Eesti EnergiaEesti EnergiaEesti EnergiaEesti Energia Unaudited Financial Unaudited Financial Unaudited Financial Unaudited Financial Results for Q2Results for Q2Results for Q2Results for Q2 2011201120112011

29 July 2011

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• The presentation does not constitute or form part of, and should not be construed as, an offer, solicitation or invitation to subscribe for, underwrite or otherwise acquire, any securities of the Company or any member of its group nor should it or any part of it form the basis of, or be relied on in connection with, any contract to purchase or subscribe for any securities of the Company or any member of its group, nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever. Any person considering the purchase of any securities of the Company must inform himself or herself independently before taking any investment decision. The presentation has been provided to you solely for your information and background and is subject to amendment. Further, the information in this presentation has been compiled based on information from a number of sources and reflects prevailing conditions as of its date, which are subject to change.

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DisclaimerDisclaimerDisclaimerDisclaimer

Revenues

42 43

132

0

30

60

90

120

150

Q2 2009 Q2 2010 Q2 2011

m€

+207.9%

Investments

5569

26

0

20

40

60

80

Q2 2009 Q2 2010 Q2 2011

m€

-62.2%

EBIT

3138 37

0

10

20

30

40

50

Q2 2009 Q2 2010 Q2 2011

m€

+1.3%

Operating cash flow

Continued Revenue GrowthContinued Revenue GrowthContinued Revenue GrowthContinued Revenue Growth

147 170206

0

50

100

150

200

250

300

Q2 2009 Q2 2010 Q2 2011

m€

+21.2%

3

61%

39%

Open markets Regulated markets

53%

47%

Open markets Regulated markets

86%

14%

60%

40%

Approximately 90% of EBIT from Approximately 90% of EBIT from Approximately 90% of EBIT from Approximately 90% of EBIT from Open Open Open Open MarketsMarketsMarketsMarkets

Q2 2010

Revenues €170m

EBIT €38m

Q2 2011

Revenues €206m

EBIT €37m

4

* Open market – electricity, shale oil, telecommunication, metal products, other services* Regulated market – network services, electricity, oil shale

Revenue share from open markets continues to grow

Profitability of regulated business declining

Prices in Estonian price area, spread with Finnish and Lithuanian price area

Estonian Estonian Estonian Estonian and Finnish and Finnish and Finnish and Finnish Prices Equal ca 40% Prices Equal ca 40% Prices Equal ca 40% Prices Equal ca 40% of of of of HoursHoursHoursHours

• The average quarterly price in the Nord Pool Estonian price area was 45.1 €/MWh (+24.1%), in the Finnish price area 51.8 €/MWh (+24.7%) and on BaltPool 46.7 €/MWh (+12.3%)

• Nord Pool Estonia prices 1.5 times higher than on regulated market

• The hourly prices in the Estonian and Finnish price areas were equal 38.5% of the time during Q2

• High levels of hydroreserves impacted Finnish price area

5

-60

-40

-20

0

20

40

60

80

Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11

€/MWh

Nord Pool Estonia price area

Estonian and Finnish price area spread

Estonian and Lithuanian price area spread

Revenue Increase from NonRevenue Increase from NonRevenue Increase from NonRevenue Increase from Non----Recurring Recurring Recurring Recurring TransactionsTransactionsTransactionsTransactions

170

206

+1

+6+2

+6

+21

150

160

170

180

190

200

210

RevenuesQ2 2010

Electricitysales at

regulatedprices

Electricitysales at non-

regulatedprices

Sales ofnetworkservices

Sales ofliquid fuels

Otherrevenues

Revenues Q22011

m€

Non-recurring revenues +€16.2 m

Breakdown of Revenues Q2 2011Change of Group Revenues by Products

37

65

40

4

9

16

17

18

Electricity sales at regulated pricesElectricity sales at non-regulated pricesSales of network servicesSales of heatSales of oil shaleSales of liquid fuelsOther services and productsOther income

m€

6

Stable Elektricity Sales at Regulated Stable Elektricity Sales at Regulated Stable Elektricity Sales at Regulated Stable Elektricity Sales at Regulated PricesPricesPricesPrices

CommentsGroup Electricity Sales at Regulated Prices

+3.8% +2.7%

• Sales volume increase mostly from sales to private customers (+6.1%, +23 GWh)

• Average sales price in the regulated market 30.4 €/MWh (-1.0% compared to Q2 2010)

7

CommentsGroup Eelectricity Sales at Non-Regulated Prices

+13.5%+10.6%

75% Market Share 75% Market Share 75% Market Share 75% Market Share in Estoniain Estoniain Estoniain Estonia

