TIDM96DB
RNS Number : 1123I
Eesti Energia AS
03 August 2023
Eesti Energia Group results for Q2 2023
The sales revenues of Eesti Energia Group amounted to EUR 416.1
million, -0.1% year-on-year, in the second quarter of 2023.
Reported group EBITDA was EUR 107.7 million (+17.4% year-on-year),
while adjusted EBITDA* was at EUR 115.7 million (+45.0%). The
Group's reported net profit was at EUR 42.7 million (-5.6%
year-on-year), adjusted net profit at EUR 50.6 million
(+52.0%).
* - 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 Q2 2023 the group had strong financial performance with
Electricity segment's profits increasing the most together with
Distribution segment and Shale Oil segment. Natural gas segment
showed the biggest decline on the profit line together with Other
Products and Services 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
lower than in the second quarter of 2022. In Q2 2023 such temporary
fluctuations of PPA derivatives amounted to -8.0 million euros, in
Q2 2022 to +11.9 million euros with a total effect of -19.9 million
year-on-year.
Despite distribution segment's slightly lower volumes, revenues
increased by 19.1% due to increases in the tariff. Distribution
EBITDA grew significantly and was positively affected by the
increase of average sales price. Shale oil segments EBITDA saw an
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 increased . Natural gas sales volumes have decreased by -41.0%
with sales revenue decreasing by -69.4% mostly due to significantly
lower market prices and lower demand. Other segment's performance
was mostly negatively impacted by frequency restoration reserve
(FRR) service, which was caused by high variable costs and lower
electricity prices due to which the group was not able to offer the
service to the market in the intended capacity.
Investments during the quarter amounted to 181 million euros,
+84.8% higher than a year earlier. The rise in investments mainly
came from renewable energy investments to new wind and solar parks
and the distribution network. The 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 +5.5%
year-on-year to EUR 267 million in Q2 2023. The Group's average
electricity sales price excluding derivative impact was at 113.1
EUR/MWh (+9.3% year-on-year). As a comparative figure, the Q2 2023
average market electricity price for Estonian Nord Pool area
declined to 74.4 EUR/MWh (-47.6% year-on-year). The Group's average
electricity sales price increased compared to the decrease of 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 2.4
TWh (-5.9% year-on-year), from which retail sales amounted to 2.3
TWh (-0.1% year-on-year). Electricity generation during the quarter
amounted to 0.7 TWh (-50% 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 produced ca 0.4
TWh of electricity in Q2 2023. Renewable electricity production
which includes electricity production from wind, solar, and waste
wood decreased to 0.3 TWh (-11% year-on-year) due to unfavorable
wind conditions Estonia and Lithuania.
EBITDA of the electricity segment totaled at EUR 80.2 million
(+20.2% year-on-year). Largest positive impact came from margin
impact (+24.7 million) due to higher sales price and lower variable
costs. Other positive impacts came from gain on derivatives which
amounted to EUR +8.2 million in annual comparison and changes in
fixed costs +5.2 million. Largest negative impact was related to
changes in value of derivative instruments and power purchase
agreements for renewable energy . The effect of these unrealized
hedges amounted to EUR -22.0 million in annual comparison). 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 88.2 million (+60.8% year-on-year)
compared to EUR 54.9 million in Q2 2022.
Distribution segment
Eesti Energia's revenues from the distribution segment amounted
to EUR 65.9 million in Q2 2023 (+19.1% year-on-year). The
distributed volumes declined (-9.8% year-on-year) and amounted to
1.4 TWh (-0.2 TWh) for the quarter. Average distribution sales
price, the tariff, was at 43.4 EUR/MWh (+22,9% year-on-year).
