Eesti Energia auditedfinancial results for 2019

28 February 2020

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2

Sales revenues increased and EBITDA decreased

Sales revenues EBITDA

Operating cash flow Investments

3

264.2 283.2 259.8

2017 2018 2019

m€-23.4 (-8.2%)

753.9 875.3 956.4

2017 2018 2019

m€+81.2 (+9.3%)

268.8

166.3 147.6

2017 2018 2019

m€-18.7 (-11.3%)

144.0194.6

136.0

2017 2018 2019

m€

-58.6 (-30.1%)

Average quarterly Nord Pool electricity prices• In 2019 electricity prices in NP Baltic price areas

decreased compared to 2018

• 2019 average price in NP Estonia price area was45.9 €/MWh* (-1.2 €/MWh, -2.6%). Eesti Energia Narvapower plants achieved 7% higher electricity price than NPEstonia

• Price spread between Estonia and Finland decreased by-0.7 €/MWh to 0.5 €/MWh in 2019 Q4, as electricity pricein Estonia was higher than in Finland

• Estonia-Latvia price spread increased by 4.1 €/MWh to0.1 €/MWh in 2019 Q4, as electricity price in Estonia wasslightly higher than in Latvia

• Clean Dark Spread in NP Estonia average electricity pricedecreased to -0.6 €/MWh in 2019 Q4 (-11.4 €/MWh,-105.4%). Decrease in NP Estonia average electricity pricewas -1.2 €/MWh. Impact of the cost of CO2 was-7.6 €/MWh. Impact of the cost of oil shale equalled-1.2 €/MWh

Nord Pool Baltic electricity prices decreased

4

* average Nord Pool electricity market price. This price may differ compared with Eesti Energia’s electricity sales prices achieved on wholesale market** average electricity price achieved on Nord Pool Estonia electricity market by Eesti Energia Narva power plants

-20

-10

0

10

20

30

40

50

60

70

2017 2018 2019 2020

€/MWh

NP Estonia

NP Finland

Clean Dark Spread in NP Estonia average electricity price

Estonia-Finland price spread

NP Latvia

Estonia-Latviaprice spread

EE Average on

NP

Estonia**

Average quarterly fuel oil and Brent crude oil prices• Average price of Brent crude oil in 2019 was64.1 $/bbl (-7.6 $/bbl, -10.6%).

- In the beginning of 2019 crude oil price decreased evenmore due to 2018 year end higher inventories, slowingeconomic growth and low tide in the stock markets.

- Increase in Q2 2019 was driven by the easing of the tradewar between the US and China.

- In the second half of 2019 crude oil price dropped due togrowing US oil inventories.

• Average price of fuel oil (1% Sulphur content) in 2019 was341.9 €/t (+9.0 €/t, +2.7%).

- Fuel oil increase was driven by the regulations of theInternational Maritime Organization (IMO) that imposes atighter cap on the Sulphur content of marine fuels as from2020. IMO regulations will most likely continue to supportEuropean fuel oil market in 2020.

Prices of Brent crude oil decreased and fuel oil increased

5

0

100

200

300

400

500

0

25

50

75

100

125

2017 2018 2019 2020

$/bbl €/t

Brent crude ($/bbl)

Fuel oil 1% (€/t)

Sales revenues breakdown and Y-o-Y change EBITDA breakdown and Y-o-Y change

Group’s sales revenues increased and EBITDA decreased

6

437505

241219

113125

84

107

+68.0 +12.2 +22.3

(21.3)

875

956

Sales

revenues

2018

Sales

revenues

2019

Electricity Distribution Shale oil Other

m€+81.2 (+9.3%)

131 133

10080

4446

9

+1.6 +2.2

(19.9) (7.2)

283

260

EBITDA

2018

EBITDA

2019Electricity Distribution Shale oil Other

m€

-23.4 (-8.2%)

Eesti Energia Aulepa Wind Park, Läänemaa, Estonia

Electricity

7

Average electricity sales price Electricity sales revenue Electricity sales volume

