Eesti Energia Audited Financial Results for 2016

Transcription

1 Eesti Energia Audited Financial Results for February 2017 Eesti Energia Narva Wind Park, Estonia

2 2 Disclaimer This presentation and any materials distributed or made available in connection herewith (collectively, the presentation ) have been prepared by Eesti Energia AS (the Company ) solely for your use and benefit for information purposes only. By accessing, downloading, reading or otherwise making available to yourself any content of the presentation, in whole or in part, you hereby agree to be bound by the following limitations and accept the terms and conditions as set out below You are only authorized to view, print and retain a copy of the presentation solely for your own use. 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3 3 Sales Revenues -4%, EBITDA +23% Sales Revenues EBITDA (-4.5%) (+23.2%) Operating Cash Flow Investments (-34.9%) (-42.7%)

4 Nord Pool Baltic Electricity Prices Converging 2016 characterised by increased NP electricity prices in Estonia and Finland. Decreased price spreads in Baltic states and between Estonia and Finland Average price in NP Estonia price area 33.1 /MWh* (+2.0 /MWh, +6.3%). Eesti Energia Narva power plants achieved 4-15% higher quarterly electricity prices than NP Estonia Price spread between Estonia and Finland decreased by 0.8 /MWh to 0.6 /MWh as Estonian price stayed slightly higher Average price in NP Latvia price area 36.1 /MWh (-5.7 /MWh, -13.7%). Estonia-Latvia price spread decreased by 7.7 /MWh to -3.0 /MWh, Latvian price remained higher. Price spread decrease is related to NordBalt cable Clean Dark Spread*** in NP Estonia average electricity market price increased to 8.7 /MWh (+6.1 /MWh) due to: - CO 2 and oil shale costs component (total impact +4.2 /MWh) due to lower CO 2 and oil shale cost - increased NP Estonia average electricity price (+2.0 /MWh) * average Nord Pool electricity market price. This price may differ compared with Eesti Energia s electricity sales prices achieved on wholesale market ** average electricity price achieved on Nord Pool Estonia electricity market by Eesti Energia Narva power plants *** CDS calculation methodology has been adjusted in Q by taking into account oil shale costs used in electricity wholesale bidding strategy Average Quarter Nord Pool Electricity Prices NP Latvia NP Finland Clean Dark Spread*** in NP Estonia average electricity price Estonia-Finland price spread Estonia-Latvia price spread EE Average on NP Estonia** NP Estonia /MWh

5 5 Oil Prices Decreased Y-o-Y, Increased Q-o-Q Average price of Brent crude oil 43.3 $/bbl (-8.8 $/bbl, -16.8%) - Crude oil prices impacted mainly by changes in supply incl. OPEC decision to reduce production Average price of fuel oil (1% sulphur content) /t (-40.6 /t, -17.2%). Fuel oil vs Brent crack spread narrowed by 1.4 /bbl to -9.9 /bbl - Crack spread impacted by increased demand and improved export opportunities Fuel prices increased Q-o-Q by 19%-42% on average in 2016 Average Quarter Fuel Oil and Brent Crude Oil Prices and Crack Spread $/bbl; /bbl /t Brent crude ($/bbl) Fuel oil 1% ( /t) Crack spread /bbl

6 Group s EBITDA Increased Despite Lower Sales Revenue Sales Revenues* Breakdown and Y-o-Y Change (-4.5%) EBITDA* Breakdown and Y-o-Y Change (+23.2%) 777 (6.7) (35.8) (2.7) (40.2) Sales revenues 2015 Electricity Distribution Shale oil Other Sales revenues 2016 EBITDA 2015 Electricity Distribution Shale oil Other EBITDA 2016 * Compared to Annual report 2015, segment reporting has been adjusted due to the specification of an accounting policy 6

