Revenue of the Estonian state-owned energy group Eesti Energia decreased 4.5 percent to €732.1 million last year, while net profit increased by 322.4 percent, or €130.5 million, to €171 million.
Although the market situation was complicated at the beginning of last year, the second half of the year was more profitable. The fourth quarter was especially strong, the Estonian company told the London Stock Exchange. The decrease in the group's sales revenue is primarily attributable to lower gains from hedge positions, both for electricity as well as shale oil.
"Despite a difficult operating environment, Eesti Energia ended 2016 with considerably better results than we expected at the beginning of the year," the company's management said in the annual report.
Eesti Energia's EBIDTA — or earnings before interest, taxes, depreciation and amortization — grew by 23.2 percent, rising to an exceptional €327.3 million. Net profit grew by 322.4 percent, rising to €171 million. The group's EBITDA was substantially increased by an exceptional factor, which is reported in EBITDA on other products and services: the impact of liquidated damages of €68.6 million related to the construction of the Auvere Power Plant. As a result of negotiations, the builder of the power plant agreed to compensate Eesti Energia for unearned revenue caused by the delay in construction.
Exceptional net profit growth is partly attributable to the fact that in 2015, profit was weakened by a write-down of non-current assets of €65.5 million and income tax paid on dividends.
Electricity in numbers
In 2016, the company produced 9.1 terawatt-hours of electricity, 18 percent more than in 2015. Shale oil production totaled 318,000 tons, marking a 6 percent decrease compared to the previous year, the company said.
Electricity sales revenue amounted to €348.8 million, 1.9 percent less than in 2015. "Although sales prices were more than 10 percent lower, we were able to keep sales revenue almost at the same level as in 2015," the company's management said.
The average electricity sales price was €40.30 per megawatt-hour, which is 13.5 percent lower than in 2015. The average sales price includes, among other items, the impact of derivative transactions. Excluding gain on derivative instruments, the average sales price of 2016 would have been €39.80 per megawatt-hour or 5.1 percent lower than in 2015.
In 2016, the company sold 16.3 percent more electricity than in 2015 and electricity sales totaled 8,956 gigawatt-hours, including 4,492 gigawatt-hours sold on the Estonian market. Retail sales grew by 5.5 percent and wholesale sales by 51.4 percent.
Last year, Eesti Energia began renovating Block No. 8 so that, in the future, up to 50 percent of the plant's oil shale fuel can be replaced by oil shale gas which arises on oil production. The investment totals €15 million and renovation work is expected to be completed by the end of 2017.
Last year, Eesti Energia began to sell gas to residential customers and launched an energy company in Poland. The energy group is also analyzing the possibility of selling electricity in other Baltic Sea countries.
According to Eesti Energia's strategy, the largest development projects of the next five years are the construction of the Tootsi wind farm, the Narva underground mine and a plant for extracting gasoline from oil shale gas.
Eesti Energia to pay €47 million in dividends
The state-owned energy group's equity at the end of last year totaled €1.7 billion. No dividiends were paid out to the state last year, however in 2017, Eesti Energia is expected to pay €47 million in dividends, it is noted in the company's annual report.
If the Estonian state, as the owner, approves the dividend payment in that amount, the company will also have to pay an additional €11.8 million in income tax.
In 2015, the company paid €62 million in dividends to the Estonian state. The company initially planned on paying the entirety of its net profit totaling €40 million in dividends in 2016, but the government later decided not to accept any dividends as energy prices on the global market were very low.
If the dividend payment is approved in the sum planned, the company's remaining retained earnings will total €723.2 million.
Editor: Aili Vahtla