances for Q3-Q4 2021
amounts to 3.4 million tonnes at an average price of 27.2 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 37.1 EUR/tonne.
The full quarterly report of Eesti Energia along with an
investor presentation is available at Eesti Energia's web site:
https://www.energia.ee/en/ettevottest/investorile .
Investor call discussing the 2021 Q2 financial results will take
place on 29 July 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 +372 465 2885
rasmus.noormagi@energia.ee
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END
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