7 Eesti Energia Auvere power plant in Ida-Virumaa, Estonia Electricity

8 Electricity Sales Revenue Decreased 47% % of sales revenues Average Electricity Sales Price* Electricity Sales Revenue Electricity Sales Volume** /MWh -6.3 (-13.5%) +2.0 (+6.3%) -6.7 (-1.9%) TWh +1.3 (+16.3%) Average electricity sales price* NP Estonia average electricity price Subsidies and municipal waste gate fees Sales revenues (excluding subsidies and waste gate fees) Retail sales Wholesale sales Average electricity sales price* decreased to 40.3 /MWh (-6.3 /MWh, -13.5%) - Gain on derivatives impacted price by 0.6 /MWh (-4.2 /MWh; 4.8m in abs. terms, m) - Average electricity sales price* excl. gain on derivatives decreased to 39.8 /MWh (-2.1 /MWh, -5.1%) Electricity sales volume 9.0 TWh (+16.3%)**. Wholesale sales increased by 937 GWh (+51.4%) Electricity generation amounted to 9.1 TWh (+1.4 TWh, +18.0%) 2017 sales hedged against price risk amounted to 4.7 TWh with an average price of 35.4 /MWh; 2018 sales hedged against price risk amounted to 0.9 TWh with an average price of 33.6 /MWh * total average sales price of electricity product (including retail sales, wholesale sales and gain on derivatives). Average sales price excludes subsidies for renewable energy and municipal waste gate fees ** includes sales volume of Auvere power plant. In the Group's accounting, the sales revenue and cost of Auvere power plant is partially capitalized as the plant is still under construction. Without including the netted sales volume of Auvere power plant, the Group's electricity sales would have increased by 14% or 986 GWh 8

9 26% Retail Market Share in the Baltics Eesti Energia Electricity Retail Market Share in Baltic Countries in 2016 Estonia Latvia Lithuania Baltic States 16% 29% 5% 11% 26% -2.1pp* 59% +0.3pp* +0.5pp* -0.6pp* Eesti Energia Others Regulated market * change compared to 2015 Sources: Estonian TSO Elering, Central Statistical Bureau of Latvia, Lithuanian TSO Litgrid and DSO Lesto, Eesti Energia Total electricity retail market share in Baltic states decreased by 0.6 percentage points compared to 2015 Market share changed in Latvia and Lithuania by +0.3 and +0.5 percentage points, respectively Eesti Energia retail market share in Estonia decreased by 2.1 percentage points compared to 2015 due to changes in large customer portfolio since the beginning of

10 10 Electricity EBITDA +16% 36% Electricity EBITDA Development (+15.6%) (29.5) (5.3) Total margin impact - 5.3m (-0.6 /MWh). Average sales revenue decreased by 2.6 /MWh (impact m). Subsidies decreased by 0.4 /MWh. Average electricity sales price excl. subsidies and waste gate fees decreased by 2.1 /MWh. Lower variable costs impact m mainly related to decreased border crossing costs and lower environmental costs Volume impact m (sales volume of Auvere power plant is not included in Group s sales revenue and EBITDA to the full extent) Fixed costs impacted EBITDA by + 1.0m. Fixed cost component in inventories impacted EBITDA by m. Decreased payroll costs impact + 8.1m. Decreased maintenance costs impact + 6.6m Gain on derivatives decreased impacting EBITDA by m (gain on derivatives 34.2m in 2015, 4.8m in 2016) Other changes (total impact + 25m) related to change in value of derivative instruments (impact m) and smaller environmental provisions (impact + 1.6m) % of EBITDA Key Figures Return on fixed assets* (%) EBITDA 2015 Margin impact Volume impact Change in fixed costs Gain on derivatives Other EBITDA 2016 Electricity EBITDA ( /MWh) * Rolling 12 months. Excluding impairment of generation assets in December 2013 and December 2015

11 Distribution Cable Tunnel in Tallinn, Estonia Distribution

12 12 Distribution Revenue Increased 4% Average Distribution Sales Price Distribution Sales Revenue Distribution Volume /MWh TWh -0.0 (-0.1%) (+4.3%) +0.3 (+4.4%) 34% % of sales revenues Sales revenue increased to 252.7m (+4.3%) due to increased distribution volume Network losses amounted to 4.1% (-0.7 percentage points) of electricity entered into distribution network

