TIDM96DB
RNS Number : 9059U
Eesti Energia AS
04 August 2022
Eesti Energia Group results for Q2 2022
The sales revenues of Eesti Energia Group amounted to EUR 416.6
million, +72.8% year-on-year, in the second quarter of 2022.
Reported group EBITDA was EUR 91.7 million (+124.6% year-on-year),
while adjusted EBITDA* was at EUR 79.8 million (+148.4%). The
Group's reported net profit was at EUR 45.2 million (+552.2%
year-on-year), adjusted net profit at EUR 33.3 million
(+278.1%).
* - the introduction of adjusted EBITDA and adjusted net profit
from 2022 Q1 is to present EBITDA and net profit in a normalised
way for better comparability with the elimination of temporary
fluctuations in the fair value of long-term Power Purchase
Agreements (PPA) derivatives.
Group financials
The annual development of the financials in Q2 2022 is very
similar to the performance in Q1 with Electricity segment's
revenues and profits increasing the most together with Other
products and services also contributing. Distribution segment
together with Shale oil segment showed declines on the profit line
which did not have too significant impact on Group's overall
results.
In the Electricity segment revenue growth was underpinned by
strong performance of retail sales and higher generation from
production assets together with continuing high electricity price
environment. The high electricity price environment has not gone
away due to high gas prices which have pushed variable cost of gas
fired power plants significantly higher compared to year ago
levels. Electricity segment's EBITDA was additionally impacted by
non-monetary temporary fluctuations in the fair value of long-term
Power Purchase Agreements (PPA) derivatives, but the impacts were
smaller than in the first quarter of 2022. In Q1 2022 such
temporary fluctuations of PPA derivatives amounted to 85.7 million
euros, in Q2 2022 to 11.9 million euros.
Despite distribution segment's slightly lower volumes, revenues
increased by 5.7% annually due to increases in the tariff.
Distribution EBITDA continues to be negatively affected by
electricity costs for network losses that are repurchased at market
prices. Shale oil segments revenue and EBITDA fell despite
production and sales quantities on roughly the same level as a year
ago. Shale oil segment's revenue and EBITDA are held back by hedges
made a year ago from lower price levels in accordance with the
Group's hedging strategy, while the cost base has increased. Other
segment's performance was driven mostly by gas sales, but also a
new revenue stream, frequency restoration reserve (FRR) service,
had a decent contribution to the segment's performance.
Investments during the quarter amounted to 98 million euros,
80.3% higher than a year earlier. The rise in investments mainly
came from renewable energy investments to new wind and solar parks.
The high electricity price environment continues to support the
ongoing investments of the Group. These investments help to
increase the energy independence and generation of affordable and
environmentally friendly electricity in the region.
Electricity segment
Eesti Energia's sales revenues from electricity grew by +98.6%
year-on-year to EUR 253 million in Q2 2022. The Group's average
electricity sales price excluding derivative impact was at 103.7
EUR/MWh (+79.0% year-on-year). As a comparative figure, the Q1 2022
average market electricity price for Estonian Nord Pool area rose
to 142.1 EUR/MWh (+160.7% year-on-year). The Group's average
electricity sales price increased to a lesser extent compared to
the market average due to retail sales contracts where the
electricity prices are fixed. Such contracts make up roughly half
of the retail portfolio. Electricity sales volume for the quarter
totalled at 2.5TWh (+19.8% year-on-year), from which retail sales
amounted to 2.3TWh (+21.3% year-on-year) on the back of strong
sales increases especially from Latvia (+56.1% year-on-year). All
other markets (Estonia, Lithuania, Poland, Finland) showed at least
10% higher volumes on annual comparison basis as well. Electricity
generation during the quarter rose to 1.4TWh (+56.0% year-on-year)
as a direct result of higher generation from Group's flexible power
production units (oil shale based hybrid power plants) despite high
prices of CO2. Although CO2 emission allowance prices increased
from 40-50 euros in Q2 2021 to 80-90 euros in Q2 2022, the
electricity price increases have been higher mainly due to gas
prices which have increased the variable cost of gas fired power
plants and thus providing access to the market for Group's flexible
power production fleet. Group's flexible power production units
(oil shale based hybrid power plants) produced ca 1.1TWh of
electricity in Q2 2022 vs 0.7TWh in Q1 2021. Renewable electricity
production which includes electricity production from wind, solar,
and waste wood was stable at 0.4TWh.
