Earnings call transcript: Tauron Polska Energia reports record EBITDA in Q2 2025

Tauron Polska Energia SA, a leading energy company in Poland, reported its Q2 2025 earnings, highlighting a historical high in EBITDA despite a slight year-over-year revenue drop. According to InvestingPro data, the stock has delivered impressive returns, with a 100.3% gain year-to-date and 123.29% over the past year. Currently trading at $30.21, the company appears slightly undervalued based on InvestingPro’s Fair Value analysis.

Key Takeaways

• Tauron reported a record EBITDA of 4.2 billion PLN.
• Revenue slightly decreased year-over-year to 17.3 billion PLN.
• Net profit exceeded 2 billion PLN, showcasing strong financial health.
• Investment in renewable energy and infrastructure is a key focus.
• Stock price increased by 0.66% post-earnings announcement.

Company Performance

Tauron Polska Energia demonstrated robust performance in Q2 2025, achieving a historical high in EBITDA at 4.2 billion PLN. Despite a slight decline in revenue to 17.3 billion PLN compared to the previous year, the company maintained a strong net profit of over 2 billion PLN. This performance is supported by increased electricity production and strategic investments in renewable energy and infrastructure.

Financial Highlights

• Revenue: 17.3 billion PLN, a slight year-over-year decrease.
• EBITDA: 4.2 billion PLN, a historical high for the company.
• Net profit: Over 2 billion PLN.
• Compensation payments reduced significantly from 2,100 million PLN to 630 million PLN.
• Net debt to EBITDA ratio improved, indicating stronger financial leverage.

Outlook & Guidance

Looking forward, Tauron has laid out an ambitious CAPEX plan ranging from 100 to 130 billion PLN, with a focus on expanding its green electricity portfolio to 20-40%. The company has secured nearly 17 billion PLN in preferential financing to support these initiatives. Tauron expects stable to improved EBITDA in 2025 and is considering dividend payments in 2026. Analysts maintain a bullish outlook with a consensus recommendation of 1.9 (Buy), and investors can track the company’s next earnings release scheduled for November 12, 2025.

For deeper insights into Tauron’s financial health and growth prospects, including exclusive ProTips and comprehensive valuation metrics, check out the detailed Pro Research Report available on InvestingPro.

Executive Commentary

Grzegorz Lot, an executive at Tauron, emphasized the company’s commitment to its strategic goals, stating, "Good financial results mean that such companies are always able to invest." The management team reiterated their determination to implement the company’s strategy, focusing on the generation of electricity that benefits people directly.

Risks and Challenges

• Fluctuating electricity prices on the futures market could impact revenue.
• Potential delays or cost overruns in renewable energy projects.
• Regulatory changes affecting energy production and distribution.
• Competition from other energy providers in the renewable sector.
• Economic conditions affecting domestic electricity consumption.

Q&A

During the earnings call, analysts inquired about Tauron’s capacity market mechanisms post-2028 and the potential for investments in the photovoltaic (PV) market. The company confirmed that there would be no coal unit shutdowns through 2026 and highlighted its focus on in-house renewable project development, reflecting cautious optimism about future investments.

Tauron Polska Energia’s Q2 2025 earnings reflect a strong operational performance and strategic focus on renewable energy, positioning the company well for future growth amidst evolving market dynamics.

Full transcript - Tauron Polska Energia SA (TPE) Q2 2025:

Unnamed Moderator, Conference Host/Moderator, TAURON Polska Energia: Good morning, good afternoon. I’d like to welcome you to the conference call during which we will present the financial results of TAURON Group, the first for this year. I’d like to welcome you present here and those online. The results will be presented today by Mr. Grzegorz Lot, the President of the Management Board of TAURON Polska Energia, Caspar Coppetti, the CFO, Vice President of the Management Board for Finance, Gerald Marolf, Vice President of the Management Board for Trading, Michele Pedemonte, the Vice President of the Management Board for Asset Management and Development, as well as Mrs. Barbara Hantura, Vice President of the Management Board for Financial Affairs of TAURON. To brief you today, my name is Grzegorz Lot. I’m responsible for communications at TAURON Polska Energia. Let’s move on to the presentation of the earnings. Mr. President, please.