13 13 Distribution EBITDA Higher Mainly due to Increased Volume Distribution EBITDA Development (0.5) +7.1 (+6.7%) Total margin impact - 0.5m (-0.1 /MWh). Decreased average sales price impact on EBITDA - 0.1m. Higher variable costs impacted EBITDA by - 0.4m Distribution volume increased 4.4%, impact on EBITDA + 6.8m Fixed costs decreased 0.8m, payroll costs decreased 0.4m 34% % of EBITDA Key Figures Return on fixed assets* (%) Distribution losses (GWh) SAIFI SAIDI (unplanned) SAIDI (planned) EBITDA 2015 Margin impact Volume impact Change in fixed costs EBITDA 2016 Adjusted RAB* () * Rolling 12 months. RAB (Regulated Asset Base) allocated to distribution product

14 Eesti Energia Oil Industry in Ida-Virumaa, Estonia Shale Oil

15 15 Support From Hedges Decreased 9% % of sales revenues Average Shale Oil Sales Price Shale Oil Sales Revenue Shale Oil Sales Volume /tonne (-32.0%) (-17.2%) (-34.8%) thousand tonnes (-4.2%) Average shale oil sales price Average price of heavy fuel oil (1%) Sales volume decreased 4.2% as production decreased. The Groups shale oil production in 2016 decreased by 18.8 thousand tonnes (-5.6%) to thousand tonnes due to planned maintenance works and reducing load of the plant during a time period where market prices were on their lowest levels in 2016 Average shale oil sales price decreased to 222 /t (-104 /t, -32%) - Gain on derivatives impacted price by 12.7 /t ( /t, 3.8m in abs. terms, m) - Average sales price excl. gain on derivatives increased to 209 /t (+3 /t, +1%) despite a decrease in the reference product average price (-40.6 /t, -17.2%) 2017 sales hedged against price risk amounted to 287 thousand tonnes with an average price of 237 /t 2018 sales hedged against price risk amounted to 180 thousand tonnes with an average price of 253 /t

16 16 Shale Oil EBITDA Decreased Mainly due to Lower Gain on Derivatives 48.0 Shale Oil EBITDA Development (-83.7%) +1.8 (1.3) +1.2 (33.9) (8.0) 7.8 Margin impact on profitability + 1.8m (+6.1 /t). Increased average sales price impact + 0.9m. Lower variable costs increased EBITDA by 1.0m Sales volume decreased by 4%, impact on EBITDA - 1.3m Fixed costs decreased by 1.2m. Fixed cost component in inventories impact on EBITDA - 3.6m, Decreased maintenance costs impact + 0.9m, decreased payroll costs impact + 3.3m Gain on derivatives decreased, impacting EBITDA by m (gain on derivatives 37.7m in 2015, 3.8m in 2016) Other changes (- 8.0m) mainly related to change in value of derivative instruments (- 8.9m) and smaller environmental provisions impact + 0.8m Return on fixed assets (%)* % % of EBITDA EBITDA 2015 Margin impact Volume impact Change in fixed costs Gain on derivatives Other EBITDA 2016 Shale Oil EBITDA ( /t) * Rolling 12 months

17 17 Other Sales Revenues Decreased, Other EBITDA Increased Mainly due to One-off Impact Sales Revenues From Other Products and Services -2.7 (-3.5%) Other sales Enefit Solutions' products sales revenue Sales of natural gas Sales of heat EBITDA impact due to liquidated damages related to the delay in the delivery of the Auvere power plant m Retrospective reduction of resource charge rates improved EBITDA by 14.2m Sale of surplus CO 2 allowances in Q impact on EBITDA - 8.3m Heat sales EBITDA improved by 1.1m Other changes in EBITDA totalled + 3.1m 10% % of sales revenues 27% % of EBITDA Other Products and Services EBITDA Development (+770.1%) (8.3) Other EBITDA 2015 Heat Environmental charges Auvere CO2 Other Other EBITDA 2016

18 18 Operating Cash Flow 127m Lower than EBITDA EBITDA to Operating Cash Flows Development (-38.8%) (14.4) (60.6) (30.3) (14.9) (11.9) EBITDA 2016 CO2 impact Derivative instruments Auvere Interest paid Income tax Other Operating cash flow 2016