• Average electricity sales price* increased to 53.4 €/MWh (+6.0 €/MWh, +12.6%)- Gain on derivatives impacted price by 0.9 €/MWh (+1.7 €/MWh Y-o-Y)- Average electricity sales price incl. gain on derivatives increased to 54.4 €/MWh (+7.7 €/MWh, +16.4%)

• Electricity sales volume was 8.6 TWh (-3.1%). Wholesale electricity sales decreased by 1.1 TWh (-50.3%) while retail sales increased by 0.9 TWh (+13.1%)

• Electricity generation amounted to 5.5 TWh (-3.6 TWh, -39.2%), due to higher CO2 price and higher rate of emergency repairs and prolonged large-scale maintenance (229 repair days in total) in Auvere power plantRenewable energy production increased to 1.3 TWh (+0.8 TWh, +166.4%), including +0.7 TWh from wind energy

Electricity sales revenue increased 15.6%

8

* total average sales price of electricity product (including retail sales ja wholesale sales). Average sales price excludes gain on derivatives, subsidies for renewable energy and municipal waste gate fees

47.4 47.153.445.9

Average electricity

sales price*

NP Estonia average

electricity price

2018 2019

-1.2 (-2.6%)+6.0 (+12.6%)

€/MWh

416 470

437505

2018 2019

Subsidies and municipal waste gate fees

Sales revenues (excluding subsidies and

waste gate fees)

+68.0 (+15.6%)m€

53%

% of revenues

6.6 7.5

2.3 1.1

8.9 8.6

2018 2019

Retail sales Wholesale sales

-0.3 (-3.1%)TWh

Electricity EBITDA development ✓ Total margin impact +€9.0m (+1.0 €/MWh). Average sales revenue increased by 7.8 €/MWh (impact +€67.0m). Highervariable costs impact -€58.0m, mainly from electricity purchasing costs as the Group sourced a smaller proportionof the net sales volume from own production. Margin impact also includes gains from sale of CO2 emission allowances as the Group liquidated its long positions due to lower production, in accordance with our hedging strategy

Sales volume decreased by 3%, impact on EBITDA -€7.7m

✓ Fixed costs impacted EBITDA by +€2.7m, including impactsfrom Renewable Energy (-€11.3m), Customer Services(-€4.7m) and Large-scale Energy Production (+€19.3m)

✓ Gain on derivatives increased impacting EBITDA by +€14.6m(gain on derivatives -€6.7m in 2018, +€8.0m in 2019)

Other changes impacted EBITDA by -€17.0m, mainly relatedto change in value of derivative instruments

Key Figures 2019 2018

Return on fixed assets (%) 2.3 5.8

Electricity EBITDA (€/MWh) 15.4 14.7

Electricity EBITDA stable Y-o-Y

9

131.2 132.8+9.0

+2.7

+14.6 (7.7)

(17.0)

EBITDA2018

Marginimpact

Volumeimpact

Changein fixedcosts

Gain onderivatives

Other EBITDA2019

m€

+1.6 (+1.2%)

51%

% of EBITDA

Street lights in Tartu, Estonia

Distribution

10

Average distribution sales price Distribution sales revenue Distribution volume

• Sales revenue decreased by €21.3m (-8.9%) due to lower average distribution sales price. InJanuary 2019 distribution tariffs were decreased by 8.4% on average and reduce our customers’electricity related costs

• Network losses amounted to 4.1% (+0.2pp) of electricity entered into distribution network

• The average duration of unplanned interruptions was 260.7 minutes (2018: 141.8 minutes), ofwhich 91.1 minutes fell in the period of stormy weather in October and December.