• Retail sales 473 GWh (+11 GWh), sales on exchanges and to wholesale buyers 794 GWh (+141 GWh)

• Average open market shares in Q2: 75% in Estonia, 14% in Latvia and 7% in Lithuania

• Average sales price on the open market excluding renewable energy subsidies was 47.2 €/MWh (4.2%)

• Change in regulation decreased renewable energy subsidies 36% to 5.5 mln euros

• In Q2 2011 electricity sales hedged against price risk amounted to 980 GWh (+555 GWh y-o-y)

8

Sale of Network Services StableSale of Network Services StableSale of Network Services StableSale of Network Services Stable

CommentsSales of Network Services

+1.0% +3.6%

• Average network fees 29.2 €/MWh (2.6%):

– Change in network fees on 1 July 2010 due to an increase in Elering’s transmission fees (+18.9%)

– New average network fees of 33.0 €/MWh from 1 August 2011

• Network losses were at 4.3% (-0.2 percentage points)

9

10

16

Revenues (m€)

CommentsSales of Liquid Fuels

+17.5%

+55.2%

Strong Oil Prices Boosting RevenuesStrong Oil Prices Boosting RevenuesStrong Oil Prices Boosting RevenuesStrong Oil Prices Boosting Revenues

• Increased production volumes and better reliability of production equipment increased sales volumes

• Average sales price was 375 €/t(+32.1%) due to higher fuel oil prices on the world market

– Excluding price hedges average price was 423 €/t

– Average price of heavy fuel oil, the reference product, was 461 €/t

• In Q2 2011 the sales hedged against price risk amounted to 15 thousand tonnes with an average price of 333 €/t

10

36

42

Sales volume (th tonnes)

Q2 2010 Q2 2011

10

295

4

7

9

5

6

2010 II kv 2011 II kv

m€

Sales of electrical equipment

Sales of oil shale

Sales of heat

Other revenue

27

48

• Increase mainly by non-recurring revenue from the sale of 11% share in Jordanian development project (+€16.2m)

• Sales of technological equipment increased due to the construction of new shale oil plant (+€1.3m)

• Oil shale sales increased (+€2m, sales volume +9.0%) due to higher production volumes

CommentsOther Revenues

Other Revenues Increased by NonOther Revenues Increased by NonOther Revenues Increased by NonOther Revenues Increased by Non----recurring Revenuesrecurring Revenuesrecurring Revenuesrecurring Revenues

+83.1%

11

Higher Prices Increase Variable ExpensesHigher Prices Increase Variable ExpensesHigher Prices Increase Variable ExpensesHigher Prices Increase Variable Expenses

12

CommentsChange in Operating Expenses

• Variable expenses increased due tp price increases by €14 million:

– Higher transmission fees (€1.9m)

– Higher taxes in mining and generation (€1.8m)

– Higher explosives prices in miningand generation (€1.5m)

– Higher fuel costs (€1.5m)

• Fixed expenses increased mainly due to larger repair costs

• Non-recurring expenses include enivronmental provisions

132

169

147

79

0

20

40

60

80

100

120

140

160

180

OpexQ2 2010

Impact ofinput pricechanges to

variableexpenses

Impact ofvolume tovariable

expenses

Fixedexpneses

Non-recurringexpenses

OpexQ2 2011

m€

EBIT Divisional BreakdownQ2 2011 *EBIT Change Breakdown by Divisions

* Excluding other and eliminations

EBIT Growth From Fuels DivisionEBIT Growth From Fuels DivisionEBIT Growth From Fuels DivisionEBIT Growth From Fuels Division

13

m€

Retail Profitability Hampered by Lower Retail Profitability Hampered by Lower Retail Profitability Hampered by Lower Retail Profitability Hampered by Lower MarginsMarginsMarginsMargins

� -0.9 million euros from lower sales margins

� -0.9 million euros from implementation of new IT systems

Impact on Retail division (excl. Jaotusvõrk) profitability:Retail Division

Q2 2010 Q2 2011

Q2 2010 Q2 2011

Electricity sales (GWh) 1548 1674

100

14

86

0

20

40

60

80

100

120

Revenue Opex EBIT

m€

107

7

100

0

20

40

60

80

100

120

Revenues Opex EBIT

m€

14

Profitability of Distribution Grid below Profitability of Distribution Grid below Profitability of Distribution Grid below Profitability of Distribution Grid below Permitted ReturnPermitted ReturnPermitted ReturnPermitted Return