Ladies and gentlemen, I’d like to welcome you very warmly here and present here and all our shareholders, customers, and analysts online. We promised a number of things last time. First thing, we’ll make it within an hour. We’ll finish within an hour. We have a very good debt today. Once we get over, expand over time, we have limits. The rushing has not been that much. We’ll leave enough time for questions. Traditionally, and that’s the direction we are aiming for, we also ask to have more time and to present more details regarding distribution. That’s why we invited the President of TAURON Distribution Subsidiary to be with us. Mrs. Baker will have some information for you to present. We are here available also with all the information you need. What is most important about today is the matter of delivering.

The plan is there, but the strategy that we presented to you was, I don’t want to say positively received. I don’t want to say that because what the earnings demonstrate and the value of our choice and the market cap of the company. As we declared a year ago, the question that was asked when we will be checking whether we deliver the strategy out by the end of the quarter, in six months, the most important thing is to deliver what you plan and what you declare, what you promise. Today we’ll be communicating to you what we have succeeded in doing for the first six months of this year. Of course, also the current situation, what we can communicate and what’s guaranteed as a... Ladies and gentlemen, we’ll be speaking about the capacity market. That’s the first question. I’d like to thank you for that.

What was the resolution of the capacity market? What are the implications for our assets? We’ll be talking both about the investment, both in renewables, in distribution, as well as the gas-fired units, our peaking units that we showed in the strategy as an option. We’ll be speaking a lot about the customer. This is our pride and joy. What we do in this perspective about the digitization, about our offerings, for instance, the Cheap Hours tariff, for instance, what its implication, what its impact upon the price of electricity, about the distribution, finances, and the market situation. I’m looking at the timing. Yes, it’s running. The time is running very quickly. With additional stress, it’s good.

Ladies and gentlemen, I want to say that based on the outlook that we presented in the strategy of a heat decarbonization, the growth of distribution, a just transition, the growth, expansion of the sales, supply, and the renewables, under which of these directions we have specific projects and issues underway. At the same time, we are working very hard on the financing. First off, we’ll present to you how we are delivering on the promises regarding the acquisition of funds. We had such conferences, but in detail, we’ll show you how we deliver this topic and what I’m very proud of. I’d like to emphasize that how we are managing to create a team within TAURON, how we are building the team, how we are building the agreement between the management boards and the employees and the workforce.

For instance, at ShareShop Upland yesterday, the person who had the pleasure to take part in that saw what the just strategy is all about. At the time when business combines specific money with respect for the workforce, for the people who are employed at various sites, how the new energy, the new world of energy, as we define it, takes responsibility for the energy, traditional, classical energy that brought us to where we are at now. Under this item, I want to also say that we introduced a lot of changes regarding our organizational structure for some time now. The company is managed by EGM. That’s 15 persons. These are the representatives of the business units, how we set up the organizational system. These are the heads of those business units.

As part of that structure, we take the most important decisions, of course, with all due respect for the code and the governance and so on. I don’t want to repeat it. In addition, key directors are engaged as part of the TPE head office. This is the group that makes decisions about the future of the company, the strategic direction, about the changes, the cultural changes, organizational changes, as well as the business. This is a very interesting thing and gives us a lot of effects. I want to also say that we place a lot of emphasis on the issues regarding the women on the board. Today, we have 34% of women who are holding positions in the supervisory boards and the management boards of TAURON Group. Enormous change. We do believe in the power of women.

We do believe in the value that they’re bringing to the organization. We face it. We see it every day. We do believe strongly in that and we support it very strongly. Of course, with all respect for the power of the men as well. It’s a full emancipation here. The subject matter provided by women is very good. The women are very good regarding the engagement and it’s very good to be in the organization that’s changing in that direction. Okay, that’s it. I report that I delivered the first topic. I made it on time, so I’m handing the floor over to the colleagues. I’m so stressed already now about the timeframes that you gave here. I don’t know if I’m able to say anything.

Ladies and gentlemen, in a very telegraphic pace, I want to cover the generation and supply portfolio assets, asset portfolio of TAURON Group, but to give a certain framework, I’d like to refer to the situation in the national power system. First of all, here on the bottom graph, you can see the pricing. The electricity prices are dropping, are declining, mainly on the futures market, which has an impact upon the spot market afterwards. In a base summary, this is the effect of the hardcore price dropping. The CO2 price is stable and the renewable share in the energy mix in Poland and the energy industry is going up. This is the reason for the situation.