Distribution sales revenue decreased 8.9%

11

34.631.9

2018 2019

-2.8 (-8.0%)€/MWh

240.6219.3

2018 2019

-21.3 (-8.9%)m€

6.9 6.9

2018 2019

-0.1 (-1.0%)TWh

23%

% of revenues

Distribution EBITDA development Total margin impact -€16.7m (-2.4 €/MWh) dueto decreased average sales price

Distribution volume decreased by 1%, impact onEBITDA -€1.4m

Fixed costs increased by €1.8m. Maintenancecosts increased by €3.3m in relation to theincrease in storm related network interruptions.Payroll costs decreased by €1.3m

Distribution EBITDA lower mainly due to decreased margin

12

* RAB (Regulated Asset Base) allocated to distribution product

Key Figures 2019 2018

Return on fixed assets (%) 3.3 5.7

Distribution losses (GWh) 298.3 319.2

SAIFI 2.4 2.0

SAIDI (unplanned) 260.7 141.8

SAIDI (planned) 71.8 90.0

Adjusted RAB* (m€) 810 793

31%

% of EBITDA

99.6

79.7

(16.7)

(1.4) (1.8)

EBITDA2018

Marginimpact

Volumeimpact

Change infixed costs

EBITDA2019

m€

-19.9 (-20.0%)

Shale Oil

Eesti Energia Oil Industry in Ida-Virumaa, Estonia

13

Average shale oil sales price Shale oil sales revenue Shale oil sales volume

• Sales volume increased by 43.1 thousand tonnes (+11.0%) due to increased production capability. The Group’s shale oil production in 2019 was 442 thousand tonnes, an increase of 31.9 thousand tonnes (+7.8%) compared to 2018

• Average shale oil sales price* increased to 348 €/t (+17.3 €/t, +5.2%) mainly through higher prices in the global liquid fuelsmarket.

• Gain on derivatives impacted price by -60.2 €/t (-17.9 €/t, -€9.6m Y-o-Y)- Average sales price incl. gain on derivatives decreased to 287.5 €/t (-0.6 €/t, -0.2%)

Shale oil sales revenue and volume increased

14* total average sales price excludes gain on derivatives

13%

% of revenues

393436

Sales Volume

2018 2019

+43.1 (+11.0%)

thousand tonnes

113.1125.3

2018 2019

+12.2 (+10.8%)m€

330 333348 342

Average shale oil

sales price*

Average price of

heavy fuel oil (1%)

2018 2019

+9.0 (+2.7%)+17.3 (+5.2%)€/tonne

Shale oil EBITDA development ✓ Margin impact on profitability +€9.4m (+21.6 €/t)mainly due to the decrease in average sales price(+€17.3 €/t)

✓ Sales volume increased by 11%, impact on EBITDA+€10.1m

Fixed costs impacted EBITDA by -€8.6m. Increase inpayroll costs impacted EBITDA by -€6.2m, of which-€4.3m are related to mining costs.

Gain on derivatives impacted EBITDA by -€9.6m (gainon derivatives -€16.6m in 2018, -€26.2m in 2019)

✓ Other changes impacted EBITDA by +€0.9m, mainlyrelated to change in environmental provisions

Key Figures 2019 2018

Return on fixed assets (%) 9.9 9.2

Shale Oil EBITDA (€/t) 111.0 105.1

Shale oil EBITDA increased 5%

15

18%

% of EBITDA

43.645.8

+9.4

+10.1

+0.9

(8.6)

(9.6)

0

EBITDA2018

Marginimpact

Volumeimpact

Change infixedcosts

Gain onderivatives

Other EBITDA2019

m€

+2.2 (+5.0%)

Sales revenues from other products and services

Other products and services EBITDA development

• Other products and services comprise sales of heat, natural gas, industrial equipment, mining productsand other sales articles. The impacts of one-offtransactions, R&D costs and a portion of the Group’soverhead costs are also recognised in this segment

• Heat sales volume decreased by 16.6%, sales revenuedecreased by €6.4m. Impact on EBITDA -€3.2m

• Sales revenue from pellets increased by €15.8m as theGroup acquired a pellet factory in Latvia in 2018 Q4

• Sales revenue from natural gas increased by €7.5m,natural gas sales volume increased by 55.9%

• EBITDA impact due to liquidated damages related tothe delay in the delivery of the Auvere power plant-€6.0m. Accounting of liquidated damages had apositive EBITDA impact in 2018, there was no impactin 2019

• Other changes in EBITDA totalled +€1.9m, biggestpositive impacts from sales of fixed assets and sales ofpellets

Other sales revenues +€22m, other EBITDA - €7m

16

8.7

1.5

+1.9

(3.2)(6.0)

