Eesti Energia’s net profit increased

The energy group earned in the second quarter of 2018 a net profit of 15 million euros, which is 12% more compared to the same period last year. The turnover of Eesti Energia grew by 5% in yearly comparison and reached 186 million euros. EBITDA decreased by 17% to 53 million euros.

Andri Avila, the financial director of Eesti Energia, said that the past quarter was characterised by increased prices in energy markets. In the second quarter of 2018, the average market price of electricity within the Estonian pricing area of the power exchange Nord Pool was 42.1 euros per megawatt hour, which is 37% higher than during the same period in 2017. In June, the average market price of electricity amounted even to 47.8 euros per megawatt hour. The average price of electricity in the second quarter was practically the same as it was in our area this winter, while electricity consumption is higher and the prices are generally the highest of the year. The average quarterly market price of electricity was last higher in 2013, that is immediately after the complete opening of the electricity market,” Avila said. He added that the considerable appreciation of the market price of electricity was caused by low levels of hydro reservoirs in Scandinavia, tripled CO2 quota price compared to previous year, as well as increased coal and gas prices.

“Compared to the same period last year, the market price of fuel oil has also increased by a third, which means more income for us from the sale of shale oil. At the same time, resource fee rate paid for the utilization of oil shale has increased as well, because as the market price of fuel oil increases, we have to pay more for resource, i.e. oil shale to the state. By the third quarter, the resource fee rate for oil shale has risen to 1.58 euros per tonne. In other words, resource fee is back at the same level that it was before the Government’s decision in 2016 to bind oil shale resource fees to the world market price of fuel oil,” Avila explained the operating environment.

Due to planned large-scale maintenance, both the production of electricity and shale oil decreased in Q2 2018 in yearly comparison. Eesti Energia produced 2 terawatt hours of electricity or 17% less than same time last year. Nevertheless, Estonia is still one of the few countries in the region exporting electricity. “We will carry out all major maintenance works in our power stations during the summer, in order to be ready to produce at full capacity in autumn and winter when the consumption of electricity is the highest,” Avila said.

Eesti Energia’s shale oil production decreased by 15% and measured up to 90,000 tons. The vast majority of shale oil is exported from Estonia.

Of the latest major investments, the reconstruction of Eesti Power Plant’s 8th energy block was completed, as a result of which it is possible to produce more electricity from the by-product of oil production - oil shale gas. “As a result of the reconstruction, we enhance the value of oil shale more efficiently than before, the environmental impact of electricity production reduces and the flexibility of production increases, which are very important aspects in the electricity market with volatile prices,” Avila said.

In June, there was a planned pre-acceptance maintenance break at Auvere Power Plant and the station was restarted again in July. “At the night of 8th July, a successful fault ride through took place in co-operation with Elering and as of now, all tests that were necessary for the acceptance of the power station from the constructor have been passed. Hopefully, we will be able to accept the power plant from General Electric during this quarter,” Andri Avila said. Eesti Energia has invested 581 million euros in the Auvere Power Plant as of the end of Q2 2018.

Within the months of April, May and June this year, the distribution network company Elektrilevi, part of Eesti Energia Group, built 417 kilometres of new and weather-resistant power lines and established 72 new substations. A total of 18 million euros was invested in the power distribution network in the quarter. Thanks to large investments, 65% of Elektrilevi’s network is currently weatherproof.

At the end of May, a contract was signed, according to which Eesti Energia’s renewable energy company Enefit Green will acquire 100% of Nelja Energia. Major part of the shares are acquired from the company Vardar Eurus belonging to Norwegian local governments and the remaining shares from investors of Estonian origin. An approval from competition authorities is still necessary for the transaction to take effect.

The above-mentioned transaction helps Eesti Energia to move towards their strategic goal of producing 40% of electricity from renewable and alternative sources by 2022. The updated strategic activity plan was confirmed by the council of Eesti Energia in June.

According to Andri Avila, electricity transactions are currently being made in the financial market at the price level of 55 euros per megawatt hour for the end of this year and the beginning of the next year. “We haven’t had average quarterly market prices of electricity this high before. At the same time, this is the price that the market predicts to be upcoming. The reality may prove to be different, if for example there will be a rainy autumn in Scandinavia and a mild winter after that. In this case, we will probably not see such prices coming true,” Avila said.