TIDM96DB
RNS Number : 4688Y
Eesti Energia AS
05 May 2023
Eesti Energia Group results for Q1 2023
The sales revenues of Eesti Energia Group amounted to EUR 582.7
million, 2.0% year-on-year, in the first quarter of 2023. Reported
group EBITDA was EUR 178.3 million (-16.3% year-on-year), while
adjusted EBITDA* was at EUR 202.3 million (+58.9%). The Group's
reported net profit was at EUR 118.6 million (-27.2% year-on-year),
adjusted net profit at EUR 142.6 million (+84.6%).
* - 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
In Q1 2023 the group had strong financial performance with
Electricity segment's profits increasing the most together with
Distribution segment and other products and services also
contributing. Natural gas segment showed the biggest decline on the
profit line but 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 together with hedges done from
higher price 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 lower than in the first quarter of 2022. In Q1 2023
such temporary fluctuations of PPA derivatives amounted to -24.0
million euros, in Q1 2022 to +85.7 million euros with a total
effect of -109.7 million year-on-year.
Despite distribution segment's slightly lower volumes, revenues
increased by 28.0% due to increases in the tariff. Distribution
EBITDA almost doubled and was positively affected by the increase
of average sales price. Shale oil segments EBITDA saw a slight
increase with increases in production and sales quantities and
revenue, despite the lower sales price. 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 also slightly increased . Natural gas sales volumes have
decreased by 55.0% with sales revenue decreasing by 45.3% mostly
due to significantly lower market prices and lower demand. Other
segment's performance was driven mostly by pellet sales, but also
frequency restoration reserve (FRR) service had a decent
contribution to the segment's performance.
Investments during the quarter amounted to 159.5 million euros,
+168.8% 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 slightly by
+2.4% year-on-year to EUR 373 million in Q1 2023. The Group's
average electricity sales price excluding derivative impact was at
130.1 EUR/MWh (+10.5% year-on-year). As a comparative figure, the
Q1 2023 average market electricity price for Estonian Nord Pool
area declined to 99.4 EUR/MWh (-25.5% year-on-year). The Group's
average electricity sales price increased to a greater 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 2.9 TWh (-0.4% year-on-year), from which retail
sales amounted to 2.8 TWh (+6% year-on-year). Electricity
generation during the quarter amounted to 1.3TWh (-22%
year-on-year) as a direct result of lower generation from Group's
flexible power production units (oil shale based hybrid power
plants) due to low electricity prices and high CO2 prices. Group's
flexible power production units (oil shale based hybrid power
plants) produced ca 0.8 TWh of electricity in Q1 2023. Renewable
electricity production which includes electricity production from
wind, solar, and waste wood increased to 0.5 TWh (+30%
year-on-year) due to the addition of new wind farms in Estonia and
Lithuania.
EBITDA of the electricity segment totaled at EUR 149.7 million
(-3.8% year-on-year) mostly due to negative impact related to
changes in value of derivative instruments and power purchase
agreements for renewable energy . The effect of these unrealized
hedges amounted to EUR -68.1 million in annual comparison). Largest
positive impacts came from gain on derivatives which amounted to
EUR 39.9 million in annual comparison and margin impact, which
biggest contributor is higher sales price, that amounted to EUR
24.6 million in annual comparison. Negative impacts came from
higher variable costs and fixed costs. 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 173.7 (+148.5% year-on-year) million compared to EUR 69.9
million in Q1 2022.
Distribution segment
Eesti Energia's revenues from the distribution segment amounted
to EUR 81.5 million in Q1 2023 (+28.0% year-on-year). The
distributed volumes declined (-4.5% year-on-year) but stayed at
1.9TWh for the quarter. Average distribution sales price, the
tariff, was at 43.4 EUR/MWh (+34.0% year-on-year). Distribution
EBITDA for the quarter increased to EUR 29.1 million (+90.3%
year-on-year) due to positive impacts mainly from higher tariffs.
Slightly lower volumes and higher fixed costs had a negative impact
but to a small extent.