EBITDA2018

Heat Auvere liquidateddamages

Other EBITDA2019

Other EBITDA development, m€

-7.2 (-82.6%)

11%

% of revenues

1%

% of EBITDA

EBITDA to operating cash flows development

Operating cash flow

17

259.8

147,6

259.8

147.6

+19.4

(67.9)

(7.9)(24.7)

(17.2)(14.1)

EBITDA

2019

Changes in

working

capital

CO2

impact

Derivative

instru-

ments

Interest

paid

Income tax Other Operating

cash flows

2019

m€

-112.2 (-43.2%)

Operating cash flow changes

Operating cash flow

18

147,6

166.3

147.6+6.2

+18.4 +33.7

(46.1)

(23.4)

(5.5) (2.1)

Operating

cash flows

2018

CO2

impact

Changes in

working

capital

Derivative

instru-

ments

Change

in

EBITDA

Income

tax

Interests

paid

Other Operating

cash flows

2019

m€

-18.7 (-11.3%)

Capex breakdown by projects

Capex breakdown by products

• Investments into electricity network increased to €83m (+€1.6m, +2.0%)

• Maintenance investments (excl. electricity network) decreased by €9.1m to €35m

• Development projects investments decreased to €15.8m. Decrease came from 2018 payments made for Auvere power plant.

- €3.2m was invested in wood shredding complex. We use waste wood in Balti power plant’s cogeneration unit to produce renewable energy. It supports our goal to increase the share of alternative fuels in our production processes and decrease our CO2 footprint

- €4.4m was invested in wind energy development activities in Estonia and Lithuania.

Capital expenditure €136m in 2019

19

82 83

44 35

1110

34

195

136

2018 2019

Renewable energy investments

Auvere 300 MW power plant

Other developm. projects

Maintenance investments

Capitalised interest

Electricity network

m€ -58.6 (-30.1%)

9136

87

85

195

136

2018 2019

Other

Shale oil

Distribution

Electricity

m€-58.6 (-30.1%)

Group’s liquidity development in 2019

• €460m of liquid assets and unused loans available as at 31 December 2019, including:

- €35m of liquid assets

- €425m undrawn loans, consisting of liquidity loans of €250m and long-term loans of €175m

€35m amount of liquid assets at the end of 2019

20

61.534.6

+147.6

(128.0)

(46.5)

Cash and

cash equivalents

31 December 2018

Operating

cash flow

Investment

cash flow

Financing

cash flow

Cash and

cash equivalents

31 December 2019

m€-26.9 (-43.7%)

Debt maturity

Net debt / EBITDA & financial leverage• Eesti Energia credit ratings are at investment grade level

- BBB- (S&P) (outlook: stable), updated in January 2020

- Baa3 (Moody’s) (outlook: stable)

• Eesti Energia’s financing policy is aimed at maintaining investment grade credit ratings

• Group’s long term target of Net Debt/EBITDA ratio 3.5 set out in financial policy. Group’s strategy outlines measures for meeting this target

• Total debt by the end of 2019 was €1,170.9m, net debt€1,101.2m

Debt maturity profile

21

2.23.7 4.2

25%

36% 38%

0%

8%

16%

24%

32%

40%

0

1

2

3

4

5

2017 2018 2019

Net debt/EBITDA Financial leverage (right sc.)

Financial Leverage, %Net Debt/EBITDA, times

106

500

111

211 235

55

629

1212 12

2020 2021 2022 2023 2024 2025 2026

m€

EIB (parent company) Eurobond (parent company)Other (parent company) Other (Enefit Green)

Sales revenues EBITDA Investments

• Sales revenues and EBITDA are likely to grow* in 2020

- Group's sales revenue will be supported by the growth of electricity sales revenue from Enefit Green andCustomer Services

- EBITDA growth will be supported by rise in the average sales price of shale oil

• Investments will grow* mostly due to higher investments into new wind and solar farms. We are also going tostart with the investments required for the construction of a new oil plant.

