The group's earnings before interest, tax, depreciation and amortization (EBITDA) increased by 9 percent to €83.8 million, while its net profit decreased by 77 percent to €9.5 million.

According to Andri Avila, Chief Financial Officer and member of Eesti Energia's management board, the group's electricity sales revenue as well as proceeds from selling shale oil increased mainly due to increased market prices. Meanwhile distribution network revenue decreased due to a 8.4 percent drop in network fees at the beginning of the year, saving customers some €8 million in Q1.

Income tax payment affected net profit

The massive drop in the group's net profit has two main reasons. "Where income tax on dividends is typically paid in the second quarter, this time it was paid in Q1," Avila explained. "Income tax amounted to €14.3 million. Profitability was also affected by a nearly threefold increase in the CO2 quota compared to the first quarter of 2018," he added.

The average market price of electricity in Estonia increased by 14 percent to €48 per megawatt-hour in Q1 primarily due to the lower levels of the reservoirs of Nordic hydroelectric power plants. Market prices also increased due to the higher price of CO2 quotas, which increased dramatically in annual terms and had a significant impact on the cost of electricity production from fossil fuels. The quarterly average of the market price of CO2 reached €22 per tonne.

Influx of cheap Russian electricity distorting market

The Nordic-Baltic common electricity market continues to be severely distorted by the inflow of CO2 quota-free electricity from Russia, which increased 150 percent compared to Q1 2018. "This means a serious blow for electricity production in the EU, because it is difficult to compete in the same market with other electricity producers whose costs are lower due to their not paying some €20 per megawatt hour for the CO2 quota," Avila said.

As a result of these factors, Eesti Energia's electricity production decreased by 20 percent to 2.2 terawatt-hours, and Estonia for the first time in decades has now been a net importer of electricity.

This means a structural change in the economy that will affect the Estonian state as well: "We earned export revenue from electricity before, now we have to buy electricity ourselves," Avila said.

Share of renewable energy in total production increases

Meanwhile, Eesti Energia's renewable energy production has multiplied, thanks to the acquisition of international wind power producer Nelja Energia as well as recently favorable wind conditions. The share of electricity produced from renewable and alternative sources in Eesti Energia's total production rose to an average 25 percent of quarterly output, bringing the group closer to the strategic goal of 40 percent, to be reached by 2022.

Thanks to the increased reliability of its oil plants, Eesti Energia produced 125,000 tons of shale oil in the first quarter, also a new record.

Investment down 40 percent

The group's investments decreased by 40 percent to €21.8 million. A major slice of the money, some €15 million, ended up in the electricity grid, Eesti Energia said. The share of weatherproofed network infrastructure increased to 67 percent, and the number of new network connection contracts concluded by Eesti Energia subsidiary, Elektrilevi increased by more than a thousand in Q1.