Eesti Energia Group results for Q2 2022

The sales revenues of Eesti Energia Group amounted to EUR 416.6 million, +72.8% year-on-year, in the second quarter of 2022. Reported group EBITDA was EUR 91.7 million (+124.6% year-on-year), while adjusted EBITDA\* was at EUR 79.8 million (+148.4%). The Group's reported net profit was at EUR 45.2 million (+552.2% year-on-year), adjusted net profit at EUR 33.3 million (+278.1%).

\* - the introduction of adjusted EBITDA and adjusted net profit from 2022 Q1 is to present EBITDA and net profit in a normalised 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 annual development of the financials in Q2 2022 is very similar to the performance in Q1 with Electricity 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 continuing high electricity price environment. The high electricity price environment has not gone away due to high gas prices which have pushed variable cost of gas fired power plants significantly higher compared to year ago 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, but the impacts were smaller than in the first quarter of 2022. In Q1 2022 such temporary fluctuations of PPA derivatives amounted to 85.7 million euros, in Q2 2022 to 11.9 million euros.

Despite distribution segment’s slightly lower volumes, revenues increased by 5.7% annually due to increases in the tariff. Distribution EBITDA continues to be negatively affected by electricity costs for network losses that are repurchased at market prices. Shale oil segments revenue and EBITDA fell despite production and sales quantities on roughly the same level as a year ago. Shale oil segment’s revenue and EBITDA are 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. Other segment’s performance was driven mostly by gas sales, but also a new revenue stream, frequency restoration reserve (FRR) service, had a decent contribution to the segment’s performance.

Investments during the quarter amounted to 98 million euros, 80.3% 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 +98.6% year-on-year to EUR 253 million in Q2 2022. The Group's average electricity sales price excluding derivative impact was at 103.7 EUR/MWh (+79.0% year-on-year). As a comparative figure, the Q1 2022 average market electricity price for Estonian Nord Pool area rose to 142.1 EUR/MWh (+160.7% 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 quarter totalled at 2.5TWh (+19.8% year-on-year), from which retail sales amounted to 2.3TWh (+21.3% year-on-year) on the back of strong sales increases especially from Latvia (+56.1% year-on-year). All other markets (Estonia, Lithuania, Poland, Finland) showed at least 10% higher volumes on annual comparison basis as well. Electricity generation during the quarter rose to 1.4TWh (+56.0% 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 increased from 40-50 euros in Q2 2021 to 80-90 euros in Q2 2022, the electricity price increases have been higher mainly due to gas prices which have 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 1.1TWh of electricity in Q2 2022 vs 0.7TWh in Q1 2021. Renewable electricity production which includes electricity production from wind, solar, and waste wood was stable at 0.4TWh.

EBITDA of the electricity segment totalled at EUR 66.8 million (+215.7% year-on-year) mostly due to positive impact from realised hedges (effect EUR +31.7 million in annual comparison) and higher sales price (effect EUR +112.0m in annual comparison). Negative impacts came from higher variable costs (EUR -101.9m in annual comparison) and fixed costs (EUR -9.8m 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 quarter was at EUR 54.9 (+342.7% year-on-year) million compared to EUR 12.4 million in Q2 2022.

Distribution segment

Eesti Energia's revenues from the distribution segment amounted to EUR 55.4 million in Q2 2022 (+5.7% year-on-year). The distributed volumes declined slightly (-1.5% year-on-year), but stayed at ca 1.6TWh for the quarter. Average distribution sales price, the tariff, was at 35.3 €/MWh (+7.3% year-on-year). This year there have been already two tariff increases, and a third one will come from 1st October 2022 with average tariff expected to increase a further 3% from current levels. Distribution EBITDA for the quarter decreased to EUR 19.9 million (-27.0% 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 32.2 million (+0.7% year-on-year), with shale oil sales volume at 105 thousand tonnes (+3.1% year-on-year). Quarterly oil production was at 106.0 thousand tons (+9.5% year-on-year) as this year there were less maintenances in the second quarter than last year. Eesti Energia's average shale oil sales price excluding the impact from derivative transactions increased to 624 EUR/tonne (+73.1% year-on-year) due to supportive oil market prices and good demand for Group’s oil products as reference products average quarterly market price was at 598 EUR/t (+70.4% year-on-year). Group’s average shale oil sales price including the impact of derivative transactions was at 305.6 EUR/tonne (-2.3% year-on-year). Due to higher cost base and hedging impacts EBITDA from Shale oil operations staid in the negative territory in the second quarter with a result of EUR -4.9 million (-265.3% year-on-year) compared to EUR -1.3 millon in Q2 2021.

