Eesti Energia AuditedFinancial Results

for 2018

28 February 2019

Disclaimer

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2

Sales Revenues and EBITDA Increased

742.1 753.9 875.3

2016 2017 2018

m€+121.4 (+16.1%)

Sales Revenues EBITDA

Operating Cash Flow Investments

327.3264.2 283.2

2016 2017 2018

m€+19.0 (+7.2%)

200.3268.8

166.3

2016 2017 2018

m€-102.5 (-38.1%)

140.7 144.0215.1

2016 2017 2018

m€

+71.1 (+49.3%)

3

Average Quarter Nord Pool Electricity Prices• In 2018 electricity prices increased, due to an

increase in emission allowance prices and lowerlevels of the Nordic water reservoirs

• Average price in NP Estonia price area was 47.1 €/MWh* (+13.9 €/MWh, +41.7%). Eesti Energia Narva power plants achieved 2% higher electricity price than NP Estonia

• Price spread between Estonia and Finland increasedby 0.2 €/MWh to 0.3 €/MWh, as electricity price inEstonia was slightly higher. Estonia-Latvia pricespread widened by 1.3 €/MWh to -2.8 €/MWh,Latvian price remaining higher.

• Clean Dark Spread in NP Estonia average electricityprice increased to 12.0 €/MWh (+3.0 €/MWh,+33.7%). Increase in NP Estonia average electricityprice (+13.9 €/MWh) covered the impact of highercost of CO2 (-11.0 €/MWh). Impact of the cost of oilshale equalled +0.2 €/MWh.

-20

-10

0

10

20

30

40

50

60

70

2016 2017 2018

€/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**

Nord Pool Baltic Electricity Prices Increased

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

Average Quarter Fuel Oil and Brent Crude Oil Prices• Average price of Brent crude oil was71.7 $/bbl (+16.9 $/bbl, +30.9%) in 2018

- In the first half of 2018 crude oil price increasedmainly due to political tensions in the Middle Eastand decreased number of active oil rigs in the US

- In the second half of 2018 crude oil prices declineddue to increased inventories, slowing economicgrowth and low tide in the stock markets

• Average price of fuel oil (1% sulphur content) in 2018was 340.5 €/t (+69.7 €/t, +25.7%)

• In second half of 2018 the price gap between fuel oiland Brent crude oil widened due to decrease in crudeoil price, while fuel oil price rose. Fuel oil priceincreased due to lower outputs, caused by higherlevel of maintenance works in refineries and lowerstock levels.

0

100

200

300

400

500

0

25

50

75

100

125

2016 2017 2018

$/bbl €/t

Brent crude ($/bbl)

Fuel oil 1% (€/t)

Fuel Oil Prices Increased

5

351437

247

241

86

11370

84

+86.3 +27.1 +14.8

(6.8)

754

875

Sales

revenues

2017

Sales

revenues

2018

Electricity Distribution Shale oil Other

m€+121.4 (+16.1%)

Sales Revenues Breakdown and Y-o-Y Change EBITDA Breakdown and Y-o-Y Change

98

131

107

100

24

4435

9

+33.2 +19.7

(7.3)

(26.6)

264

283

EBITDA

2017

EBITDA

2018Electricity Distribution Shale oil Other

m€

+19.0 (+7.2%)

Group’s Sales Revenues and EBITDA Increased

6

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 47.4 €/MWh (+9.6 €/MWh, +25.3%)

- Gain on derivatives impacted price by -0.7 €/MWh (-1.9 €/MWh Y-o-Y; in abs. terms -€6.7m, -€16.1m Y-o-Y)

- Average electricity sales price* incl. gain on derivatives increased to 46.7 €/MWh (+7.7 €/MWh, +19.8%)

• Electricity sales volume 9.2 TWh (-1.2%)**. Wholesale electricity sales decreased by 556 GWh (-17.6%) while retail salesincreased by 440 GWh (+7.1%)

• Electricity generation amounted to 9.1 TWh (-0.6 TWh, -6.2%), due to more extensive scheduled maintenance work

• 2019 sales hedged against price risk amounted to 4.4 TWh with an average price of 44.8 €/MWh;2020 sales hedged against price risk amounted to 0.5 TWh with an average price of 34.7 €/MWh

332 416

351437

2017 2018

Subsidies and municipal waste gate fees

Sales revenues (excluding subsidies and

waste gate fees)

+86.3 (+24.6%)m€

6.2 6.6

3.2 2.6

9.4 9.2

2017 2018

Retail sales Wholesale sales

-0.1 (-1.2%)TWh

37.9 33.2

47.4 47.1

Average electricity

sales price*

NP Estonia average

electricity price

2017 2018

+13.9 (+41.7%)+9.6 (+25.3%)

€/MWh

50%

% of sales revenues

Electricity Sales Revenue Increased

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** includes total sales volume of Auvere power plant. In the Group's accounting, the sales revenues and variable costs of Auvere power plant were partially capitalized in 2017 and 2018 as the plant was under construction. Without including the netted sales volume of Auvere power plant, the Group's electricity sales increased by 4.7% or 399 GWh.

