The lastingly low oil price is increasingly affecting state-owned Eesti Energia. Today the company announced a 65-million write-off as it reduced the value of two of its largest projects, and it might have to give up shale oil production.
The assets in question are the only recently completed Auvere power plant as well as the company's Utah project, now worth €39.6m and €26m less respectively. According to its management, Eesti Energia decided to record an impairment loss as a result of both low oil and electricity prices. The effect on the company’s total assets value is a reduction of roughly 2.5%.
Eesti Energia CEO Hando Sutter called the devaluation of assets an “obvious” choice considering the circumstances, while Finance Minister Sven Sester stated that he didn’t see the change as a big problem, referring to the fact that Eesti Energia is still profitable, having made €93m in profits over the first three quarters of 2015.
Meanwhile, the low global market price of oil is threatening Eesti Energia’s shale oil production, which may soon become unprofitable due to its relatively high costs. According to Sutter, if the currently rather cold winter continues and energy sales to Finland remain as profitable as they are, the effects of the low oil price can be held off.
He sees Eesti Energia’s other advantages in the fact that they can still produce at comparably low cost, while at the same time their production is diverse enough to survive price crashes in a single category of oil.
Asked how long oil prices needed to remain below a certain price level before Eesti Energia would consider layoffs, Sutter said that he couldn’t answer the question right now, pointing to Eesti Energia’s various agreements and the variety of its products in this sector.
Eesti Energia's annual report for 2015 is due next month.