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Enefit Green interim report for Q3 2024

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The Enefit Green group’s operating income for Q3 2024 decreased by 2% while operating expenses (excl. D&A) decreased by 3% compared to the same period last year. As a result, EBITDA decreased by 1% to €15.7m. Net profit for the period increased by €0.4m to €5.4m (earnings per share €0.021).


Comments by Juhan Aguraiuja, CEO of Enefit Green:

"The first two weeks as the CFO of Enefit Green are now behind me. I have taken over the management from the previous Interim Chairman of the Management Board, Andres Maasing. These weeks have confirmed that Enefit Green is a strong company staffed with professionals in their field. Our main goal currently is to get all the projects under construction finalised and put them into operation in a best possible way to reach a return on invested capital that exceeds the cost of our raised capital. Recently, there have been some difficulties with this – the current 12-month return on invested capital (ROIC) was just under 5% at the end of the quarter, while the return on equity was 8.5%. The reason for the low figures is that we have raised a lot of capital, but putting the projects into operation and reaching a positive cash flow has, for various reasons, required more time than we would have liked.

However, looking ahead, the outlook appears hopeful – we were able to successfully end the dispute with our important partner GE Vernova regarding last year's incident in Akmene, in the largest Baltic wind farm Sopi-Tootsi, 35 of 38 wind turbines out have generated first power, the Sopi solar farm generated first power a few days ago, before the end of the year the first power should be generated from the Kelme I wind farm. We must now make sure that we can also stabilise the availability of these new assets at a high level as quickly as possible and, at the same time, also finalise the assets that are still under construction – the most important asset being the Kelme II wind farm in Lithuania, on which we laid the cornerstone two months ago.

The production and financial results of the second and third quarters are understandably modest due to seasonality, but the fourth and upcoming first quarter are the prime time for a wind energy producer like Enefit Green to earn cash flow. This is the time when we have to bring home most of our annual result.

In the long term, our challenge is to find new opportunities for further development of the company. We are weighing several ideas for further value creation in our rather large development portfolio. As our core power markets – those of the Baltic States and Poland – continue to be in deficit, I believe that together with Enefit Green's strong team we will find ways to realize this value to the benefit of our investors."


Webinar to present the results of Q3 2024

Today, on 31 October 2024 at 13.00 EET Enefit Green will host a Webinar in English to present and discuss its Q3 2024 results. To participate, please follow this link.


Significant events

€100m loan agreement with EBRD
Settlement with GE Vernova regarding May 2023 incident at Akmene wind farm
Finalised installation of all turbines and started power generation at Sopi-Tootsi wind farm
Considering alternative options for further value creation of our development portfolio

Key figures

 	                                     Q3 2024	Q3 2023	   Change	Change %
PRODUCTION AND SALES VOLUMES	 	 	 	 
Electricity production	                         342	    259	       83	    32%
incl. new wind and solar farms	                 150	     53	       97	   183%
incl. assets sold	                           -	      9	       (9)	 (100)%
Electricity sales	                         491	     364       127	    35%
Heat energy production	                          80	     115       (34)	  (30)%
incl. assets sold	                           -	      30       (30)	  (100)%
 	 	 	 	 
OPERATING INCOME, m€		  	        43.5	    44.5      (1.0)	    (2)%
Sales revenue		    	    	    	33.8	    39.7      (5.8)	   (15)%
Renewable energy support and other income	 9.7	     4.8       4.8	    100%
EBITDA, m€	   	    	    	    	15.7	    15.9      (0.2)	    (1)%
NET PROFIT, m€		    	    	         5.4	     5.0       0.4	      8%
EPS, €		    	    	    	       0.021	   0.019     0.002	      8%


Sales revenues and other operating income

The group’s Q3 electricity production grew by 83 GWh (32%) to 342 GWh, with the output of new wind and solar farms completed and under construction increasing by 97 GWh. The comparison of the group’s Q2 performance indicators is strongly affected by the sale of the Brocēni CHP plant and pellet factory, which was completed in Q4 2023, and the sale of the Paide and Valka CHP plants, which was completed in March 2024 (‘assets sold’). Assets sold had a negative impact, reducing Q3 electricity and heat energy production by 9 GWh and 30 GWh respectively compared to Q3 2023.

