TIDM96DB
RNS Number : 4098R
Eesti Energia AS
05 November 2021
Eesti Energia Group results for Q3 2021
The sales revenues of Eesti Energia Group increased to EUR 290.8
million in the third quarter of 2021 (+52.2% year-on-year). Group
EBITDA amounted to EUR 65.9 million (+48.5% year-on-year). The
Group's net profit for the third quarter was at EUR 16.9 million
compared to previous year's net loss of EUR 8.0 million.
Group financials
The performance dynamics in the third quarter of 2021 were quite
similar to the trends in the first half of 2021. On the back of
climbing electricity market prices, and better electricity sales
volumes, Eesti Energia's sales revenue in the third quarter
increased by more than a half from last year's levels while EBITDA
growth was held back by pressure on margins from increased market
prices of CO2 and higher electricity purchase costs. Quarterly
average electricity prices in the Baltic Nord Pool price regions
were around 100 euros per MWh, roughly 2.6 times higher compared to
Q3 2020. Distribution segment's sales revenue also rose as the
electricity consumption volumes have grown on the back of
recovering economic activity, although distribution segment's
EBITDA has been held back by higher costs associated to network
losses that are adversely affected by the higher electricity market
prices. Shale oil segment's sales revenue and EBITDA declined due
to maintenance works carried out during the quarter, while also
hedged positions running through the Income Statement for the
unsettled positions had negative effect. Although Group recorded an
income of 28.0 million euros after a reached agreement with GE for
the availability guarantees of Auvere power plant, the "Other"
segment was negatively influenced by gas hedging effects not
covered under the IFRS hedge accounting framework, thus affecting
the Income Statement with the unsettled positions. Reported EBITDA
of the Group rose compared to last year's same period by EUR 21.5
million (+48.5% year-on-year) to EUR 65.9 million due to strong
performance of the electricity segment.
Impact of hedge transactions to Group financials
As in the second quarter of this year, the 2021 third quarter
EBITDA result was significantly influenced by unrealised gains of
derivative transactions - these are the market-to-market valuations
of the hedge transactions done in accordance with the Group's
hedging strategy. Because some of the hedge transactions do not
fall under the IFRS hedge accounting framework, these positions
affect the Profit and Loss statement with the unrealised gain
figures. Most of the Group's hedge transactions are covered with
the IFRS hedge accounting framework, thus the effect on the Profit
and Loss statement takes place 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 -2.7
million with EUR -3.4 million from oil instruments (naphtha
derivatives), EUR -30.1 million from gas instruments and EUR +30.8
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 2.7 million higher.
Electricity segment
Eesti Energia's sales revenues from electricity increased by
121.3% year-on-year to EUR 186 million. The Group's average
electricity sales price equalled 80.3 EUR/MWh in the third quarter
(+63.5% year-on-year), while the quarterly average market
electricity price for Estonian Nord Pool area increased to 97.5
EUR/MWh (+164.6% year-on-year). After last year's lowest
electricity prices since 2010, prices in the first 9 months of 2021
have been at the highest level for the last couple of years, with
monthly average electricity prices making new records and peaking
at 122 euros per MWh for the month of September in the Estonian
price region. Electricity sales volume of the group grew by 25.2%
year-on-year to 2.2 TWh. W holesale electricity sales increased 14%
year-on-year to 0.2 TWh, while the major share of the electricity
sales volume goes to retail which increased by 0.41TWh on an annual
basis (+26% year-on-year). Electricity generation during the third
quarter rose by 12.4% to 1.2TWh on the back of favourable
electricity market prices. Renewable energy generation grew on an
annual basis to 0.3TWh (+8.6% year-on-year) due to increased
biomass usage at the group's hybrid power plants, and favourable
wind conditions.
EBITDA from the electricity segment rose by EUR 52.6 million to
EUR 56.2 million (+1433.2% 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
was negative due to higher variable cost associated to increased
CO2 prices and electricity purchase costs amidst higher electricity
market prices. As mentioned in the previous interim reports,
perhaps the most significant events in the first nine 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.
For this Eesti Energia has signed long-term Power Purchase
Agreements (PPAs) internally and externally with wind park
developers.
Distribution segment
Eesti Energia's revenues from the distribution segment totalled
EUR 52.2 million (+7.7% year-on-year). The increase in revenues can
be traced to the growth in the distributed volumes (+6.1%
year-on-year) which grew to 1.5TWh . The average distribution sales
price increased slightly to 34.1 EUR/MWh (+1.6% year-on-year). In
Q3 2021 an acquisition of third largest DSO network in Estonia was
finalised, the impact to annual volumes is around 0.2TWh.
Distribution EBITDA totalled EUR 22.9 million (-6.0% year-on-year)
as electricity purchases costs for network losses increased due to
increased electricity market price, while planned maintenance costs
also rose slightly from last year's figures.
