TIDM96DB
RNS Number : 4174R
Eesti Energia AS
28 February 2023
Eesti Energia Group unaudited results for 2022 financial
year
The sales revenues of Eesti Energia Group amounted to EUR
2,218.2 million, +69.0% year-on-year, in the financial year of
2022. Group EBITDA was EUR 420.4 million (+32.4% year-on-year),
while adjusted EBITDA* was at EUR 333.0 million (+37.0%). The
Group's net profit was at EUR 215.7 million (+93.5% year-on-year),
adjusted net profit at EUR 128 million (+247%).
* - 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 sales revenues and EBITDA of Eesti Energia in 2022 compared
to 2021 have risen significantly with Electricity and Natural Gas
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 high electricity price environment.
Electricity segment's EBITDA was additionally impacted by
non-monetary temporary fluctuations in the fair value of long-term
Power Purchase Agreements (PPA) derivatives. Such temporary
fluctuations of PPA derivatives amounted to 87.4 million euros in
2022.
Distribution segment EBITDA fell significantly despite higher
sales revenues and sales price with a slight decline in sales
volumes. The segment's EBITDA was affected by electricity costs for
network losses that are repurchased at market prices. Shale oil
segment's EBITDA fell despite the relatively stable sales
quantities and revenue and a significantly higher sales price. The
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 segment had a
significant increase in sales revenue, mostly driven by much higher
sales price, despite lower sales volumes. The segment's EBITDA
turned positive with the largest impact coming from unrealized
hedges. Other segment's performance was driven mostly by a new
revenue stream frequency restoration reserve (FRR) service.
Investments during the financial year amounted to 447 million
euros, +76.6% 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 +93.2%
year-on-year to EUR 1,480 million in 2022. The Group's average
electricity sales price excluding derivative impact was at 145.8
EUR/MWh (+87.9% year-on-year). As a comparative figure, the 2022
average market electricity price for Estonian Nord Pool area rose
to 192.8 EUR/MWh (+122.3% 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 year
totaled at 10.5TWh (+11.7% year-on-year), from which retail sales
amounted to 9.9TWh (+14% year-on-year). Electricity generation
during the year rose to 6.3TWh (+20.0% 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 remained high, mostly
between 70 to 100 euros in 2022, the electricity price increases
were higher mainly due to gas prices which had 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 4.8TWh of electricity in 2022 vs 3.6TWh in
2021. Renewable electricity production which includes electricity
production from wind, solar, and waste wood amounted to 1.5 TWh and
decreased by 0.1TWh compared to 2021 mainly due to unfavorable wind
conditions.
EBITDA of the electricity segment totaled at EUR 286.1 million
(+31.5% year-on-year) mostly due to positive impact from realized
hedges (effect EUR +124.5 million in annual comparison) and higher
sales volume (effect EUR +24.3 million in annual comparison).
Negative impacts came from higher variable costs (EUR -19.3 million
in annual comparison) and fixed costs (EUR -28.8 million 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 year was at EUR 198.7
million (+38.9% year-on-year) compared to EUR 143.0 million in
2021.
Distribution segment
Eesti Energia's revenues from the distribution segment amounted
to EUR 242.1 million in 2022 (+3.7% year-on-year). The distributed
volumes declined (-6.5% year-on-year) and amounted to 6.7 TWh.
Average distribution sales price, the tariff, was at 36.1 EUR/MWh
(+10.8% year-on-year). In 2022 there were four tariff increases.
Distribution segment's EBITDA for the year decreased to EUR 85.1
million (-40.3% 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
133.2 million (-1.3% year-on-year), with shale oil sales volume at
405.4 thousand tons (-3.4% year-on-year). Yearly oil production was
at 423.9 thousand tons (-3% year-on-year) due to large-scale repair
and reconstruction works. Eesti Energia's average shale oil sales
price excluding the impact from derivative transactions increased
to 565.2 EUR/ton (+45% year-on-year) due to supportive oil market
prices and good demand for Group's oil products as reference
products average yearly market price was at 542 EUR/t (+43.6%
year-on-year). Group's average shale oil sales price including the
impact of derivative transactions was at 328.6 EUR/ton (+2%
year-on-year). Due to hedging impacts EBITDA from shale oil
operations turned negative in 2022 with a result of EUR -12.0
million (-248.3% year-on-year) compared to EUR 8.1 million in
2021.
Natural gas segment
Eesti Energia's revenues from the natural gas segment amounted
to EUR 243.9 million in 2022 (+161.2% year-on-year). The sales
volumes declined (-19.5% year-on-year), at 1.9 TWh for the year due
to lower demand from higher prices. Average natural gas sales price
was at 128.8 EUR/MWh (+224.3% year-on-year). Natural gas EBITDA for
the quarter increased to EUR 73.5 million (+1,297.0% 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
20.6 million in 2022 (+91.4% year-on-year). The biggest negative
factor came from heat sales where EBITDA decreased by -7.3 million
euros due to higher variable and fixed costs. The biggest positive
impact came from the new revenue stream the frequency restoration
reserve (FRR) service which contributed 17.1 million euros to
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 447 million
(+76.6% year-on-year) in 2022. Investments to the renewable asset
developments (EUR 161.2 million during the year, +280%) have pushed
electricity distribution network investments to the third place
(EUR 125.5 million during the year, 24%). 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 127 million, from which the largest share went to
the construction of a new chemical plant Enefit-280 (EUR 81.8
million). 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 and credit ratings
As of the end of 2022, cash and cash equivalents held by the
Group totaled EUR 280.5 million. As of 31 December 2022, Eesti
Energia had access to a total of EUR 495 million of bank loans,
from which revolving credit facilities amounted to EUR 250 million
and long-term loan agreements signed with multiple counterparties
to EUR 245 million. Eesti Energia's net debt was at EUR 774
million, net debt to EBITDA ratio decreased to 1.8x (on adjusted
EBITDA basis to 2.3x) compared to the 3.5x financial policy target
of the company as a result of strong operating cash flows.
On February 15th, 2023, Eesti Energia signed a sustainability
linked, amortising 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- (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 2023 Eesti Energia's
sales revenue, EBITDA and investments will likely increase (defined
as at least 5% growth) compared to 2022 numbers.
Eesti Energia will publish its audited report in April 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 2.4 TWh for 2023 (at
average price of 201.7 EUR/MWh) and 0.5TWh for 2024 (at average
price of 149.6 EUR/MWh). The Group's hedge positions for
electricity retail sales amounted to 4.0 TWh for the year 2023 (at
average price of 103.3 EUR/MWh) and 3.1 TWh for 2024 (at average
price of 67.7 EUR/MWh).
For shale oil, the hedge positions totaled 364.3 thousand tons
for 2023 (at average price of 342.1 EUR/ton) and 315.0 thousand
tons for 2024 (at average price of 403.9 EUR/ton). For naphtha, the
hedge positions totaled 58.0 thousand tons for 2023 (at average
price of 456.2 EUR/ton) and 49.7 thousand tons for 2024 (at average
price of 586.1 EUR/ton)
The Group's position in CO2 emission allowances for 2023 amounts
to 3.5 million tons at an average price of 63.8 EUR/ton (including
forward transactions, free emission allowances received as
investment support and the surplus of unused allowances from
previous periods).
The 2022 unaudited 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 financial results will take
place on 1 March 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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