Outlook for FY2020

22

* slight growth / slight decline ≤ 5%, growth / decline > 5%

956

2019 2020

m€ Growth*

260

2019 2020

m€

Growth*

136

2019 2020

m€

Growth*

• 2019 sales revenues increased to €956.4 m (+9.3%; +€81.1m)

- Electricity sales revenue increased by €68m (+15.6%), due to higher electricity sales price

- Distribution sales revenue decreased by €21m (-8.9%), due to a lower average sales price

- Shale oil sales revenue increased by €12m (+10.8%), due to increased sales volume

- Other products and services sales revenue increased by €22m (+26.4%), mainly due to sales of pellets and natural gas

• 2019 EBITDA decreased to €259.8m (-8.2%; -€23.4m)

- Electricity EBITDA increased by €1.6m (+1.2%), due to higher sales price

- Distribution EBITDA decreased by €19.9m (-20.0%), due to decline in the average network charge

- Shale oil EBITDA increased by €2.2m (+5.0%), due to higher sales price and larger sales volumes

- Other products and services EBITDA decreased by €7.2m (-82.6%), due to one-off impacts in 2018

• Investments decreased by 30.1% to €136m

• 2019 net profit decreased to €23.2m (-78.2%; -€83.1m)

Summary

23

APPENDICES

24

Production and sales in 2019

25

Shale oilElectricity

9.0 m tonnes used in electricity and shale oil

production

442 thousandtonnes of shale oil

produced

435 thousandtonnes of oil sold

to clients

4,269 GWh of non-renewable electricity

produced

8,644 GWh of electricity sold

7,514 GWhsold in retail

market

1,130 GWhsold in wholesale

market

Oil shale mined 10 m tonnes

1,280 GWh of renewableelectricity produced,

3,852 GWh of electricitypurchased

Distribution

6,878 GWh of electricity

distributed toclients

Electricity Fuel oil CO2

Hedged positions

26

351

272

0

100

200

300

400

500

2020 2021

Amount hedged

thousand tonnes

312.0 €/tonne

315.0 €/tonne

1.31.4

0

1

1

2

2

2020 2021

Amount hedged

TWh

36.0 €/MWh

37.0 €/MWh

4.3

0

1

2

3

4

5

2020 2021

Total position

million tonnes

15.9 €/tonne

Profit and loss statement

27

million euros 2019 2018 Change Change

Sales revenues 956.4 875.3 +81.2 +9.3%

Other revenues 62.1 22.3 +39.8 +178.4%

Expenses (excl. depreciation), incl: 758.7 614.4 +144.3 +23.5%

Electricity purchasing costs 284.2 131.0 +153.2 +117.0%

Environmental fees 35.5 52.4 -16.9 -32.3%

CO2 emission costs 68.9 82.8 -14.0 -16.9%

Change in inventories -14.1 -11.3 -2.8 +24.9%

Other 384.2 359.4 +24.8 +6.9%

EBITDA 259.8 283.2 -23.4 -8.2%

Depreciation 188.0 154.5 +33.5 +21.7%

EBIT 71.9 128.7 -56.8 -44.2%

Net financial income (-expenses) -36.8 -24.7 -12.1 +48.9%

Net profit from associates -0.1 6.6 -6.7 -108.7%

Earnings before tax 34.9 110.6 -75.6 -68.4%

Income tax expense 11.8 4.4 +7.4 +170.1%

Net profit 23.2 106.2 -83.1 -78.2%

Balance sheet

28

million eurosDecember

2019

December

2018

Change

yoy

Assets 3,468.1 3,559.1 -2.6%

Current assets 431.4 484.5 -11.0%

Cash and cash equivalents 34.6 61.5 -43.7%

Trade receivables 134.6 121.6 +10.7%

Inventories and prepaid expenses 118.1 95.8 +23.2%

Other current assets 144.1 205.6 -29.9%

Non-current assets 3,036.7 3,074.6 -1.2%

Liabilities and equity 3,468.1 3,559.1 -2.6%

Liabilities 1,666.5 1,699.5 -1.9%

Trade payables 84.2 103.6 -18.7%

Borrowings 1,135.8 1,109.5 +2.4%

Current liabilities 211.7 142.7 +48.4%

Long-term liabilities 924.1 966.9 -4.4%

Provisions 105.7 126.4 -16.4%

Deferred income 234.7 213.2 +10.1%

Other liabilities 106.1 146.7 -27.7%

Equity 1,801.6 1,859.6 -3.1%

Cash flow statement

29

million euros 2019 2018 Change Change

Cash generated from operations 189.3 208.5 -19.2 -9.2%

Interest and loan fees paid -24.7 -30.9 +6.2 -20.1%

Interest received 0.2 0.3 -0.1 -33.3%

Corporate income tax paid -17.2 -11.6 -5.6 48.3%