19 Operating Cash Flow 107m Lower Y-o-Y Operating Cash Flow Changes (-34.9%) (81.8) (15.2) (60.6) (14.9) (10.0) Operating cash flow 2015 Change in EBITDA CO2 Derivative instruments Auvere Interest paid Income tax Other Operating cash flow 2016

20 Capital Expenditure 141m in 2016 Capex Breakdown by Projects Capex Breakdown by Products (-42.7%) Longwall mining Capitalised interest Other developm. projects Maintenance investments Auvere 300 MW power plant Electricity network (-42.7%) Other Shale oil Distribution Electricity Auvere power plant* Increase of burning of retort gas Main Ongoing Projects Until end of 2016 Future Needed upgrade of fabric filters defers the acceptance of Auvere power plant from the contractor. During the upgrade power plant will operate at modes and loads where emissions are in compliance with requirements. Auvere power plant generated 1.1 TWh of electricity in 2016 (+143% compared to 2015) Maintenance investments (excl. distribution) decreased by 19.6m to 21.6m, Investments in distribution network continued ( 88.5m; - 4.8m, -5%) * actual capex impacted by netting of Auvere sales against plants costs 20

21 443m Amount of Liquid Assets at the End of 2016 Group s Liquidity Development in (+39.7%) (115.8) (21.0) Liquid assets 31 December 2015 Operating cash flow Investment cash flow Financing cash flow Liquid assets 31 December m of liquid assets and unused loans available as at 31 December 2016, including: - 223m of liquid assets - 150m revolving credit facilities with SEB and OP Corporate Bank - 70m loan agreement signed with European Investment Bank (EIB) 21

22 22 Debt Maturity Profile Net Debt / EBITDA & Financial Leverage Eesti Energia credit ratings at investment grade level Financial Leverage, % - BBB (S&P) retained in June 2016 (negative 34% 34% 40% outlook) 30% 32% - Baa3 (Moody s), downgraded from Baa2 in April 24% 2016 (stable outlook) % Group s financial status in line with contractual loan 2.2 8% covenants 0% Total debt 940m, net debt 717m as at the end of 2016 Net Debt/EBITDA, times Net debt/ebitda Financial leverage (right sc.) Debt Maturity EIB Eurobond

23 Outlook for FY2017 Sales Revenues EBITDA Investments Growth* Decline* 141 Growth* sales revenues and investments are likely to grow*, EBITDA will decline* - Group s results impacted by forecasted higher market prices of oil and electricity - Excluding the positive impact of the liquidated damages related to the Auvere power plant (68.6 million euros) and the retrospective reduction of the resource charge rates (14.2 million euros) on 2016, EBITDA for 2017 will remain at the same level as in Investments expected to grow mostly due to new development projects. According to plan, the largest capital investments of 2017 are the final payment for the Auvere power plant and the Tootsi wind farm Forecast for 2017 includes dividend payment 47.0m and income tax 11.8m * slight growth / slight decline 5%, growth / decline > 5% 23

24 24 Summary 2016 sales revenues decreased to 742m (- 34.7m) Shale oil sales revenue decreased by 36m Electricity sales revenue decreased by 7m 2016 EBITDA increased to 327m (+ 61.6m) One-off EBITDA impact due to Auvere power plant + 69m Electricity EBITDA increased by 16m Shale oil EBITDA decreased by 40m Investments decreased 43% to 141m Financial leverage at 30% and net debt to EBITDA ratio 2.2. At the end of 2016, the Group s financial indicators complied with all contractual covenants

25 APPENDICES

26 Production and Sales in 2016 Distribution Electricity Shale oil 6,196 GWh sold in retail market 2,761 GWh** sold in wholesale market 6,616 GWh of electricity distributed to clients 8,957 GWh** of electricity sold* 302 thousand tonnes of oil sold to clients 380 GWh of renewable electricity produced, 41 GWh of electricity purchased 8,691 GWh of nonrenewable electricity produced 318 thousand tonnes of shale oil produced 15.0 m tonnes used in electricity and shale oil production Oil shale mined 13.3 m tonnes * includes sales volume of Auvere power plant. In the Group's accounting, the sales revenue and cost of Auvere power plant is partially capitalized as the plant is still under construction 26