EBITDA of the electricity segment totalled at EUR 66.8 million
(+215.7% year-on-year) mostly due to positive impact from realised
hedges (effect EUR +31.7 million in annual comparison) and higher
sales price (effect EUR +112.0m in annual comparison). Negative
impacts came from higher variable costs (EUR -101.9m in annual
comparison) and fixed costs (EUR -9.8m in annual comparison).
Higher variable costs are the result of high CO2 prices and
electricity purchasing cost as the electricity for market-based
retail contracts are bought from the market at the currently high
price levels. The adjusted EBITDA (adjusted with the elimination of
temporary fluctuations in the fair value of long-term PPA
derivatives ) figure for the quarter was at EUR 54.9 (+342.7%
year-on-year) million compared to EUR 12.4 million in Q2 2022.
Distribution segment
Eesti Energia's revenues from the distribution segment amounted
to EUR 55.4 million in Q2 2022 (+5.7% year-on-year). The
distributed volumes declined slightly (-1.5% year-on-year), but
stayed at ca 1.6TWh for the quarter. Average distribution sales
price, the tariff, was at 35.3 EUR/MWh (+7.3% year-on-year). This
year there have been already two tariff increases, and a third one
will come from 1(st) October 2022 with average tariff expected to
increase a further 3% from current levels. Distribution EBITDA for
the quarter decreased to EUR 19.9 million (-27.0% year-on-year) due
to negative impacts mainly from higher electricity costs for
network losses. Slightly lower volumes and higher fixed costs also
had a negative impact but to a smaller extent than network
losses.
Shale oil segment
Eesti Energia's revenues from shale oil sales amounted to EUR
32.2 million (+0.7% year-on-year), with shale oil sales volume at
105 thousand tonnes (+3.1% year-on-year). Quarterly oil production
was at 106.0 thousand tons (+9.5% year-on-year) as this year there
were less maintenances in the second quarter than last year. Eesti
Energia's average shale oil sales price excluding the impact from
derivative transactions increased to 624 EUR/tonne (+73.1%
year-on-year) due to supportive oil market prices and good demand
for Group's oil products as reference products average quarterly
market price was at 598 EUR/t (+70.4% year-on-year). Group's
average shale oil sales price including the impact of derivative
transactions was at 305.6 EUR/tonne (-2.3% year-on-year). Due to
higher cost base and hedging impacts EBITDA from Shale oil
operations staid in the negative territory in the second quarter
with a result of EUR -4.9 million (-265.3% year-on-year) compared
to EUR -1.3 millon in Q2 2021.
Other segment
EBITDA from Group's other products and services totalled at EUR
76.2 million in the second quarter of 2022 (+159.0% year-on-year).
The biggest positive factor came from retail gas sales where
despite stable quantities at 0.4TWh the high gas market price
environment pushed gas sales revenues higher, while the profit line
also had impacts from derivative instruments. An addition to the
revenue stream in Q2 was the frequency restoration reserve (FRR)
service which contributed 6.8 million euros to revenues and EBITDA.
FRR is a service offered by Group's flexible hybrid power plants to
transmission system operators in Finland, and Estonia from the
start of this year. The nature of the service is to offer TSO's
additional capacities for keeping the electricity system's
frequency in balance through ramping the production units up or
down based on the necessity.
