Eesti Energia earned a record profit

The Eesti Energia Group earned a net profit of EUR 171 million in 2016, which is the best result in its history. Also, EBITDA rose to a record EUR 327 million last year.

In 2016, the business income of Eesti Energia totalled EUR 832 million, having grown by 5% over the year. Business expenses decreased by EUR 23 million, or 4% in comparison with the previous year. The company’s turnover decreased by 4% in a year-on-year comparison, reaching EUR 742 million.

According to Andri Avila, the Financial Director of Eesti Energia, the achievement of the record financial results was supported by a very strong second half of 2016. “In summer, we started to increase the production capacity and at the beginning of autumn we were already working at full capacity and continued to do so until the end of the year. “Last year was a year of opposites. At the beginning of the year we were preparing crisis plans and reduced the capacity of oil plants due to very low oil prices. In the middle of the year, however, the market prices of oil as well as electricity recovered. In addition, starting in July the government decided to implement flexible taxation of oil shale resources, enabling the oil shale companies to survive during low market price periods, and in the event of a higher market price the tax revenues received by the state will also increase,” Avila added.

In 2016, Eesti Energia sold a total of 9.1 terawatt-hours of electricity, which was 18% more than in 2015. The production of shale oil dropped 6% over the course of the year, to 318,000 tonnes.

Andri Avila also noted that extraordinary income played an important role in achieving the good financial results. “Last November, we signed an interim arrangement with the builder General Electric (GE), builder of the Auvere power plant, according to which GE will build extra bag filters for the power plants, to ensure that the dust emissions remain within the standard even when the plant is operating at full capacity. Initially, the builder was to deliver the Auvere power plant in November 2015. Since the delivery of the power plant has been delayed and the plant has been unable to operate at full capacity, GE paid Eesti Energia a contractual penalty of EUR 66 million, according to the interim arrangement, which was added to the company’s profit,” Avila said. “It is important to note that we managed to reach an agreement with the builder of the power plant in the course of joint negotiations and did not have to turn to court. I praise GE as well as the team from Eesti Energia for that,” added Avila.

According to Andri Avila, the start of last year was very difficult for energy companies, since the market prices of electricity and oil were on a low level and the forecasts did not predict any improvement in prices. “Due to the changed operating environment, we quickly undertook the updating of our strategy, in order to increase the competitiveness of the company. The strategy, approved in June, is based on increasing efficiency and implementing more smart solutions to enable us maximum output with current production facilities. We also adjusted the structure of Eesti Energia in order to implement the strategy,” said Avila.

In 2016, Eesti Energia started modification of Unit 8 of the Eesti Power Plant, to increase the capability of using oil shale to 50 per cent. The size of the investment is EUR 15 million and the reconstruction works will be completed by the end of 2017.

Last year, Eesti Energia also entered the household clients’ gas market and established an energy sales company in Poland. Furthermore, the company is analysing the possibility of beginning energy sales in other Baltic Sea countries.

Although, according to Andri Avila, 2016 brought Eesti Energia the best profit figures in its history, the company still has to take the implementation of a new strategy and the increasing of efficiency very seriously. “The long-term outlook of energy markets is still weak; in order to stay competitive, there is no other way than to remain flexible in terms of changes in the future and find places for efficiency,” he said. The biggest investments by Eesti Energia in the coming years will be the construction of a wind farm at Tootsi, the Narva underground mine and construction of the device for separating petrol from oil shale gas.

Eesti Energia proposes that the owner pay EUR 47 million in dividends for 2016.

Eesti Energia is an energy group, comprising 25 companies and employing a total of 5840 people as at 31 December 2016. Besides Estonia, the company is also present in Latvia, Lithuania, Poland, Germany, Jordan, and the United States of America.