Eesti Energia Group Unaudited Results for Q1 2025

Sales Revenues and Profitability

Amid a challenging energy market characterized by volatile electricity prices and disconnecting from the Russian electricity grid in February 2025, Eesti Energia Group's Q1 2025 sales revenue totalled EUR 530 million, marking a 6% increase year-on-year. The reported Group EBITDA decreased by 4% to EUR 122 million. Net profit for the period amounted to EUR 78 million (-1%). Overall, the Group's financial results were stable despite the changes in the Baltic grid and uncertainty on the global macroeconomic front.

The renewable energy and electricity sales segment was the largest contributor to the Group's EBITDA, followed by the distribution and shale oil segments. Overall performance was shaped by higher market prices in both - the electricity and frequency market, strong volumes in shale oil, and continued reliability of non-renewable generation assets, which primarily serve as strategic power reserve units for Estonia.

Renewable Generation and Electricity Sales Segment
The renewable energy and electricity sales segment posted EUR 217 million in sales revenue. Renewable electricity generation reached 0.7 TWh (+7%), mainly driven by newly completed wind farms. However, retail electricity sales declined to 2.6 TWh (-6%), primarily due to lower volumes in Estonia and Poland. Importantly, more than half of the Group's electricity production came from renewable sources-an important trend in Eesti Energia's energy transition.

Segment EBITDA fell by 58% to EUR 21 million, impacted by a lower total margin (EUR -21.8 million) mainly due to higher electricity purchasing costs and decreased sales volumes, largely driven by warmer weather conditions resulting in lower consumption. The EBITDA was positively impacted by settled derivative gains of EUR 16.5 million reflecting effective hedging. Adjusted EBITDA for the segment was EUR 36 million, down 38% year-on-year.

Non-Renewable Electricity Production
Electricity generation from non-renewable sources increased to 0.6 TWh (+10%) mainly compensating less than anticipated renewable output, also due to the outage of the EstLink2 interconnection cable, which was severely damaged in December 2024. The cable outage resulted in the loss of ~650 MW of energy flows between Estonia and Finland, necessitating compensation through local power generation units. As a result, Sales revenue from non-renewables rose to EUR 100 million (+22%).

Segment EBITDA increased by 83% to EUR 31 million, mainly driven by improved margins from higher sales prices and lower CO₂ costs. Looking ahead, we see the continued expansion of renewable energy capacities across the region, leading to lower electricity market prices and reducing the long-term competitiveness of oil shale-based power plants. Despite this, currently the fossil-based facilities continue to serve as key strategic reserve units for Estonia participating in both - power generation and frequency markets.

Distribution Segment
Sales revenue from the distribution segment increased by 2% year-on-year to EUR 88.0 million, supported by higher tariffs. Network losses slightly improved. Unplanned outage durations increased, while planned interruptions slightly decreased.

EBITDA rose by 12% year-on-year to EUR 37 million. The positive effect came from higher margins (EUR +3 million), but this was offset by lower volumes (EUR -3 million). Additional positive impact arose from decreased fixed costs (EUR +3 million).

Shale Oil Segment
Shale oil sales revenue increased to EUR 54 million (+18%), supported by a 15% rise in sales volumes despite a 5% drop in production. The average sales price excluding derivatives declined by 4%, but the price including derivatives rose by +2%, justifying the benefits of our renewed hedging strategy. Under the new hedging approach, greater emphasis is placed on financial options instead of the previously used swaps - enabling downside protection and upside potential for the commodity mainly trading in backwardation.

Segment EBITDA grew by 6% to EUR 19 million. While margins declined due to higher variable costs, this was offset by higher volumes and a EUR 2.9 million positive impact from derivatives.

Other Products and Services
Sales revenue from other products and services increased by EUR 4 million (+6%). Frequency services, which has become increasingly important following the desynchronization from the Russian grid, generated additional EBITDA of EUR 6.9 million year-on-year. EBITDA from the Other segment increased by EUR 4 million overall, with mixed performance across heat and gas services.

Investments
The Group's capital expenditure in Q1 2025 totalled EUR 97 million (-42%) aligned with the communicated strategy to slow the pace of additional investments and seek improved returns and efficiency from already held assets. As part of our efficiency efforts, in March 2025 we initiated a voluntary takeover proposal for acquiring 100% of the shares of Enefit Green with the intent to maximize intra-group synergies across different Group assets and business segments. As of publishing this notice, the voluntary takeover process is still going on with a final date on 12 May 2025.

Q1 2025 investments focused on distribution network improvements (EUR 28.9 million) and renewable energy projects (EUR 39.2 million), including the final stage additions into Kelme and Sopi-Tootsi wind farms. Investments into the new Enefit-280 shale oil plant - which is scheduled for completion in 2025 - amounted to EUR 13.0 million.

Financing and Liquidity
As of 31 March 2025, Eesti Energia had EUR 477 million in liquid assets and access to EUR 942 million in total liquidity (incl. EUR 465 million in undrawn loans and revolving credit facilities). Net debt amounted to EUR 1,153 million, down EUR 317 million year-on-year. The net debt-to-EBITDA ratio improved to 2.9x.

Should the voluntary takeover of Enefit Green finalize positively, we estimate the short-term net debt-to-EBITDA ratio increase of up to 4.0x for the half year of 2025, resulting in a level higher than set out in Eesti Energia's financial policy long-term target of up to 3.5x. To mitigate the temporary increase and to pave the path toward restoring the policy target:

1.   We've received formal covenant relaxation consents from all our lenders that will give us enough headroom to safely execute the potential takeover;

2.   We're working on internal efficiencies for increasing profits without incurring additional debt in material amounts and timing our CAPEX plans in line with the Group's financial capabilities.

Post Enefit Green voluntary takeover announcement, we've received two credit rating adjustments resulting in one rating downgrade and two outlook revisions, mainly explained by higher net leverage compared to profits. Currently active ratings are as follows:

·      Baa3 (Moody's), outlook: negative

·      BB+ (S&P), outlook: negative

After the publication of updated ratings, we have not experienced, nor do we expect, any material impact on the Group's financial situation or performance. We continue our efforts towards having at least two investment grade ratings.

Outlook
In 2025, the management expects a slight increase in sales revenue and EBITDA, supported by already operating renewable and non-renewable assets, also significant participation in the frequency market with our existing asset portfolio, including wind farms, oil shale powered facilities, and a battery park. Capital expenditure is expected to notably decline compared to 2024 as major projects reach completion. Focus will remain on finalising the Enefit-280-2 plant and unfinished renewable parks, also upgrading the electricity distribution network.

Eesti Energia will publish its unaudited Q1 2025 results on 8 May 2025. The Q1 2025 interim report and investor presentation are available on Eesti Energia's website. An investor call discussing the Q1 2025 financial results will take place on 8 May 2025 at 11:00 London time, 12:00 Frankfurt time, and 13:00 Tallinn time. Please register to participate. After registration, you will receive the details required to join the conference call.

Further Information:
Danel Freiberg
Head of Treasury and Financial Risk Management
Eesti Energia AS
Tel: +372 5594 3838
Email: [email protected]