Total operating income decreased by €1.0m, the figure reflecting a decrease in revenue of €5.8m, an increase in other operating income of €4.8m and no change in the level of renewable energy support. Assets sold, which generated operating income of €5.8m in Q3 2023, did not have any impact on operating income for Q3 2024. Excluding the impact of assets sold, i.e. operating income from continuing operations was €38.7m for Q3 2023 and €43.5m for Q3 2024 (up €4.8m, the figure reflecting a decrease in revenue of €0.2m and an increase in other operating income of €4.9m).

Of the €0.2m decrease in revenue from continuing operations, €1.4m resulted from electricity sales revenue. In Q3 2024, the average electricity price in the group’s core markets was €87.5/MWh (Q3 2023: €97.8/MWh). The group’s average implied captured electricity price was €50.3/MWh (Q3 2023: €83.9/MWh). The implied captured electricity price differs from the average market price in the group’s core markets, because it takes into account long-term fixed-price power purchase agreements (PPAs), renewable energy support, purchases of balancing energy, electricity purchases from the Nord Pool day-ahead and intraday markets and the fact that wind farms do not produce the same amount of electricity every hour.

The group’s average price of electricity sold to the market was €49.8/MWh in Q3 2024 and €82.2/MWh in Q3 2023. Enefit Green sold 196 GWh of electricity to the market in Q3 2024 compared with 163 GWh in Q3 2023.

In Q3 2024, 276 GWh of the group’s electricity production was covered by PPAs at an average price of €60.7/MWh. In Q3 2023, 202 GWh of electricity was sold under PPAs at an average price of €80.9/MWh. The average price of electricity sold under PPAs has decreased significantly year on year because the settlement periods of PPAs signed in Lithuania and Finland in 2021 at lower prices began in Q1 2024.

In Q3 2024, we purchased 132 GWh of electricity from the market at an average price of €106.6/MWh, compared with 109 GWh at an average price of €116.5/MWh in Q3 2023 (the prices and volumes exclude the electricity purchased for pellet production in Q3 2023). The volume of electricity purchased increased (+23 GWh) due to higher sales under PPAs. The purchase price decreased compared to Q3 2023 due to lower market prices, but the gap between the purchase price and the sales price widened due to a larger wind discount.

Wind discounts deepened significantly year on year. Enefit Green’s wind discounts in Estonia and Lithuania were similar to the market level, increasing by 11.6 and 8.1 percentage points in Estonia and Lithuania, respectively. In Finland, however, low correlation of the production with other Finnish wind farms and downregulation of power production during negative prices enabled us to reduce the wind discount more than twofold compared to the market level.

Other operating income (excl. the impact of assets sold) increased by €4.8m, supported by income of €5.3m from the settlement reached with GE Vernova regarding an incident during the construction of the Akmenė wind farm. After negotiations concerning the incident, Enefit Green and GE Vernova agreed on an amendment to the Akmenė wind farm turbine supply agreement signed between the parties, including compensation of €8.2m, of which €3.9m was paid by GE Vernova to Enefit Green in cash and the remaining amount was offset against reciprocal receivables and liabilities. Of the €8.2m, €5.3m was recognised as other operating income and €1.6m as a reduction of previously made investments. GE Vernova and Enefit Green also entered into additional agreements totalling €1.3m, which did not affect Enefit Green’s financial results.

Renewable energy support remained stable compared to Q3 2023. The eligibility period of the Purtse wind farm began in Q2 2024, which increased the amount of support received for the period by €0.3m year on year. The output of other wind farms eligible for support in Estonia was lower than in Q3 2023 and, therefore, the amount of support received decreased by €0.5m. The amount of support received in Poland, on the other hand, increased by €0.2m, because the market price of electricity (€103.1/MWh) was below the fixed price of €125–134/MWh and the difference was paid out as support.