Impact on Distribution Network’s Profitability:Eesti Energia Jaotusvõrk

Q2 2010 Q2 2011

Q2 2010 Q2 2011

Electricity distributed (GWh) 1427 1445

Distribution network ROIC 9,3% 4,9%

� +0.3 million euros from higher sales of network services

� -2.0 million euros due to rise in transmission fees

� -1.6 million euros due to changes in amortization of connection fees

� -1.0 million euros due to increase in depreciation

� -0.7 million euros due to an increase in maintenance costs

42

12

30

0

10

20

30

40

50

Revenues Opex EBIT

m€

42

7

35

0

10

20

30

40

50

Revenues Opex EBIT

m€

15

105

19

86

0

30

60

90

120

Revenues Op ex EBIT

m€

� +1.7 million euros due to lower depreciation

� -8.7 million euros due to environmental provisions

� -4.8 million euros due to increased maintenance costs

� -3.3 million euros due to decrease in renwable energy subsidies

� -1.5 million euros due to decrease in electricity sales margin

Impact on Generations Profitability:Electricity and Heat Generation Division

Q2 2010 Q2 2011

Electricity sales (GWh) 2398 2527

Electricity generation (GWh) 2250 2316

Electricity purchase (GWh) 151 213

Q2 2010 Q2 2011

110

2

109

0

30

60

90

120

Revenues Opex EBIT

m€

Provisions and Maintenance Costs Reduce Provisions and Maintenance Costs Reduce Provisions and Maintenance Costs Reduce Provisions and Maintenance Costs Reduce Generation’s Generation’s Generation’s Generation’s ProfitsProfitsProfitsProfits

16

� +16.2 million euros due to sale of 11% shareholding in Jordanian development project

� +5.6 million euros due to increased oil sales volume and price

� -0.8 million euros due to increase in depreciation

� -0.4 million euros due to increase in fixed expenses

Impact on Fuels (excl Mining) division:Fuels Division

Q2 2010 Q2 2011

Shale oil sales (th tonnes) 36 42

Q2 2010 Q2 2011

57

7

50

0

20

40

60

80

100

Revenues Opex EBIT

m€

92

27

65

0

20

40

60

80

100

Revenues Opex EBIT

m€

Fuels DivisionFuels DivisionFuels DivisionFuels Division Boosted by NonBoosted by NonBoosted by NonBoosted by Non----Recurring Recurring Recurring Recurring Revenues Revenues Revenues Revenues

17

� +3.7 million euros due to increased sales volume

� -2.9 million euros due to higher input purchase prices and tax rates

� -2.3 million euros due to increase in labor costs

Impact on Mining profitability:Eesti Energia Kaevandused

Q2 2010 Q2 2011

Oil shale production (m tonnes) 3,7 4,1

Sales of oil shale (m tonnes) 3,3 3,7

Q2 2010 Q2 2011

44

3

41

0

10

20

30

40

50

60

Revenues Opex EBIT

m€

50

2

48

0

10

20

30

40

50

60

Revenues Opex EBIT

m€

Higher Input Prices Weigh on Mining Higher Input Prices Weigh on Mining Higher Input Prices Weigh on Mining Higher Input Prices Weigh on Mining SubsidiarySubsidiarySubsidiarySubsidiary

18

19

Group EBIT Affected by NonGroup EBIT Affected by NonGroup EBIT Affected by NonGroup EBIT Affected by Non----recurring recurring recurring recurring RevenuesRevenuesRevenuesRevenues

Impact on Group’s profitability:

38 37+6

+16 -9

-5

-3-3

-2

0

10

20

30

40

50

60

70

EBIT Q2 2010 Profitable oilsales

Non-recurringrevenue from

saleof 11% stake in

Jordanianproject

Environmentalprovisions

Repair expenses Change in fixedexpenses (excl.

repairs)

Renewableenergy

Lowerprofitability of

electricity sales

EBIT Q2 2011

m€

Development of operating cash flows :

Operating Cash Flows Impacted by Operating Cash Flows Impacted by Operating Cash Flows Impacted by Operating Cash Flows Impacted by Income Tax and COIncome Tax and COIncome Tax and COIncome Tax and CO2222 PurchasesPurchasesPurchasesPurchases

20

61

26

+5

+23 -5-9

-13

-20

-15

20

30

40

50

60

70

80

90

100

EBITDA Non-monetarycomponents in

EBITDA

Tradereceivables

Inventories Trade payables CO2 purchases Other currentassets andliabilities

Income tax Operting cashflow

m€

Dividend payment earlier compared to 2010

Incl.:-€16.2m due to sale of stake in Jordanian project and reclassification of remaining stake+€8.7m due to environment provisions-€1.7m from amortisation of connection fees +€13.3m CO2 provision