Distribution EBITDA for the quarter increased to EUR 33.1 million
(+66.5% 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
43.2 million (+34.3% year-on-year), with shale oil sales volume at
124.7 thousand tons (+18.4% year-on-year) as this year there were
less maintenances and disruptions in the second quarter than last
year. Eesti Energia's average shale oil sales price excluding the
impact from derivative transactions decreased to 401 EUR/ton
(-35.7% year-on-year) due to lower oil market prices. The reference
products average quarterly market price was at 409 EUR/t (-31.7%
year-on-year). Group's average shale oil sales price including the
impact of derivative transactions was at 346.6 EUR/ton (+13%
year-on-year). EBITDA from Shale oil operations was positive in the
second quarter with a result of EUR 3.3 million (+166%
year-on-year).
Natural gas segment
Eesti Energia's revenues from the natural gas segment amounted
to EUR 15.5 million in Q2 2023 (-69.4% year-on-year). The sales
volumes declined (-41.0% year-on-year), at 0.2 TWh for the quarter
due to lower demand. Average natural gas sales price was at 62.1
EUR/MWh (-48% year-on-year). Natural gas EBITDA for the quarter
decreased to negative territory and amounted to EUR -5.3 million
(-272.0% year-on-year) due to negative impacts mainly from gain on
derivatives and high variable costs.
Other segment
EBITDA from Group's other products and services decreased to
negative territory and totaled at EUR -3.6 million in the second
quarter of 2023 (-151.4% year-on-year). The biggest negative factor
came from frequency restoration reserve (FRR) service where high
variable costs and lower electricity prices where the reasons why
the group was not able to offer the service to the market in the
intended capacity. Other changes in EBITDA totaled -5.7 million
with negative impacts from solar services, one-off transactions and
other ancillary services as well as increased overhead costs.
Capital expenditure
The Group's capital expenditure amounted to EUR 181 million
(+84.8% year-on-year) in Q2 2023. Investments to the renewable
asset developments amounted to EUR 74 million during the quarter.
Electricity distribution network investments are in second place
with EUR 44 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 and increasing the liability of the
network. Investments to other development projects increased to EUR
46 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 second quarter 2023, cash and cash equivalents
held by the Group totaled EUR 409.2 million with additional
short-term deposits of 245 million totaling 654.2 million. As of 30
June 2023, Eesti Energia had access to a total of EUR 730 million
of bank loans, from which revolving credit facilities amounted to
EUR 270 million and long-term loan agreements signed with multiple
counterparties to EUR 460 million. Eesti Energia's net debt was at
EUR 1,278 million (together with short-term deposits 1,033
million), net debt to EBITDA ratio increased to 3.1x (on adjusted
EBITDA basis to 2.8x), together with short-term deposits 2.5x (on
adjusted EBITDA basis to 2.3x) compared to the 3.5x financial
policy target of the company.
During the second quarter 2023 the Group paid out total
dividends for the 2022 financial year in the amount of EUR 81.5
million, from which EUR 68.9 million was paid to the sole
shareholder, State of Estonia. EUR 12.6 million was paid to the
minority shareholders of the Tallinn stock exchange listed majority
owned Enefit Green subsidiary.
In Q2 2023 Eesti Energia disbursed the 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 volatile environment due to Group's diverse
asset structure.
Outlook
It is the management's expectation that in 2023 Eesti Energia's
sales revenue will see a slight decline while EBITDA and
investments will likely increase compared to 2022 numbers.
Eesti Energia will publish its Q3 results on 2 November
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 1.1 TWh for the
remainder of 2023 (at average price of 202.9 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 1.9 TWh for the
remainder of 2023 (at average price of 80.4 EUR/MWh) and 3.0 TWh
for 2024 (at average price of 53.2 EUR/MWh).
For shale oil, the hedge positions totaled 182.2 thousand tons
for the remainder 2023 (at average price of 347.2 EUR/ton) and
315.0 thousand tons for 2024 (at average price of 398.3 EUR/ton).
For naphtha, the hedge positions totaled 29.0 thousand tons for
2023 (at average price of 485.2 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 3.6 million tons at an average price of 62.3 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 Q2 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 second quarter financial
results will take place on 3 August 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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