Shale oil segment
Eesti Energia's revenues from shale oil sales amounted to EUR
40.6 million (+28.6% year-on-year), with shale oil sales volume at
111.9 thousand tons (+7.5% year-on-year) as this year there were
less maintenances in the first quarter than last year. Eesti
Energia's average shale oil sales price excluding the impact from
derivative transactions decreased to 420.7 EUR/ton (-26.7%
year-on-year) due to lower oil market prices. There is still good
demand for Group's oil products as reference products average
quarterly market price was at 407 EUR/t (-25.2% year-on-year).
Group's average shale oil sales price including the impact of
derivative transactions was at 363.3 EUR/ton (+20% year-on-year).
EBITDA from Shale oil operations was positive in the first quarter
with a result of EUR 5.7 million (+113.9% year-on-year).
Natural gas segment
Eesti Energia's revenues from the natural gas segment amounted
to EUR 45.6 million in Q1 2023 (-45.3% year-on-year). The sales
volumes declined (-55.0% year-on-year), at 0.4 TWh for the quarter
due to lower demand. Average natural gas sales price was at 125.9
EUR/MWh (+21.6% year-on-year). Natural gas EBITDA for the quarter
decreased to negative territory and amounted to EUR -7.1 million
(-116.1% year-on-year) due to negative impacts mainly from
unrealized derivatives and high variable costs.
Other segment
EBITDA from Group's other products and services totaled at EUR
1.1 million in the first quarter of 2023 (+121.8% year-on-year).
The biggest negative factor came from heat sales due to higher
variable and fixed costs. The frequency restoration reserve (FRR)
service was the biggest positive contributor to EBITDA with 3.6
million euros (+71.4% year-on-year).
Capital expenditure
The Group's capital expenditure amounted to EUR 160 million
(+168.8% year-on-year) in Q1 2023. Investments to the renewable
asset developments amounted to EUR 92 million during the quarter.
Electricity distribution network investments are in second place
with EUR 32 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 26 million, from which the largest share went to
the construction of a new chemical plant (new Enefit-280). The new
Enefit-280 chemical 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 first quarter 2023, cash and cash equivalents
held by the Group totaled EUR 233.6 million. As of 31 March 2023,
Eesti Energia had access to a total of EUR 1,370 million of bank
loans, from which revolving credit facilities amounted to EUR 200
million and long-term loan agreements signed with multiple
counterparties to EUR 1,170 million. Eesti Energia's net debt was
at EUR 866 million, net debt to EBITDA ratio increased to 2.2x (on
adjusted EBITDA basis to 2.1x) compared to the 3.5x financial
policy target of the company.
On February 15th, 2023, Eesti Energia signed a sustainability
linked, amortizing term loan contract in the amount of 600 million
EUR. The term of the senior unsecured loan is 5 years. The loan is
sustainability linked with two ESG KPI's: carbon intensity of scope
1, 2 and 3 emissions and yearly addition of renewable energy
capacity. The purpose of the term loan is to primarily refinance
the 500 million EUR bond maturing in September 2023 and supporting
Eesti Energia's carbon neutrality strategy.
Eesti Energia is rated BBB- (stable) 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.
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 2023 Eesti Energia's
sales revenue, EBITDA and investments will likely increase compared
to 2022 numbers.
Eesti Energia will publish its Q2 results on 3 August 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 1.7 TWh for the
remainder of 2023 (at average price of 200.5 EUR/MWh) and 0.5 TWh
for 2024 (at average price of 148.2 EUR/MWh). The Group's hedge
positions for electricity retail sales amounted to 3.1 TWh for the
remainder of 2023 (at average price of 69.8 EUR/MWh) and 2.9 TWh
for 2024 (at average price of 50.8 EUR/MWh).
For shale oil, the hedge positions totaled 273.3 thousand tons
for the remainder 2023 (at average price of 337.4 EUR/ton) and
315.0 thousand tons for 2024 (at average price of 398.3 EUR/ton).
For naphtha, the hedge positions totaled 43.5 thousand tons for
2023 (at average price of 455.5 EUR/ton) and 49.7 thousand tons for
2024 (at average price of 567.6 EUR/ton)
The Group's position in CO2 emission allowances for 2023 amounts
to 3.7 million tons at an average price of 62.9 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 2024 amount to 1.6
million tons at an average price of 33.1 EUR/ton (including forward
transactions).
The Q1 2023 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 2023 first quarter financial
results will take place on 5 May 2023, 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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