Incl.:-€8.5m due to higher VAT prepayment as a result of growing investments -€6.6m due to personnel taxes-€2.0m due to decrease in prepayments in Tehnoloogiatööstus

Implementation of Capex Programme Implementation of Capex Programme Implementation of Capex Programme Implementation of Capex Programme ContinuesContinuesContinuesContinues

Major projectsCapex divisional breakdown Q2 2011

• New Enefit-280 shale oil plant 37 million Euros

• New CFB power plant 29 million Euros

• Distribution networks 17 million Euros

• Iru waste-to-energy plant 12 million Euros

• Narva wind park 11 million Euros

• Oil shale mining equipment 6 million Euros

• Desulphurisation equipment in Narvapower plant 4 million Euros

€18m

€64m

€47m

€4m

RetailElectricity and Heat GenerationFuelsOther

Capex€132m

21

Update on Capex ProgrammeUpdate on Capex ProgrammeUpdate on Capex ProgrammeUpdate on Capex Programme

Investment Project Capex up to 30 June 2011

Expected Future Capex

Project Deadline

Distribution networks 2008-2011 218 million euros 6 million euros 2011

New Enefit-280 oil plant 96 million euros 111 million euros 2012

Development of oil shale industry infrastucture

4 million euros 20 million euros 2012

Desulphurisation equipment in NPP

77 million euros 27 million euros 2012

Narva wind park 17 million euros 42 million euros 2012

Paldiski wind park 6 million euros 27 million euros 2012

Iru waste-to-energy plant 28 million euros 77 million euros 2013

Distribution networks 2011-2014 - 300 million euros 2014

CFB power plant in Narva 30 million euros 610 million euros 2015

Predevelopment of liquid fuels industry in USA

29 million euros 48 million euros Development up to 2016

Predevelopment of liquid fuels and electricity industry in Jordan

3 million euros 23 million euros Development up to 2016

22

Focus on Financing due to Large Capex Focus on Financing due to Large Capex Focus on Financing due to Large Capex Focus on Financing due to Large Capex ProgrammeProgrammeProgrammeProgramme

• Liquid assets decreased to 162 million euros

• EIB credit line of 136 million euros dispursed from July 2011

• Consulting with regional and international banks ongoing regarding additional credit lines in the amount of ca 300 million euros

• Preparations for raising long-term capital

– Talks with EIB for signing additional loan agreement

– Talks with sole shareholder for raising additional equity in 2012

23

* (excl. Changes in deposits and financial assets)

Liquidity Comments

SummarySummarySummarySummary

24

� Revenues continue to grow, operating profit remains stable:

– Revenues 206 million euros, + 21.2%

– EBITDA 61 million euros, +0.1%

– EBIT 37 million euros, -1.3%

� Profitability impacted mostly by:

– Sale of 11% stake in Jordanian development project and revaluation of remaining stake, +16.2 million eiuros

– Environmental provisions, -8.7 million euros

– Repair expenses of power stations, -4.8 million euros

�Continuous implementation of investment plan, investments growing more than two times

�Ongoing talks for raising additional capital

APPENDICESAPPENDICESAPPENDICESAPPENDICES

25

Source: Statistics Estonia, Estonian Unemployment Insurance Fund

Estonian labour market

• GDP growth in the second quarter continued to be positive

• Growth driven by exports- compared to May 2010 exports have grown by 57.4%

Economic growth driven by exportsEconomic growth driven by exportsEconomic growth driven by exportsEconomic growth driven by exports

Estonian economy

• Unemployment in Estonia 8.8%, down 4.5 percentage points compared to Q2 last year

• Average gross salaries growing

26

-40%

-20%

0%

20%

40%

January 2008 January 2009 January 2010 January 2011

GDP (real) GDP (nominal)Inflation Industrial production indexPrivate consumption

% v.e.a.

-10%

0%

10%

20%

January 2008 January 2009 January 2010 January 2011

Inflation Change in average gross salary Unemployment

% v.e.a.

Crude Crude Crude Crude OOOOilililil Price TrendsPrice TrendsPrice TrendsPrice Trends

Fuel price movement January 2008 – June 2011

Comments

• Average Brent crude oil market price in Q2 2011 was 82.0 €/barrel (117.9 $/barrel), up 33.1% (50.8%) y-o-y. Six month average was 79.6 €/barrel (111.7 $/barrel), up 36.0% (43.7%).