Shale oil segment
Eesti Energia's revenues from shale oil sales amounted to EUR
29.4 million, a decrease of 28.0% year-on-year. Shale oil sales
volume totalled 94.3 thousand tonnes (-30.8% year-on-year), while
production quantity was at 89.6 thousand tons (-22.3%
year-over-year). The main reason for the decreases in the sales
revenues and volumes is the smaller production volume as this year
the maintenances were carried out during the third quarter while
last year the maintenances took place in the second quarter.
Group's average shale oil sales price excluding the impact of
derivative transactions rose to 399 EUR/tonne (+60.2% 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 311.6 EUR/tonne (+3.9% year-on-year), with derivative
transactions resulting in a loss of 87.2 EUR/tonne in Q3 2021.
EBITDA from shale oil decreased by 115.3% year-on-year to an
EBITDA loss of EUR 2.4 million. Biggest effects came from
derivatives, both settled and unsettled instruments. The negative
effect from the settled instruments (EUR +6.9 million in 2020 Q3 vs
EUR -8.2 million in 2021 Q3) reflects the hedging effect for the
shale oil sold during the quarter as hedged positions prices are
lower from current market prices. From the end of last year the
Group started to hedge the smaller part of the 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 of all hedged naphtha positions go
through the Income Statement resulting in a loss of 3.4 million
euros in the third quarter of 2021 as the global oil prices have
been recovering lately. Lower sales volumes from last year's third
quarter influenced EBITDA negatively in the amount of EUR 6.3
million. Comparable EBITDA profit, adjusted with the lower volumes
and impact from unsettled hedge positions, was at EUR 11.6
million.
Other segment
EBITDA from Group's other products and services totalled at EUR
-10.8 million euros compared to an EBITDA profit of EUR 0.5 million
in the same period last year. The biggest effect came from the
unrealised gas derivative instruments, impact from this figure
amounted to EUR -30.1 million in Q3 2021 (EUR +2.3 million in Q3
2020; change of EUR -32.4 million year-on-year). Segment's loss was
balanced by the booking of the reached agreement with GE for the
availability guarantee of Auvere power plant in the amount of EUR
28.0 million, for which the group made a stock exchange
announcement in September 2021.
Capital expenditure
The Group's capital expenditure totalled EUR 60 million in the
third quarter (+57.0% year-on-year). The increase is attributable
to the higher development investments (new wind parks and oil plant
Enefit282), and also increased electricity distribution network
investments. The largest part of the development investments went
to the new oil plant Enefit282, EUR 10.8 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. In addition to capex amounts
brought out above, in Q3 2021 group finalised the acquisition of
third largest DSO network in Estonia (Imatra Elekter AS) for EUR
29.8 million.
Financing, credit ratings and dividends
The cash and cash equivalents held by the Group totalled EUR
162.7 million at the end of September 2021. As of 30 September
2021, the Group had access to a total of EUR 665 million of bank
loans, from which EUR 515 million belonged to the parent company
and EUR 150 million to Enefit Green. At the end of the third
quarter 2021 the Group's net debt amounted to EUR 755 million. No
dividends shall be paid in 2021, as decided by the Annual General
Meeting in April 2021.
After the third quarter, in October 2021, Eesti Energia's
renewable subsidiary Enefit Green AS was successfully listed at the
Nasdaq Tallinn Stock Exchange. As a result of the IPO, 22.8% of
Enefit Green's shares are listed and group received IPO gross
proceeds of EUR 175 million which is not taken into account in the
third quarter figures.
Eesti Energia's net debt to EBITDA ratio stood at 3.1x at the
end of Q3 2021, in line with the long term target of 3.5x from the
financial policy of the company. Eesti Energia's credit ratings 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. In the end of October
S&P affirmed the rating and outlook for Eesti Energia
group.
Outlook
Management's expectations for 2021 are unchanged. For 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 2021 annual audited results at
the beginning of March 2022.
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 0.9 TWh for Q4 of 2021
(at average price of 64.3 EUR/MWh), and 1.6TWh for 2022 (at average
price of 71.6 EUR/MWh). The Group's hedge positions for electricity
retail sales amounted to 0.9 TWh for Q4 of 2021 (at average price
of 49.4 EUR/MWh) and to 2.6TWh for 2022 (at average price of 44.1
EUR/MWh). For shale oil, the fuel oil hedge positions totalled 90.2
thousand tonnes for Q4 of 2021 (at average price of 300.7
EUR/tonne) and 332.6 thousand tonnes for 2022 (at average price of
284.2 EUR/tonne). For naphtha, the hedge positions totalled 13.8
thousand tonnes for Q4 of 2021 (at average price of 330.6
EUR/tonne) and 51.2 thousand tonnes for 2022 (at average price of
316.8 EUR/tonne)
The Group's position in CO2 emission allowances for Q4 2021
amounts to 4.2 million tonnes at an average price of 33.2
EUR/tonne. The position for 2022 amounts to 2.4 million tonnes at
an average price of 36.3 EUR/tonne. CO2 hedge positions consist of
forward transactions, free emission allowances received as
investment support and the surplus of unused allowances from
previous periods.
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 Q3 financial results will take
place on 5 November 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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