Electricity EBITDA Development ✓ Total margin impact +€43.7m (+4.9 €/MWh). Average sales revenue increased by 9.7 €/MWh (impact +€86.5m). Highervariable costs impact -€42.8m, mainly electricity purchasingcosts and CO2 costs

✓ Volume impact +€9.3m (sales volume of Auvere power plant is not included in Group’s sales revenue and EBITDA to the full extent)

Fixed costs impacted EBITDA by -€14.8m. Increased payrollcosts impact -€10.4m, increased maintenance costs impact -€4.6m.

Gain on derivatives decreased impacting EBITDA by -€16.1m (gain on derivatives €9.5m in 2017, -€6.7m in 2018)

✓ Other changes impacted EBITDA by +€11.2m, mainly relatedto smaller environmental provisions (impact +€5.5m) and change in value of derivative instruments (impact +€5.9m)

98.0

131.2+43.7

+9.3

+11.2

(14.8)

(16.1)

EBITDA2017

Marginimpact

Volumeimpact

Changein fixedcosts

Gain onderivatives

Other EBITDA2018

m€

+33.2 (+33.9%)

46%

% of EBITDA

Key Figures 2018 2017

Return on fixed assets* (%) 5.8 7.7

Electricity EBITDA (€/MWh) 14.7 11.5

Electricity EBITDA Increased by 34%

9

* Rolling 12 months. Excluding impairment of generation assets in December 2013 and December 2015

Street lights in Tartu, Estonia

Distribution

10

Average Distribution Sales Price Distribution Sales Revenue Distribution Volume

• Sales revenue decreased to €240.6m (-2.7%) due to decreased average distribution sales price. Distributiontariffs were decreased by 6.7% in July 2017 and 2.3% in November 2017. In January 2019 distribution tariffswere further decreased by 8.4% on average and reduce our customers’ electricity related costs

• Network losses amounted to 4.3% (-0.4pp) of electricity entered into distribution network

• The average duration of unplanned interruptions was 141.8 minutes (2017: 105.3 minutes). The growth wascaused by windy weather on second half of 2018.

247.4 240.6

2017 2018

-6.8 (-2.7%)m€

6.8 6.9

2017 2018

+0.2 (+2.8%)TWh

36.6 34.6

2017 2018

-2.0 (-5.4%)€/MWh

27%

% of sales revenues

Distribution Sales Revenue Decreased 3%

11

Distribution EBITDA Development Total margin impact -€11.6m (-1.7 €/MWh) mainly due todecreased average sales price

✓ Distribution volume increased 2.8%, impact on EBITDA+€4.3m

Fixed costs stable y-o-y. Maintenance costs increasedslightly while other fixed costs decreased.107.0

99.6

+4.3

(11.6)

(0.0)

EBITDA2017

Marginimpact

Volumeimpact

Change infixed costs

EBITDA2018

m€

-7.3 (-6.8%)

35%

% of EBITDA

Distribution EBITDA Lower Mainly due to Decreased Margin

12

* Rolling 12 months. RAB (Regulated Asset Base) allocated to distribution product

Key Figures 2018 2017

Return on fixed assets* (%) 5.7 6.7

Distribution losses (GWh) 319.2 343.5

SAIFI 2.0 1.9

SAIDI (unplanned) 141.8 105.3

SAIDI (planned) 90.0 79.6

Adjusted RAB* (m€) 792.5 777.7

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 22.5 thousand tonnes (+6.1%). The Groups’ shale oil production in 2018 was 411 thousand tonnes, anincrease of 15.8 thousand tonnes (+4.0%) compared to 2017, due to production facilities’ higher operational reliability

• Average shale oil sales price* increased to 330.4 €/t (+69.5 €/t, +26.6%) due to an increase in the reference product averageprice (+69.7 €/t, +25.7%)

