TIDM96DB
RNS Number : 0993F
Eesti Energia AS
03 November 2022
Eesti Energia Group results for Q3 2022
The sales revenues of Eesti Energia Group amounted to EUR 657.1
million, +125.9% year-on-year, in the third quarter of 2022.
Reported group EBITDA was EUR 194.8 million (+195.7% year-on-year),
while adjusted EBITDA* was at EUR 93.8 million (+179,2%). The
Group's reported net profit was at EUR 128.5 million (+659.5%
year-on-year), adjusted net profit at EUR 27.4 million
(+278.5%).
* - the introduction of adjusted EBITDA and adjusted net profit
from 2022 Q1 is to present EBITDA and net profit in a normalized
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 Q3 2022 is similar
to the performance in Q2 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 which were
significantly higher than in the second quarter of 2022. In Q2 2022
such temporary fluctuations of PPA derivatives amounted to 11.9
million euros, in Q3 2022 to 68.8 million euros.
Despite distribution segment's slightly lower volumes, revenues
increased by 5.8% 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 EBITDA fell despite the increase in
production and sales quantities and revenue. Shale oil segment's
EBITDA is 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 remained stable. Natural gas sales volumes have
decreased by 32.7% but sales revenue has increased by 160.4% and
reached 31.6 million euros mostly due to significantly higher
market prices. Other segment's performance was driven mostly by
pellet 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 124 million euros,
+106% 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 +175.9%
year-on-year to EUR 513 million in Q3 2022. The Group's average
electricity sales price excluding derivative impact was at 221.2
EUR/MWh (+178.5% year-on-year). As a comparative figure, the Q3
2022 average market electricity price for Estonian Nord Pool area
rose to 275.0 EUR/MWh (+182.1% 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
totaled at 2.5TWh (+11.9% year-on-year), from which retail sales
amounted to 2.3TWh (+14.4% year-on-year) on the back of strong
sales increases especially from Latvia (+38.3% year-on-year). All
other markets (Lithuania, Poland, Finland) showed at least 10%
higher volumes on annual comparison basis as well, with the
exception of Estonia with a slight decrease of 1.7%. Electricity
generation during the quarter rose to 1.5TWh (+23.0% 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 50-60 euros in Q3 2021 to 60-100 euros in Q3 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 Q3 2022 vs 0.7TWh in Q3 2021. Renewable electricity
production which includes electricity production from wind, solar,
and waste wood decreased by 0.06TWh and amounted to 0.3TWH mainly
due to unfavorable wind conditions.
EBITDA of the electricity segment totaled at EUR 167.3 million
(+208.4% year-on-year) mostly due to positive impact from realized
hedges (effect EUR +52.4 million in annual comparison) and higher
sales price (effect EUR +344.1m in annual comparison). Negative
impacts came from higher variable costs (EUR -349.4m in annual
comparison) and fixed costs (EUR -6.3m 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 66.2 (+200.9%
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 55.2 million in Q3 2022 (+5.8% year-on-year). The
distributed volumes declined (-8,6% year-on-year), but stayed at ca
1.4TWh for the quarter. Average distribution sales price, the
tariff, was at 39.4 EUR/MWh (+15.7% year-on-year). This year there
have been already three tariff increases, and a fourth one will
come in December 2022 with average tariff expected to increase a
further 2% from current levels. Distribution EBITDA for the quarter
decreased to EUR 11.7 million (-48.6% 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
29.9 million (+1.8% year-on-year), with shale oil sales volume at
98.4 thousand tons (+5.5% year-on-year). Quarterly oil production
was at 110.1 thousand tons (+22.8% year-on-year) as this year there
were less maintenances in the third quarter than last year. Eesti
Energia's average shale oil sales price excluding the impact from
derivative transactions increased to 580.8 EUR/ton (+44.0%
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 558 EUR/t (+43.5% year-on-year). Group's
average shale oil sales price including the impact of derivative
transactions was at 304.3 EUR/ton (-3.5% year-on-year). Due to
hedging impacts EBITDA from Shale oil operations staid in the
negative territory in the third quarter with a result of EUR -8.9
million (-264.1% year-on-year) compared to EUR -2.4 million in Q3
2021.
Natural gas segment
Eesti Energia's revenues from the natural gas segment amounted
to EUR 31.6 million in Q3 2022 (+160.4% year-on-year). The sales
volumes declined (-32.7% year-on-year), at 195.2 GWh for the
quarter due to lower demand from higher prices. Average natural gas
sales price was at 162.0 EUR/MWh (+286.7% year-on-year). Natural
gas EBITDA for the quarter increased to EUR 12.8 million (+141.8%
year-on-year) due to positive impacts mainly from higher unrealized
derivatives.
Other segment
EBITDA from Group's other products and services totaled at EUR
11.9 million in the third quarter of 2022 (-45.5% year-on-year).
The biggest negative factor came from Auvere power plant
compensation in the amount of 28 million euros for the availability
guarantee for the period between July 2018 and August 2020. An
addition to the revenue stream in Q3 was the frequency restoration
reserve (FRR) service which contributed 5.6 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 124 million
(+106.3% year-on-year) in Q3 2022. Investments to the renewable
asset developments (EUR 52 million during the quarter) have pushed
electricity distribution network investments to the third place
(EUR 31 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 EUR 33 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 tons 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 third quarter 2022, cash and cash equivalents
held by the Group totaled EUR 379.7 million. As of 30 September
2022, Eesti Energia had access to a total of EUR 565 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 245 million. Eesti Energia's net debt was at
EUR 608 million, net debt to EBITDA ratio increased to 1.0x (on
adjusted EBITDA basis to 1.5x) compared to the 3.5x financial
policy target of the company as a result of strong operating cash
flows.
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 quarter
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 affect 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 annual results on 2 March
2023.
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 1.0 TWh for the
remainder of 2022 (at average price of 134.6 EUR/MWh) and 2.4TWh
for 2023 (at average price of 200.3 EUR/MWh). The Group's hedge
positions for electricity retail sales amounted to 1.2 TWh for the
remainder of 2022 (at average price of 103.8EUR/MWh) and 3.7Wh for
2023 (at average price of 90.9 EUR/MWh).
For shale oil, the hedge positions totaled 88.7 thousand tons
for the remainder 2022 (at average price of 294.3 EUR/ton) and
364.4 thousand tons for 2023 (at average price of 343.5 EUR/ton).
For naphtha, the hedge positions totaled 13.8 thousand tons for
2022 (at average price of 338.4 EUR/ton) and 58.0 thousand tons for
2023 (at average price of 453.1 EUR/ton)
The Group's position in CO2 emission allowances for 2022 amounts
to 6.1 million tons at an average price of 62.4 EUR/ton (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 2.60
million tons at an average price of 85.7 EUR/ton (including forward
transactions).
The Q3 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 third quarter financial
results will take place on 3 November 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.
Danel Freiberg
Head of Investor Relations and Treasury
Eesti Energia AS
Tel +372 465 2887
danel.freiberg@energia.ee
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END
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