In the third quarter Estonian state-owned energy group Eesti Energia increased its turnover and tripled its production of renewable energy, but maintenance at Auvere Power Plant that took longer than expected and large-scale energy production restructuring had a negative impact on its result.
Eesti Energia’s turnover increased to EUR 206 million in the third quarter, up by 3% YoY. Earnings before interest, tax, depreciation and amortization (EBITDA) totaled EUR 42.1 million, down by 28%, with net profit down by EUR 20.4 million and net loss totaling EUR 9.5 million, the energy group said in a press release on October 31.
“The result was affected in particular by prolonged maintenance work on Auvere Power Plant and restructuring in large-scale energy production,” said Eesti Energia CFO and board member Andri Avila. “The negative impact of the third quarter was only due to the production of oil shale electricity. All other business areas were profitable and rather exceeded expectations.”
The Auvere plant produced approximately 300 gigawatt-hours of electricity less than planned. As a result, total electricity production was significantly reduced and revenue was lost.
“At the same time, depreciation and interest in expenses for Auvere Power Plant alone totaled EUR 10 million in the third quarter,” Avila explained.
General Electric, which is conducting work covered under warranty at Auvere, has promised to finish its maintenance of the plant by mid-fourth quarter. According to the contract, losses during the warranty period will be compensated by the main contractor, with whom negotiations over the matter are ongoing.
A second extraordinary factor affecting the result was the adjustment of large-scale energy production processes and staff numbers to match market conditions. In doing so, the company took into account the state’s expectation to ensure the capacity to generate enough electricity to match the level of average Estonian consumption through 20203. A fund established to help people who lost their jobs and other measures also cost over EUR 4 million.
“Our cost base is now optimized to meet the changed market situation, and it is adapted to new production volumes,” Avila said.
Eesti Energia’s nine-month profit for 2019 totals EUR 9.4 million.
In the third quarter Eesti Energia generated 951 gigawatt-hours of electricity, down by 56% YoY. The decrease in production volumes was due primarily to the higher price of carbon dioxide emission allowances, which increased by 43%, to EUR 26.90 per ton. The decrease in electricity production volumes resulted from the decrease in oil shale-based electricity production.
In contrast, renewable electricity production more than tripled, to 241 gigawatt-hours. The share of electricity produced from renewable and alternative sources was 41% of total production as a quarterly average.
Retail electricity sales increased by 18%, to 1,698 gigawatt-hours, due primarily to increased sales on the Lithuanian and Polish markets. Oil shale production has increased by 9%, to 113,000, while sales revenue has increased by 36%, to EUR 28 million.
Sales of the energy group’s network services remained steady on year, but following a cut in rates at the beginning of the year, sales revenue decreased by EUR 3.6 million, with this money remaining in the hands of consumers.
Eesti Energia invested a total of EUR 34.4 million in the third quarter, including EUR 18.5 million on power network-related investments and another nearly EUR 4 million on renewable energy-related investments.
As an indicator of economic activity, there were nearly 950 new connections to the network this quarter, one third more than during the same quarter last year.
In the third quarter the company contributed EUR 22 million to the state treasury in the form of various fees and taxes. (ERR/Business World Magazine)