- Gain on derivatives impacted price by -42.3 €/t (-13.9 €/t, -€16.6m in abs. terms, -€6.1m Y-o-Y)

- Average sales price incl. gain on derivatives increased to 288.1 €/t (+55.6 €/t, +23.9%)

• 2019 sales hedged against price risk amounted to 323.6 thousand tonnes with an average price of 273.1 €/t2020 sales hedged against price risk amounted to 171.8 thousand tonnes with an average price of 298.1 €/t

86.1

113.1

2017 2018

+27.1 (+31.4%)m€

370 393

2017 2018

+22.5 (+6.1%)

thousand tonnes

261 271330 341

Average shale oil

sales price*

Average price of

heavy fuel oil (1%)

2017 2018

+69.7 (+25.7%)+69.5 (+26.6%)€/tonne

13%

% of sales revenues

Shale Oil Sales Revenue and Volume Increased

14

* total average sales price excludes gain on derivatives

Shale Oil EBITDA Development ✓ Margin impact on profitability +€24.2m (+61.5 €/t) due tothe increase in average sales price (+€69.5 €/t)

✓ Sales volume increased by 6%, impact on EBITDA+€3.9m

Fixed costs impacted EBITDA by -€3.0m. Increasedmaintenance costs impact -€0.2m. Increase in payrollcosts impacted EBITDA by -€3.4m, of which -€2.4m arerelated to mining costs. Fixed cost component ininventories impacted EBITDA by +€1.4m

Gain on derivatives impacted EBITDA by-€6.1m (gain on derivatives -€10.5m in 2017,-€16.6m in 2018)

✓ Other changes (total impact +€0.7m) mainly related tochange in value of derivative instruments (impact +€0.5m)

23.9

43.6

+24.2+3.9

+0.7

(3.0)(6.1)

0

EBITDA2017

Marginimpact

Volumeimpact

Change infixedcosts

Gain onderivatives

Other EBITDA2018

m€

+19.7 (+82.4%)

15%

% of EBITDA

Key Figures 2018 2017

Return on fixed assets (%)* 9.9 1.3

Shale Oil EBITDA (€/t) 108.8 64.6

Shale Oil EBITDA Increased 82%

15

* Rolling 12 months

Sales Revenues From Other Products and Services

Other Products and Services EBITDA Development

• EBITDA impact due to liquidated damages related tothe delay in the delivery of the Auvere power plant -€25.0m

• The share sale transaction of the Jordan electricityproject impacted EBITDA by +9.2m in 2017

• Heat sales volume decreased by 0.4%, sales revenueincreased by €1.2m. Impact on EBITDA -€3.4m, mainlydue to higher fixed costs

• Sales revenue from mining products increased by€4.8m as the Group sold 196 thousand tonnes of oilshale in 2018

• Other changes in EBITDA totalled +€11.0m, including+€2.9m from Enefit Solutions’ products, +€2.0m fromR&D units, +€2.0m from mining products, +€1.3mfrom natural gas sales.

38 39

16 168 7

1770

84

2017 2018

Other sales

Sales of mining products

Enefit Solutions' productssales revenueSales of natural gas

Sales of heat

m€

+14.8 (+21.2%)

35.3

8.7

+11.0

(3.4) (25.0)

(9.2)

Other EBITDA2017

Heat Auvereliquidateddamages

JordanProject

Other Other EBITDA2018

m€ -26.6 (-75.3%)m€

10%

% of sales revenues

3%

% of EBITDA

Other EBITDA Decreased by €27m

16

283.2

166.3

+1.8

(43.2)

(20.6)

(30.9)

(11.7)(12.3)

EBITDA

2018

Changes in

working

capital

CO2

impact

Derivative

instru-

ments

Interest

paid

Income tax Other Operating

cash flow

2018

m€

-116.9 (-41.3%)

EBITDA to Operating Cash Flows Development

Operating Cash Flow €117m Lower than EBITDA

17

268.8

166.3

+39.8

+19.0 +3.8

(66.1)

(36.9)

(50.4)

(11.6)

Operating

cash flow

2017

Changes in

working

capital

Auvere

liquidated

damages

CO2

impact

Derivative

instru-

ments

Change

in

EBITDA

Income

tax

Other Operating

cash flow

2018

m€

-102.5 (-38.1%)

Operating Cash Flow Changes

2018 Operating Cash Flow €103m Lower

18

Capex Breakdown by Projects

Capex Breakdown by Products

• Investments in distribution network continued atlevel €81.6m (+€7.0m, +9.4%)