• Weaker Euro, lower consumption, 60 million barrels of crude oil put on the market from IEA reserves and IMF’s reduced GDP forecast for developed countries reduced the crude oil market price in June and July 2011.

• Average fuel oil price in Q2 2011 was 461.8 €/t (664 $/t).

27

0

20

40

60

80

100

Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11

€/ba

rrel

0

100

200

300

400

500

€/t

Brent crude oil (€/barrel) Fuel oil (€/t)

Markets *Markets *Markets *Markets *

28

Nord Pool Finnish price areas Brent crude oil

Light fuel oil December 2011 CO 2 emission allowance

* Forward contracts as of 30 June 2011

Electricity Fuel oil

Closed positionsClosed positionsClosed positionsClosed positions

29

Profit and Loss StatementProfit and Loss StatementProfit and Loss StatementProfit and Loss Statement

Q2 Change 6 months Change

million euros 2011 2010 % 2011 2010 %

Revenues 206.0 170.0 21.2% 443.0 401.1 10.4%

Expenses 168.7 132.1 27.6% 361.4 302.9 19.3%

EBITDA 60.7 60.6 0.2% 127.3 145.5 -12.5%

Depreciation 23.3 22.8 2.2% 45.8 47.3 -3.2%

EBIT 37.3 37.8 -1.3% 81.5 98.2 -17.0%

Net financial income /(-expenses) -1.6 -1.1 45.5% -3.4 -2.5 36.0%

Income tax on dividends 14.6 22.1 -33.9% 14.6 22.2 -34.2%

Income from discontinued operations 27.4 -100.0%

Net profit 21.2 14.6 45.2% 63.6 101.5 -37.3%

30

Balance SheetBalance SheetBalance SheetBalance Sheet

million euros 30 June 2011 30 June 2010Change

million euros

Total current assets incl. 296.4 604.3 -307.9Cash and cash equivalents 87.3 197.8 -110.5Deposits with maturity of more than 3 months 55.0 274.8 -219.8Trade receivables 99.8 92.0 7.8Inventories 34.7 37.2 -2.5Other 19.6 14.6 24.6

Total non-current assets 1525.8 1256.3 269.5Total assets 1822.2 1860.6 -38.4

Total payables, incl. 684.3 660.1 24.2Trade payables 125.5 121.0 4.4Other 134.3 127.6 6.7Borrowings 357.4 362.3 -4.9Current liabilities 26.8 3.6 23.2Long-term liabilities 330.6 358.7 -28.1

Provisions 67.1 49.1 36.7Equity 1137.9 1191.6 -4.5Total liabilities and equity 1822.2 1860.6 -38.4

31

Cash flowsCash flowsCash flowsCash flows

Q2 Change 6 months Change

million euros 2011 2010 % 2011 2010 %

Net cash from operating activities 25.9 68.5 -62.2% 130.8 157.9 -17.2%

Purchase of fixed assets 117.3 47.0 149.6% 189.2 85.6 121.0%

Net change in deposits with maturities greater than 3 months 143.0 106.1 34.8% 126.4 269.7 -53.1%

Received long-term bank loans 1.3 0.4 225.0% 1.5 1.0 50.0%

Repayment of bank loans 1.1 1.1 0.0% 1.9 1.7 11.8%

Dividend payment 56.1 - 100.0% 56.1 - 100.0%

Other adjustments 17.3 -1.3 -1430.8% 21.7 -0.5 -4440.0%

Cash flows from discontinued operations - - - - 360.2 -100.0%

Net cash flows 13.0 125.7 -89.7% 33.2 161.6 -73.6%

32

Sound FSound FSound FSound Financialinancialinancialinancial PPPPositionositionositionosition

1.6

-0.4

1.0

-1

0

1

2

Q2 2009 Q2 2010 Q2 2011

24.1% 23.2% 23.9%

0%

10%

20%

30%

Q2 2009 Q2 2010 Q2 2011

Net debt / EBITDA* Financial leverage

Net Debt Debt Maturity

050

100150200250300350

2011 2013 2015 2017 2019 2021 2023 2025

m€

Debt maturity EIB loan drawn on 20 July 2011

33

Net debt = borrowings – cash and cash equivalents (incl. deposits with maturities more than 3-months)

* EBITDA for running 12 months Financial leverage = borrowings / (borrowings + equity)

211

-100

225

-150

-50

50

150

250

Q2 2009 Q2 2010 Q2 2011

m€