24 Jan 2014
Eesti Energia’s financial performance and credit rating continue to be very good
Moody’s Investors Service has downgraded to Baa2 from Baa1 the issuer rating and the senior unsecured ratings of Eesti Energia AS, the Estonian-based owner of Enefit American Oil. According to Moody’s, the rating action reflects the development of Eesti Energia’s business risk profile in light of the increasing integration of the Baltic and Nordic power markets with weak levels of wholesale power prices and the potential risk of the CO₂ prices.
Margus Kaasik, member of the Management Board of Eesti Energia said that the lowered ratings are affecting all energy companies in Europe. “It hasn’t affected Eesti Energia’s finances negatively and the current rating is high. There are risks, but investments will also drop in the near future and a return is expected,” Kaasik affirmed.
Eesti Energia has been operating in the volatile Nordic power market since 2006, but the opening of the Estonian electricity market in 2013 has had an impact on the company´s business risks and the credit rating.
Eesti Energia’s economic performance continues to be strong. According to preliminary data, Eesti Energia has contributed EUR 190 million to the 2013 Estonian national budget (mainly royalties, taxes and dividends). Over the past five years, Eesti Energia has contributed almost EUR 1 billion to the Estonian state budget or on average EUR 200 million per year.
“The credit rating is still high enough to attract investors, and the downgrade will have no direct effect on interest rates paid on current loans,” said Kaasik. This week, Eesti Energia successfully launched and priced an increase of 100 million euro eurobonds due in 2018. The transaction attracted a high quality and strong order book that exceeded 400 million euros with over 40 investors participating. Newly issued notes yield 2.181%, which is the lowest yielding eurobond transaction in the group´s history.
The net proceeds of the offering will be used mainly to finalize the construction of the Auvere power plant in Estonia. “A number of large projects have already been completed in Estonia, such as the waste-burning heat and power unit and Enefit280 oil plant, which will increase future revenues,” said Kaasik. Eesti Energia is also developing oil shale projects in Utah, US and Jordan, where in 2013 Eesti Energia ´s affiliate company mandated Bank of China and Industrial and Commercial Bank of China, supported by China Export & Credit Insurance Corporation (Sinosure), to arrange USD1.4 billion of debt financing for the construction of Jordan´s first oil shale fired power plant.