• Maintenance investments (excl. distribution)increased by €33.6m to €62.0m, incl:

o +€13.5m to €28.7m in mining unit

o €33.9m was invested in Auvere power plant,which was accepted from the builder on 31 July.Total investment was €610m

o €2.9m was invested in increasing a generatingunit’s capacity to use oil shale gas. Project wascompleted in 2018. Total investment for theproject was €14.7m

o €3.8m was invested in constructing solar powerplants with total capacity of 7 MW

75 8222 1328 62

2134144

215

2017 2018

Oil shale gas burning

Auvere 300 MW power plant

Other developm. projects

Maintenance investments

Capitalised interest

Electricity network

m€ +71.1 (+49.3%)

3911089

87144

215

2017 2018

Other

Shale oil

Distribution

Electricity

m€+71.1 (+49.3%)

Capital Expenditure €215m in 2018

19

298.7

61.5

+166.3

(394.8)

(8.7)

Liquid assets

31 December 2017

Operating

cash flow

Investment

cash flow

Financing

cash flow

Liquid assets

31 December 2018

m€-237.2 (-79.4%)

Group’s Liquidity Development in 2018

• €281m of liquid assets and unused loans available as at 31 December 2018 for Eesti Energia, including €61mof liquid assets and €220m of undrawn liquidity loans

• Additionally, Enefit Green had €260m of undrawn term loans available, intended for refinancing debt fromacquisition (to be completed in Q1 2019)

• In 2018, scheduled repayments of EIB loans were made in the amount of €18m, €152m of bonds wereredeemed on maturity date, €48.5m of bonds taken over in the acquisition of Nelja Energia were recalledand retired before maturity

€61m Amount of Liquid Assets at the End of 2018

20

48106

500

253

534

43

149

301

44 28 26 20 7 7

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

m€

EIB Eurobond Other bank loans

Debt Maturity

Net Debt / EBITDA & Financial Leverage • Eesti Energia credit ratings are at investment grade level

- BBB (S&P) (outlook: negative)

- Baa3 (Moody’s) (outlook: stable)

• Group’s current Net Debt/EBITDA ratio is 3.7, which is above the long term target of 3.5 set out in the financial policy. Group’s strategy outlines measures for meeting this target

• Total debt by the end of 2018 was €1157.5m, net debt€1048.1m

2.2 2.23.7

30%25%

36%

0%

8%

16%

24%

32%

40%

0

1

2

3

4

5

2016 2017 2018

Net debt/EBITDA Financial leverage (right sc.)

Financial Leverage, %Net Debt/EBITDA, times

Debt Maturity Profile

21

Sales Revenues EBITDA Investments

• Sales revenues and investments are likely to grow* in 2019, while EBITDA will remain on the same level

- Group's electricity sales revenue and EBITDA will be supported by increasing sales prices. Growth inemission allowances prices will have an adverse effect on EBITDA.

- Investments are expected to grow, mainly due to investments in renewable energy.

• Forecast for 2019 includes dividend payment €57.0m and income tax €14.3m

283

2018 2019

m€

Stable

215

2018 2019

m€

Growth*

875

2018 2019

m€ Growth*

Outlook for FY2019

22

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

• 2018 sales revenues increased to €875m (+16.1%; +€121.4m)

- Electricity sales revenue increased by €86m (+24.6%), due to increased sales price

- Shale oil sales revenue increased by €27m (+31.4%), due to increased sales price and volume

• 2018 EBITDA increased to €283m (+7.2%; +€19.0m)

- Electricity EBITDA increased by €33m (+33.9%), due to increased sales price

- Distribution EBITDA decreased by €7m (-6.8%), due to lower margin

- Shale oil EBITDA increased by €20m (+82.4%), mainly due to higher sales price

- Other Products and Services EBITDA decreased by €27m (-75.3%), mainly due to liquidated damages received in 2017 related to the delay in the delivery of the Auvere power plant

• Investments increased by 49% to €215m, mainly due to last payment of Auvere power plant and acquisition of new mining machinery

• 2018 net profit increased to €106m (+5.4%; +€5.4m)

