Eesti Energia's net profit decreased by €2.4 million - or 26 percent - to €7 million in the second quarter of 2020. High supply and low demand during the coronavirus crisis were named as the causes for the loss.
The company earned a total turnover of €168 million but this was a decrease of €36.5 million, or 18 percent, compared to the previous year.
Andri Avila, the group's chief financial officer and member of the Management Board, said given the general unfavorable operating environment - energy consumption has decreased worldwide and there is oversupply in production - they can be satisfied.
Avila said that in order to adapt to the deterioration of the external environment, production processes had to be changed accordingly, and the company's costs and investments had to be reduced.
"The electricity market was pressured by a combination of two negative factors: supply was high due to the abundance of hydropower and good wind conditions in the Nordic countries, but demand was low due to the restrictions to prevent the spread of the coronavirus. In our domestic markets, electricity prices were 30-60 percent lower compared to the same period last year. There was a lot of volatility in the market and we also saw a negative electricity price in the Baltic countries for the first time," explained Avila.
In the second quarter of 2020, compared to 2019, hydropower production in the Nordic countries increased by a fifth or 8 terawatt-hours. The growth is comparable to Estonia's annual electricity consumption. The Nord Pool market as a whole had the lowest electricity consumption in the last four years and in Estonia, the lowest in the last six years.
Eesti Energia's retail electricity sales in Estonia, Latvia, Lithuania, Poland, Finland and Sweden decreased by one tenth to 1,532 GWh. Electricity production decreased to 629 GWh (-46 percent), of which the share of renewable electricity was 277 GWh (+ 11 percent).
The total production of renewable energy increased by a fifth to 390 GWh during the year, consisting of electricity produced in Estonian and Lithuanian wind farms (230 GWh), electricity produced from biomass (47 GWh) and heat (113 GWh). During the quarter, the share of renewable energy in total electricity and heat production was on average 41 percent.
The production of liquid fuels from oil shale decreased by 8 percent to 85,900 tonnes, as the annual maintenance of the plants was performed in the second quarter of this year. Sales revenue of liquid fuels decreased by one-fifth to €26 million.
"Demand for petroleum products fell by a quarter at the peak of the corona crisis. For a moment, we also saw a historical negative price. Nevertheless, we did not have to limit our own oil production. The profitability of oil production was supported by hedging transactions concluded at higher price levels with a total of EUR 8 million. The market is recovering from the slump and the price trend is in favorable direction for us," explained Avila.
Lower electricity consumption reduced the sales volume of network services by 3 percent to 1.5 TWh, of which the sales revenue earned was €50.1 million (-1 percent).
Investments decreased by one third over the year to €28 million, of which two thirds were investments in improving the security of supply of transmission networks.
Eesti Energia also remained profitable in the first half of the year by €5 million. "If the hydro balance of the Nordic countries stabilizes and there is no second wave of the coronavirus, we can hope that the outlook for energy markets will improve in the second half of the year and we can move forward with our longer-term investment plans," said Avila.
Editor: Helen Wright