Capital expenditure
The Group's capital expenditure amounted to EUR 98 million
(+80.3% year-on-year) in Q2 2022. Investments to the renewable
asset developments (EUR 40 million during the quarter) have pushed
electricity distribution network investments to the second place
(EUR 25 million during the quarter). The distribution network
investments are largely aimed at improving connection points to
enable additional solar production capacities to be connected to
the distribution network. Investments to other development projects
increased to nearly EUR 25 million, from which the largest share
went to the construction of a new chemical plant (new Enefit-280).
The new Enefit-280 pyrolysis plant is scheduled to be completed in
2024, and will increase the annual shale oil output to 700,000
tonnes while serving as a cornerstone for transforming the current
liquid fuels and electricity oriented production from oil shale to
chemical industry based on circular economy principles with a zero
carbon footprint target by 2045.
Financing, credit ratings and dividends
As of the end of second quarter 2022, cash and cash equivalents
held by the Group totalled EUR 436.9 million. As of 30 June 2022,
Eesti Energia had access to a total of EUR 695 million of bank
loans, from which revolving credit facilities amounted to EUR 320
million and long-term loan agreements signed with multiple
counterparties to EUR 375 million. Eesti Energia's net debt was at
EUR 437 million, net debt to EBITDA ratio declined to 0.9x (on
adjusted EBITDA basis to 1.2x) compared to the 3.5x financial
policy target of the company as a result of strong operating cash
flows.
During the second quarter 2022 the Group paid out total
dividends for the 2021 financial year in the amount of EUR 55.7
million, from which EUR 46.7 million was paid to the sole
shareholder, State of Estonia. EUR 9 million was paid to the
minority shareholders of the Tallinn stock exchange listed majority
owned Enefit Green subsidiary.
Eesti Energia is rated BBB- (negative) by Standard & Poor's
and Baa3 (stable) by Moody's. Eesti Energia's financial policy is
aimed at maintaining investment grade credit rating and a net-debt
to EBITDA long-term target of 3.5 times. For the upcoming quarters
we expect the net-debt/EBITDA ratio to increase as the Group
continues the execution of its investment pipeline, and working
capital requirements (including CO2 allowance purchase) are
expected to effect the cash position negatively.
Overall, the Group's management assesses the Group to be well
balanced for current highly volatile environment due to Group's
diverse asset structure.
Outlook
It is the management's expectation that in 2022 Eesti Energia's
sales revenue, EBITDA and investments will likely increase (defined
as at least 5% growth) compared to 2021 numbers.
Eesti Energia will publish its third quarter results on 3
November, 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 1.8 TWh for the
remainder of 2022 (at average price of 109.6 EUR/MWh) and 0.6TWh
for 2023 (at average price of 119.5 EUR/MWh). The Group's hedge
positions for electricity retail sales amounted to 2.0 TWh for the
remainder of 2022 (at average price of 79.7EUR/MWh) and 3.1TWh for
2023 (at average price of 49.7 EUR/MWh).
For shale oil, the hedge positions totalled 177.4 thousand
tonnes for the remainder 2022 (at average price of 294.0 EUR/tonne)
and 364.3 thousand tonnes for 2023 (at average price of 343.9
EUR/tonne). For naphtha, the hedge positions totalled 27.6 thousand
tonnes for 2022 (at average price of 339.2 EUR/tonne) and 58.0
thousand tonnes for 2023 (at average price of 455.9 EUR/tonne)
The Group's position in CO2 emission allowances for 2022 amounts
to 5.3 million tonnes at an average price of 59.5 EUR/tonne
(including forward transactions, free emission allowances received
as investment support and the surplus of unused allowances from
previous periods). CO2 emission allowances for 2023 amount to 0.66
million tonnes at an average price of 80.3 EUR/tonne (including
forward transactions).
The Q2 2022 interim report of Eesti Energia and the investor
presentation is available at Eesti Energia's web site:
https://www.energia.ee/en/ettevottest/investorile .
Investor call discussing the 2022 second quarter financial
results will take place on 4 August 2022, 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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