Summary

23

APPENDICES

24

Production and Sales in 2018

25

Shale oilElectricity

15.3 m tonnes used in electricity and shale oil

production

411 thousandtonnes of shale oil

produced

393 thousandtonnes of oil sold

to clients

8,651 GWh of non-renewable electricity

produced

9,248 GWh* of electricity sold

6,642 GWhsold in retail

market

2,606 GWh*sold in wholesale

market

Oil shale mined 16.0 m tonnes

481 GWh of renewableelectricity produced,

1,187 GWh of electricitypurchased

Distribution

6,945 GWh of electricity

distributed toclients

* includes sales volume of Auvere power plant. In the Group's accounting, the sales revenue and cost of Auvere power plant is partially capitalized as the plant is still under construction

4.4

0.5

44.8

34.7

0

10

20

30

40

50

0

1

2

3

4

5

Amount hedged(TWh)

Price (€/MWh)

€/MWhTWh

2019 2020

Electricity

324

172

273

298

0

75

150

225

300

375

0

70

140

210

280

350

Amount hedged(thousand tonnes)

Price (€/tonne)

€/t

2019 2020

thousandtonnes

Fuel Oil

9.8

0.2

12.2

0

3

6

9

12

15

0

3

6

9

12

15

Total position(m tonnes)

Price (€/tonne)

€/tm tonnes

2019 2020

CO2

Hedged Positions as at 31st December 2018

26

Profit and Loss Statement

27

million euros 2018 2017 Change Change

Sales revenues 875.3 753.9 +121.4 +16.1%

Other revenues 22.3 66.5 -44.2 -66.4%

Expenses (excl. depreciation), incl: 614.4 556.2 +58.2 +10.5%

Electricity purchasing costs 131.0 101.4 +29.6 +29.2%

Environmental fees 52.4 44.0 +8.4 +19.2%

CO2 emission costs 82.8 64.9 +18.0 +27.7%

Change in inventories -11.3 -1.5 -9.7 +633.0%

Other 359.4 347.5 +11.9 +3.4%

EBITDA 283.2 264.2 +19.0 +7.2%

Depreciation 154.5 135.7 +18.8 +13.8%

EBIT 128.7 128.4 +0.3 +0.2%

Net financial income (-expenses) -24.7 -18.9 -5.9 +31.0%

Net profit from associates 6.2 2.7 +3.5 +132.3%

Earnings before tax 110.1 112.2 -2.1 -1.8%

Income tax expense 4.4 11.4 -7.1 -61.8%

Net profit 106.2 100.8 +5.4 +5.4%

Balance Sheet

28

million eurosDecember

2018

December

2017

Change

yoy

Assets 3,559.1 3,142.5 +13.3%

Current assets 484.5 592.2 -18.2%

Cash and cash equivalents 61.5 298.7 -79.4%

Trade receivables 121.6 104.4 +16.5%

Inventories and prepaid expenses 95.8 70.4 +36.1%

Other current assets 205.6 118.7 +73.2%

Non-current assets 3,074.6 2,550.3 +20.6%

Liabilities and equity 3,559.1 3,142.5 +13.3%

Liabilities 1,699.5 1,378.6 +23.3%

Trade payables 103.6 98.5 +5.2%

Borrowings 1,109.5 881.1 +25.9%

Current liabilities 142.7 169.9 -16.0%

Long-term liabilities 966.9 711.2 +35.9%

Provisions 126.4 104.2 +21.3%

Deferred income 213.2 196.0 +8.8%

Other liabilities 146.7 98.8 +48.5%

Equity 1,859.6 1,763.9 +5.4%

Cash Flow Statement

29

million euros 2018 2017 Change Change

Net cash from operating activities 166.3 268.8 -102.5 -38.1%

Purchase of fixed assets -170.0 -113.0 -57.0 +50.4%

Connection and other fees received 23.3 19.0 +4.3 +22.8%

Acquisition of subsidiaries -249.9 0.0 -249.9 -

Contribution to share capital -3.2 -34.9 +31.7 -90.8%

Dividends recieved from financial investments 2.6 1.6 +1.0 +63.9%

Proceeds from sale of business 0.0 18.5 -18.5 -100.0%

Proceeds from sales of non-current assets 2.1 2.2 -0.1 -3.3%

Repayment of loans granted 0.0 28.4 -28.4 -100.0%

Repayment of bonds issued -200.5 0.0 -200.5 -

Net change in bank loans paid and received 270.0 0.2 +269.8 -

Repayments of bank loans -60.2 -66.3 +6.1 -9.2%

Dividend -15.8 -47.0 +31.2 -66.4%

Acquisition of non-controlling interest in a subsidiary -1.7 -1.0 -0.7 +70.5%

Other -0.3 -1.1 +0.8 -75.1%

Net cash flows -237.2 75.4 -312.7 -414.5%

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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