EBITDA and segmental reporting

The factor with the strongest impact on EBITDA development was the decrease in the price of electricity sold (negative impact: €9.0m). Due to PPAs, the quantity of electricity sold grew significantly (positive impact: €7.9m), which also increased the volume of electricity purchased to balance the electricity portfolio (negative impact: €2.9m). The combined effect of the above factors on EBITDA is influenced by the volume and profile of electricity produced during the period. Electricity production grew by 32% year on year.

Akmene settlement had significant positive impact on EBITDA (€5.3m)

The total impact of assets sold on EBITDA development was negative at €0.8m.

Excluding the effects of the electricity price and volume, the Iru cogeneration plant had a positive impact on EBITDA (€0.1m). The calculation takes into account the effects of heat, gate fees for waste received and technological fuel.

Based on total operating income and EBITDA, the group’s largest segment is Wind energy, which accounted for 73% of operating income and 78% of EBITDA for Q3 2024. The Cogeneration segment (Iru cogeneration plant) contributed 20% to operating income and 31% to EBITDA. The smallest reportable segment is Solar energy, which accounted for 7% the group’s operating income and 13% of the group’s EBITDA for Q3 2024.

Of reportable segments both Wind and Solar energy delivered EBITDA growth (€.1.4m and €0.1m accordingly). This growth was driven by significant growth in electricity generation. EBITDA growth was driven mainly by one-off revenue regarding Akmene settlement. More detailed information is available in the attached interim report.


Net profit

Q3 2024 net profit increased by 8% to €5.4m compared to the same period last year. The increase in net profit was mainly driven by a decrease in net finance costs and income tax expense.


Capital Expenditures

The group invested €76.9m in Q3 2024, €10.4m less than in Q3 2023. The decrease resulted from development investments, which amounted to €77.0m. Of this, €55.5m was invested in the construction of three wind farms: €28.9m in the Sopi-Tootsi wind farm and €26.6m in the two Kelmė wind farms (€15.1m in Kelmė I and €11.5m in Kelmė II). The largest development investment in solar energy was made in the Sopi solar project in the amount of €2.4m.


Financing

At 30 September 2024, the amortised cost of the group’s interest-bearing liabilities was €694.0m (30 June 2024: €629.0m). Loan liabilities to banks accounted for €680.3m of the total, including an outstanding loan balance of €6.0m denominated in Polish zloty.

In Q3, Enefit Green drew down bank loans of €125m. During the quarter, the group signed an investment loan agreement of €100m with EBRD and a new revolving credit facility agreement of €20m with OP Bank to replace a matured revolving credit facility of the same amount provided by SEB, and extended a revolving credit facility agreement of €10m with SEB.

The interest rate risk of investment loans with the total outstanding balance of €144.4m has been hedged with interest rate swaps, which fix the interest rates of the loans in the range of 1.049–1.125% (plus the margin) until the loans mature. The average interest rate of bank loans drawn down at 30 September 2024 was 4.19% (30 June 2024: 4.23%).

Loans raised but not drawn down at 30 September 2024 totalled €260m, which consisted of investment loans of €210m and revolving credit facilities of €50m.

Net debt/EBITDA ratio stood at 6.2 at the end of Q3 2024 (30 June 2024: 5.5). The increase is explained by large volume of development projects under construction.


Condensed consolidated interim income statement

€ thousand	    	     	Q3 2024    	Q3 2023    	9M 2024    	9M 2023
Revenue	    	    	    	 33,833	    	 39,660	        123,900	        146,111
Renewable energy support and other 
operating income		  9,656		 4,832		 26,762		 17,051
Change in inventories of finished 
goods and work in progress	      0	         3,434	              0	          3,266
Raw materials, consumables and 
services used		    	(22,485)	(26,011)	(57,069)	(71,386)
Payroll expenses	         (2,159)	(2,634)	         (6,747)	 (8,025)
Depreciation, amortisation and 
impairment	                (10,157)       (10,218)	        (29,328)	(29,740)
Other operating expenses	 (3,182)	(3,388)	         (9,850)	(10,716)
OPERATING PROFIT	          5,506	         5,675	         47,668	         46,561
Finance income	                    316	           747	          1,342	          2,345
Finance costs	                   (443)	(1,115)	         (1,185)	 (1,897)
Net finance income and costs	   (127)	  (368)	            157	            448
Profit from associates under the 
equity method	                     62	            45	             13	             85
PROFIT BEFORE TAX	          5,441	         5,352	         47,838	         47,094
Income tax income (expense)	      6	          (326)	         (5,004)	(10,405)
PROFIT FOR THE PERIOD	          5,447	         5,026	         42,834	         36,689
 	 	 	 	 