Net cash from operating activities 147.6 166.3 -18.7 -11.3%

Purchase of fixed assets -143.4 -169.9 +26.5 -15.6%

Proceeds from connection and other fees 22.3 23.3 -1.0 -4.3%

Proceeds from sale of property, plant and equipment 6.1 2.1 +4.0 +190.5

Proceeds from grants of property, plant and equipment -0.1 0.2 -0.3 -150.0%

Dividends received from long-term financial investments 4.0 2.6 +1.4 +53.8%

Purchase of short-term financial investments -4.2 -3.2 -1.0 +31.3%

Loans repayments 0.6 0 +0.6 +100.0%

Acquisition of subsidiaries, net of cash acquired -13.8 -249.9 +236.1 -94.5%

Proceeds from disposal of subsidiary 0.6 0 +0.6 +100.0%

Net cash used in investing activities -128.0 -394.8 +266.8 -67.6%

Received long-term loans 490.0 270.0 +220.0 +81.5%

Redeemed bonds 0.0 -200.5 +200.5 -100.0%

Repayments of bank loans -468.2 -60.2 -408.0 +677.7%

Repayment of financial leases -11.2 -0.5 -10.7 2140.0%

Acquisition of non-controlling interest in a subsidiary -0.1 -1.7 +1.6 -94.1%

Dividends paid -57.0 -15.8 -41.2 +260.8%

Net cash used in financing activities -46.5 -8.7 -37.8 +434.5%

Net cash flows -26.9 -237.2 +210.3 -88.7%

Glossary

• 1 MWh – 1 megawatt hour. The unit of energy generated (or consumed) in one hour by a device operating at a constant power of 1 MW (megawatt).1,000,000 MWh = 1,000 GWh = 1 TWh

• Clean Dark Spread (CDS) – Eesti Energia’s margin between the average price of electricity (in NPS Estonia), oil shale costs and CO2 costs (taking into account the price of CO2

allowance futures maturing in December and the amount of CO2 emitted in the generation of a MWh of electricity)

• CO2 emission allowance – According to the European Union Emissions Trading System (ETS), one emission allowance gives the holder the right to emit one tonne of carbon dioxide (CO2). The limit on the total number of emission allowances available gives them a monetary value

• Financial leverage – Net debt divided by the sum of net debt and equity

• Net debt – Debt obligations (amortised) less cash and cash equivalents (incl. bank deposits with maturities exceeding 3 months), units in money market funds and investments in fixed income bonds

• Network losses – The amount of electricity delivered to customers is somewhat smaller than the amount supplied from power plants to the network because during transfer a part of electricity in the power lines and transformers converts into heat. In smaller amount, network losses are caused by power theft and incorrect measuring. The network operator has to compensate energy losses and for this a corresponding amount of electricity has to be purchased every hour

• NP system price – The price on the Nord Pool power exchange that is calculated on the basis of all purchase and sale bids without taking into account transmission capacity limitations

• Position hedged with forward transactions – The average price and the corresponding amount of electricity and shale oil sold and emission allowances purchased in the future is previously fixed

• RAB – Regulated Asset Base, which represents the value of assets used to provide regulated services

• Return on Fixed Assets (ROFA) – Operating profit (rolling 12 months) divided by average fixed assets excl. assets under construction (allocated to specific product)

• SAIDI – System Average Interruption Duration Index. The sum of all customer interruption durations in minutes divided by the total number of customers served

• SAIFI – System Average Interruption Frequency Index. The total number of customer interruptions divided by the total number of customers served

• Variable profit – Profit after deducting variable costs from sales revenues

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