Other segment

EBITDA from Group's other products and services totalled at EUR 76.2 million in the second quarter of 2022 (+159.0% year-on-year). The biggest positive factor came from retail gas sales where despite stable quantities at 0.4TWh the high gas market price environment pushed gas sales revenues higher, while the profit line also had impacts from derivative instruments. An addition to the revenue stream in Q2 was the frequency restoration reserve (FRR) service which contributed 6.8 million euros to revenues and 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 98 million (+80.3% year-on-year) in Q2 2022. Investments to the renewable asset developments (EUR 40 million during the quarter) have pushed electricity distribution network investments to the second place (EUR 25 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 nearly EUR 25 million, from which the largest share went to the construction of a new chemical plant (new Enefit-280). The new Enefit-280 pyrolysis plant is scheduled to be completed in 2024, and will increase the annual shale oil output to 700,000 tonnes 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 2022, cash and cash equivalents held by the Group totalled EUR 436.9 million. As of 30 June 2022, Eesti Energia had access to a total of EUR 695 million of bank loans, from which revolving credit facilities amounted to EUR 320 million and long-term loan agreements signed with multiple counterparties to EUR 375 million. Eesti Energia’s net debt was at EUR 437 million, net debt to EBITDA ratio declined to 0.9x (on adjusted EBITDA basis to 1.2x) compared to the 3.5x financial policy target of the company as a result of strong operating cash flows.

During the second quarter 2022 the Group paid out total dividends for the 2021 financial year in the amount of EUR 55.7 million, from which EUR 46.7 million was paid to the sole shareholder, State of Estonia. EUR 9 million was paid to the minority shareholders of the Tallinn stock exchange listed majority owned Enefit Green subsidiary.

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 quarters 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 effect 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.


It is the management’s expectation that in 2022 Eesti Energia's sales revenue, EBITDA and investments will likely increase (defined as at least 5% growth) compared to 2021 numbers.

Eesti Energia will publish its third quarter results on 3 November, 2022.

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 1.8 TWh for the remainder of 2022 (at average price of 109.6 EUR/MWh) and 0.6TWh for 2023 (at average price of 119.5 EUR/MWh). The Group's hedge positions for electricity retail sales amounted to 2.0 TWh for the remainder of 2022 (at average price of 79.7EUR/MWh) and 3.1TWh for 2023 (at average price of 49.7 EUR/MWh).

For shale oil, the hedge positions totalled 177.4 thousand tonnes for the remainder 2022 (at average price of 294.0 EUR/tonne) and 364.3 thousand tonnes for 2023 (at average price of 343.9 EUR/tonne). For naphtha, the hedge positions totalled 27.6 thousand tonnes for 2022 (at average price of 339.2 EUR/tonne) and 58.0 thousand tonnes for 2023 (at average price of 455.9 EUR/tonne).

The Group's position in CO2 emission allowances for 2022 amounts to 5.3 million tonnes at an average price of 59.5 EUR/tonne (including forward transactions, free emission allowances received as investment support and the surplus of unused allowances from previous periods). CO2 emission allowances for 2023 amount to 0.66 million tonnes at an average price of 80.3 EUR/tonne (including forward transactions).

The Q2 2022 interim report of Eesti Energia and the investor presentation is available at Eesti Energia's web site.