Eesti Energia Group results for Q3 2022

The sales revenues of Eesti Energia Group amounted to EUR 657.1 million, +125.9% year-on-year, in the third quarter of 2022. Reported group EBITDA was EUR 194.8 million (+195.7% year-on-year), while adjusted EBITDA* was at EUR 93.8 million (+179,2%). The Group's reported net profit was at EUR 128.5 million (+659.5% year-on-year), adjusted net profit at EUR 27.4 million (+278.5%).

* - 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 annual development of the financials in Q3 2022 is similar to the performance in Q2 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 which were significantly higher than in the second quarter of 2022. In Q2 2022 such temporary fluctuations of PPA derivatives amounted to 11.9 million euros, in Q3 2022 to 68.8 million euros.

Despite distribution segment’s slightly lower volumes, revenues increased by 5.8% 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 EBITDA fell despite the increase in production and sales quantities and revenue. 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 remained stable. Natural gas sales volumes have decreased by 32.7% but sales revenue has increased by 160.4% and reached 31.6 million euros mostly due to significantly higher market prices. Other segment’s performance was driven mostly by pellet 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 124 million euros, +106% 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 +175.9% year-on-year to EUR 513 million in Q3 2022. The Group's average electricity sales price excluding derivative impact was at 221.2 EUR/MWh (+178.5% year-on-year). As a comparative figure, the Q3 2022 average market electricity price for Estonian Nord Pool area rose to 275.0 EUR/MWh (+182.1% 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 totaled at 2.5TWh (+11.9% year-on-year), from which retail sales amounted to 2.3TWh (+14.4% year-on-year) on the back of strong sales increases especially from Latvia (+38.3% year-on-year). All other markets (Lithuania, Poland, Finland) showed at least 10% higher volumes on annual comparison basis as well, with the exception of Estonia with a slight decrease of 1.7%. Electricity generation during the quarter rose to 1.5TWh (+23.0% 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 50-60 euros in Q3 2021 to 60-100 euros in Q3 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 Q3 2022 vs 0.7TWh in Q3 2021. Renewable electricity production which includes electricity production from wind, solar, and waste wood decreased by 0.06TWh and amounted to 0.3TWH mainly due to unfavorable wind conditions.

EBITDA of the electricity segment totaled at EUR 167.3 million (+208.4% year-on-year) mostly due to positive impact from realized hedges (effect EUR +52.4 million in annual comparison) and higher sales price (effect EUR +344.1m in annual comparison). Negative impacts came from higher variable costs (EUR -349.4m in annual comparison) and fixed costs (EUR -6.3m 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 66.2 (+200.9% 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 55.2 million in Q3 2022 (+5.8% year-on-year). The distributed volumes declined (-8,6% year-on-year), but stayed at ca 1.4TWh for the quarter. Average distribution sales price, the tariff, was at 39.4 €/MWh (+15.7% year-on-year). This year there have been already three tariff increases, and a fourth one will come in December 2022 with average tariff expected to increase a further 2% from current levels. Distribution EBITDA for the quarter decreased to EUR 11.7 million (-48.6% 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 29.9 million (+1.8% year-on-year), with shale oil sales volume at 98.4 thousand tons (+5.5% year-on-year). Quarterly oil production was at 110.1 thousand tons (+22.8% year-on-year) as this year there were less maintenances in the third quarter than last year. Eesti Energia's average shale oil sales price excluding the impact from derivative transactions increased to 580.8 EUR/ton (+44.0% 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 558 EUR/t (+43.5% year-on-year). Group’s average shale oil sales price including the impact of derivative transactions was at 304.3 EUR/ton (-3.5% year-on-year). Due to hedging impacts EBITDA from Shale oil operations staid in the negative territory in the third quarter with a result of EUR -8.9 million (-264.1% year-on-year) compared to EUR -2.4 million in Q3 2021.

Natural gas segment

Eesti Energia's revenues from the natural gas segment amounted to EUR 31.6 million in Q3 2022 (+160.4% year-on-year). The sales volumes declined (-32.7% year-on-year), at 195.2 GWh for the quarter due to lower demand from higher prices. Average natural gas sales price was at 162.0 €/MWh (+286.7% year-on-year). Natural gas EBITDA for the quarter increased to EUR 12.8 million (+141.8% 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 11.9 million in the third quarter of 2022 (-45.5% year-on-year). The biggest negative factor came from Auvere power plant compensation in the amount of 28 million euros for the availability guarantee for the period between July 2018 and August 2020. An addition to the revenue stream in Q3 was the frequency restoration reserve (FRR) service which contributed 5.6 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 124 million (+106.3% year-on-year) in Q3 2022. Investments to the renewable asset developments (EUR 52 million during the quarter) have pushed electricity distribution network investments to the third place (EUR 31 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 EUR 33 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 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 third quarter 2022, cash and cash equivalents held by the Group totaled EUR 379.7 million. As of 30 September 2022, Eesti Energia had access to a total of EUR 565 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 245 million. Eesti Energia’s net debt was at EUR 608 million, net debt to EBITDA ratio increased to 1.0x (on adjusted EBITDA basis to 1.5x) compared to the 3.5x financial policy target of the company as a result of strong operating cash flows.

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.


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 annual results on 2 March 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 1.0 TWh for the remainder of 2022 (at average price of 134.6 EUR/MWh) and 2.4TWh for 2023 (at average price of 200.3 EUR/MWh). The Group's hedge positions for electricity retail sales amounted to 1.2 TWh for the remainder of 2022 (at average price of 103.8EUR/MWh) and 3.7Wh for 2023 (at average price of 90.9 EUR/MWh).

For shale oil, the hedge positions totaled 88.7 thousand tons for the remainder 2022 (at average price of 294.3 EUR/ton) and 364.4 thousand tons for 2023 (at average price of 343.5 EUR/ton). For naphtha, the hedge positions totaled 13.8 thousand tons for 2022 (at average price of 338.4 EUR/ton) and 58.0 thousand tons for 2023 (at average price of 453.1 EUR/ton).

The Group's position in CO2 emission allowances for 2022 amounts to 6.1 million tons at an average price of 62.4 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 2023 amount to 2.60 million tons at an average price of 85.7 EUR/ton (including forward transactions).

The Q3 2022 interim report of Eesti Energia and the investor presentation is available at Eesti Energia's web site.

Investor call discussing the 2022 third quarter financial results will take place on 3 November 2022, 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.