We are happy about that because this gives us the effects that what we anticipated with the entire energy transition aim that the low carbon economy is profitable and it will have an impact upon the prices and the situation of the balancing of the national power systems, mainly European ones, which is what we’re talking about. The national electricity consumption, domestic electricity consumption is slightly lower than last year in the first half of 2024. However, regarding the production, 1.5% higher production output, we are dealing for the first time with a balance exports balance. We exported electricity. This is mainly related to the meteorological situation, weather conditions. The high production output from the renewables, the PVs, along with the gas-fired generation means that the electricity is pushed out mainly towards Czech Republic, out of Poland, and with 1 terawatt hours of exports, that’s the balance we have reported.

Regarding the renewables share in the Polish energy mix, it’s 28%. It’s a kind of constant level, but despite that, we’re talking about electricity. Despite that, we have an increase of installed capacity in renewables, both PVs and wind, at the level of more than 17%. We can see that the capacity balance is not directly translating into the production output. Regarding the negative prices, in the first half of 2025, we observed more than five times a larger number of negative prices at the top, minus 500 PLN versus the same period of last year. This will be going up all the time. It’ll be rising. That also meant a high degree of redispatching of units by the TSO, by the PSE. This is 40% higher than the first half of 2024.

We know that this level is more than 36% higher than the total redispatching level for the entire 2024. This is the situation that we’ll be observing. It’ll be even getting more visible. In our opinion, this is the way the future is going to look. The decline of the demand for coal, 2% in the national power system, also led to the decline of prices of hard coal. Now this price level is about 16 PLN per gigajoule. It became equal to PSM1 with the ARA prices. This means that this possibility of electricity production from less efficient sources is becoming more profitable. Regarding TAURON’s balancing, we increased the production of electricity by 10%. It translates into a 12% increase of the hard coal-fired units production.

We’re happy with that because both in commercial terms, we’re able to contract more electricity, as well as the increase of the demand for our capacity from PSE, from TSO, means that we have more forced generation. We were able to generate electricity from our stable electricity using our sources. That’s what has translated into earnings, and Caspar will speak about that. An increase of the consumption of coal by 10% versus the same period of last year. CO2 regarding emissions, also about 12% versus the same period of last year up. I spoke about the redispatching. We as TAURON introduced already last year such a system that in an almost perfect way, because at least 95%, eliminates the impact of negative prices on our earnings, on our financial results. We’re able to manage those sources. Therefore, our share in the PC dispatching is about 0.5%.

PC, when redispatching the generation sources, as a matter of fact, to a very small degree, in a small percentage of the dispatching, is TAURON’s shares. We do it ourselves, we anticipate the negative prices. Therefore, the impact on the negative prices on our earnings is minimal or almost none at all. Regarding the dispatchability, availability of the units, the availability rate of the units was at a satisfactory level. The main deviations in the availability rate among the conventional units were due to the increased number of planned outages. We had an overhaul of the Wagisha power plant. We had a major overhaul there, which took a long time. This meant that this availability rate is lower than last year. Regarding the renewable units, they are at a very satisfactory availability rate.

We also, of course, are dealing with a situation where our hydro power plants are partly switched off. This is due to the fact that the production of some of those farms is not profitable, so we’re not bringing them back. The biggest units generate 80% of EBITDA of the renewables part and have this availability rate of almost 90%. Ladies and gentlemen, regarding the supply assets, regarding the supply assets portfolio, we’re dealing with a decline of about 9% decline of electricity supplies. The distribution of electricity is stable, practically hasn’t changed. We have 26 terawatt hours of electricity distributed, including 2% of an increase in G. Regarding the similar segment, the corresponding segment of our suppliers, a decline about 99%. About a 1% increase of G tariff, and the difference in the household tariff group is due to the increase of the prosumer production output.

The entire decline, the biggest factor behind it, is the decline in mainly such industries as the steelmaking industry, papermaking industry, the coal industry, and the automotive. Let me be frank that the big part of that declining demand in the supply segment is due to the rest part of the bilateral trading we are hedging, we are securing. I would like to refer to a very important thing. Grzegorz has already mentioned that this is the statistics regarding the pricing situation. The average price for 2025 was about PLN 488. Regarding the spot market, it’s PLN 427.