Basic and diluted earnings per share	 	 	 	 
Weighted average number of 
shares, thousand	        264,276	       264,276	        264,276	        264,276
Basic earnings per share, €	  0.021	         0.019	           0.16	           0.12
Diluted earnings per share, €	  0.021	         0.019	           0.16   	   0.12


Condensed consolidated interim statement of financial position

€ thousand	                          30 September 2024	    31 December 2023
ASSETS	 	 
Non-current assets	 	 
Property, plant and equipment	                  1,322,861	        1,027,057
Intangible assets	                             59,741	           59,891
Right-of-use assets		                      8,619	            9,097
Prepayments for non-current assets	             41,902	           55,148
Deferred tax assets	                              1,486	            2,013
Investments in associates	                        524	              548
Derivative financial instruments	              3,450	            5,054
Non-current receivables                               1,353	                0
Total non-current assets	                  1,439,935	        1,158,808
 	 	 
Current assets	 	 
Inventories	                                      5,611	            3,180
Trade receivables	                              6,518	            8,618
Other receivables	                              8,385	           16,380
Prepayments	                                      7,780	           30,084 
Derivative financial instruments	              2,480	            3,806
Cash and cash equivalents	                     31,362	           65,677
 	                                             62,135	          127,745
Assets classified as held for sale	                  0	           15,370
Total current assets	                             62,135	          143,115
Total assets	                                  1,502,071	        1,301,923


€ thousand	                               30 September 2024	31 December 2023
EQUITY	 	 
Equity and reserves attributable to shareholders of the parent	 	 
Share capital	                                   264,276	          264,276
Share premium	                                    60,351	           60,351
Statutory capital reserve	                     8,291	            5,556
Other reserves	                                   162,996	          163,451
Foreign currency translation reserve	               (37)	             (162)
Retained earnings	                           236,067	          223,718
Total equity	                                   731,944	          717,190
LIABILITIES	 	 
Non-current liabilities	 	 
Borrowings	                                   630,552	          454,272
Government grants	                             2,865	            3,010
Non-derivative contract liability	            12,412	           12,412
Deferred tax liabilities	                    12,416	           12,497
Other non-current liabilities	                     5,466	            5,331
Provisions	                                         7	                8
Total non-current liabilities	                   663,717	          487,530
Current liabilities	 	 
Borrowings	                                    63,494	           32,126
Trade payables	                                    23,825	           29,464
Other payables                                      17,175	           24,981
Provisions	                                         2	                6
Non-derivative contract liability	             1,913	            5,674
 	                                           106,410	           92,251
Liabilities directly associated with assets 
classified as held for sale	                        0	            4,952
Total current liabilities	                  106,410	           97,203
Total liabilities	                          770,127	          584,733
Total equity and liabilities	                1,502,071	        1,301,923


Further information:
Sven Kunsing
Head of Finance Communications
[email protected]
https://enefitgreen.ee/en/investorile/

Enefit Green is one of the leading renewable energy producers in the Baltic Sea area. The Company operates wind farms in Estonia and Lithuania, waste-to-energy CHP plant in Estonia, solar farms in Estonia and Poland and a hydroelectric plant in Estonia. In addition, the Company is developing several wind and solar farms in the mentioned countries, Latvia and Finland. As of the end of 2023, the Company had a total installed electricity production capacity of 515 MW and a total installed heat production capacity of 50 MW. During 2023, the Company produced 1,343 GWh of electricity, 604 GWh of heat energy and 156 thousand tonnes of wood pellets. In the end of 2023, Enefit Green exited the biomass based CHP and pellet production businesses.