27 Commodity Markets* Nord Pool Estonia Electricity Price CO 2 Emission Allowance (December) /MWh /tonn Brent Crude Oil Fuel Oil 1% NWE USD/bbl /tonn * Based on futures prices as at 30 December

28 Hedged Positions as at 31 December 2016 Electricity Fuel Oil CO 2 * TWh /MWh 50 thousand tonnes /t 500 m tonnes 15 /t Amount hedged (TWh) Price ( /MWh) Amount hedged (thousand tonnes) Price ( /tonne) Total position (m tonnes) Price ( /tonne) * including free CO 2 allowances related to power plant construction in Auvere position consists mostly of free CO 2 allowances 28

29 29 Profit and Loss Statement million euros Change Sales revenues Other revenues Expenses (excl. depreciation), incl: Electricity purchasing costs Environmental fees CO 2 emission costs Change in inventories Other EBITDA Depreciation EBIT Net financial income (-expenses) Net profit from associates Earnings before tax Income tax expense Net profit

30 Balance Sheet million euros December 2016 December 2015 Change yoy Assets 3, , % Current assets % Cash and cash equivalents % Trade receivables % Inventories and prepaid expenses % Other current assets % Non-current assets 2, , % Liabilities and equity 3, , % Liabilities 1, , % Trade payables % Borrowings % Current liabilities Long-term liabilities % Provisions % Deferred income % Other liabilities % Equity 1, , % 30

31 31 Cash Flow Statement million euros Change Change Net cash from operating activities % Purchase of fixed assets % Connection and other fees received % Net change of cash under limited use % Dividends recieved from financial investments % Proceeds from sales of non-current assets % Loans granted % Net change in bank loans paid and received % Dividend % Acquisition of non-controlling interest in a subsidiary % Other % Net cash flows excl. net change in deposits with maturities greater than 3 months % Net change in deposits with maturities greater than 3 months % Net cash flows %

32 32 Glossary 1 MWh 1 megawatt hour. The unit of energy generated (or consumed) in one hour by a device operating at a constant power of 1 MW (megawatt). 1,000,000 MWh = 1,000 GWh = 1 TWh Clean Dark Spread (CDS) Eesti Energia s margin between the average price of electricity (in NPS Estonia), oil shale costs and CO 2 costs (taking into account the price of CO 2 allowance futures maturing in December and the amount of CO 2 emitted in the generation of a MWh of electricity) CO 2 emission allowance According to the European Union Emissions Trading System (ETS), one emission allowance gives the holder the right to emit one tonne of carbon dioxide (CO 2 ). The limit on the total number of emission allowances available gives them a monetary value Financial leverage Net debt divided by the sum of net debt and equity Net debt Debt obligations (amortised) less cash and cash equivalents (incl. bank deposits with maturities exceeding 3 months), units in money market funds and investments in fixed income bonds Network losses The amount of electricity delivered to customers is somewhat smaller than the amount supplied from power plants to the network because during transfer a part of electricity in the power lines and transformers converts into heat. In smaller amount, network losses are caused by power theft and incorrect measuring. The network operator has to compensate energy losses and for this a corresponding amount of electricity has to be purchased every hour NP system price The price on the Nord Pool power exchange that is calculated on the basis of all purchase and sale bids without taking into account transmission capacity limitations Position hedged with forward transactions The average price and the corresponding amount of electricity and shale oil sold and emission allowances purchased in the future is previously fixed RAB Regulated Asset Base, which represents the value of assets used to provide regulated services Return on Fixed Assets (ROFA) Operating profit (rolling 12 months) divided by average fixed assets excl. assets under construction (allocated to specific product) SAIDI System Average Interruption Duration Index. The sum of all customer interruption durations in minutes divided by the total number of customers served SAIFI System Average Interruption Frequency Index. The total number of customer interruptions divided by the total number of customers served Variable profit Profit after deducting variable costs from sales revenues