Now, taking into account this portfolio of products, this range of products I’ll be discussing in a moment, we achieved a phenomenal result, I can say, by observing the behavior of those customers who took the decisions to choose the products that if we change the behavioral patterns when they consume electricity to lead to a lower price, we are dealing with the following thing. In this first half of the year, we got the price 2% lower than the spot price on average from the customers who are now observed as part of a sample of PLN 116 under the dynamic pricing product. However, regarding Q2, second quarter, we got the average price PLN 320, so 13% below the spot average price at that period. If we’re talking about June itself, and in June, we achieved the price, this is a record one, PLN 285.

This population of customers who are taking advantage of or chose this product due to the activity cost, their average price, electricity sales price to be PLN 285. Let me remind you when during that time range were PLN 436. To that price, you have to add all the sales costs. I think that this demonstrates that this activity of our customers in combination with our product offering definitely pays off. We are at least almost twice below the free price. A few words about the range of products. Again, Grzegorz gave me some free time to speak about that. This is important. Here you can see, on four examples, you can see the presentation of the products. I would like to split it into the so-called peace of mind products. There are products chosen by customers who want to have a peace of mind.

They don’t want to look into their electricity bills for a long time. The other range of products of our customers who are very active, who want through their active actions, observing the market and the electricity pricing market and the weather conditions, want to reduce their electricity bills on an ongoing basis. It’s clear that the advantage of each of those products, depending on the situation and the comfort of life, varies. However, those products are chosen by 90% of our customers. 45% of our customers now we are observing are choosing the products, new energy product, Nova Energia. This is electricity at a fixed price for nine years in the household segment, whereas in the SME segment, it’s a five-year fixed price contract. It’s a 45% now regarding the customer selection. We have 260,000 customers using this product.

We already secured more than 7.4 terawatt hours, so more than half of the annual consumption of our customers is hedged long term, in the long term. We have a second range of products. The customers that appreciate the dynamic observation of the market and also we achieve the situation that also exceeds our expectations. We introduced in June at the end of June, a product Cheap Hours, and it’s a hit product. We have now 12,000 customers applying for this product. Let me remind you that it’s a product that for more than 4,000 has a lower price than the freeze price, and the lowest price is 170 PLN in summer per megawatt hour. This product with a small activity enables you to reduce the electricity bill by 20%.

Of course, we have those products, this range of products, so that generate very clear results, implications on average prices, but this requires a lot of activity because we do not deliver. Yes, please, excuse me for extending. This is important. A year ago, we spoke about the fact that at the end of this year, we’ll have an option where the customer can go below 400 PLN. The Cheap Hours dynamic tariff, this is it. The engagement of the customer means that we have specific results, financial results, and what Piotr mentioned, the customers have a price below 400 PLN. Basha, please. Let me please provide some important information regarding the distribution tariff. The regulated revenue in 2025 under the tariff is 13 billion 470 million PLN, and year over year, as you can see, it’s a 6% increase year on year.

If you look at the structure of this regulated revenue, we can see that the biggest item that weighs 39% is the fees paid to the TSO, to the PC. The next item, 32% of our costs of our subsidiary, the cost dependent upon the company, upon the subsidiary, and the return on capital, 19%, and the depreciation, 10%. The key item for us is, of course, the return on capital because it’s the main source of financing our CAPEX. The return on capital is at the level of 2 billion 676 million PLN. You can see year over year, it’s an amount that went up in both most in percentage terms and based on the value itself. It’s a consequence of a large regulatory asset base and a bit higher WACC, weighted average cost of capital, up to a level of 10.635%.

The regulatory asset base in the distribution is PLN 24,618 million. It’s rising versus last year by PLN 2.7 billion. The additional element increasing this value is 35% of the CAPEX of the current year, so the 2025. In addition, if we look at our revenue, in the first half of this year, the tariff-based revenue comparable versus the regulated revenue that we actually performed is PLN 6,717 million. Regarding our infrastructure, in the first half of 2025, we implemented a capital CAPEX of PLN 1,590 million, PLN 190 million more than the first half of last year, almost 14% up versus last year. Our CAPEX, the biggest increase is in the expansion and refurbishment of the distribution grid. The funds that we allocate to CAPEX, of course, we are spending it very efficiently.

In the customer area, we increased our renewables grid connection to micro-institution by 510 megawatts, up to 7.7 GW. We increased the energy storage facilities by almost 59 megawatts as far as the capacity of the grid connections are concerned. In this six-month period, we connect about 23 new customers. Regarding expansion and refurbishment, we built 2,200 kilometers of new power lines. We increased the length of medium voltage cable lines by 300 kilometers. At the end of June, the share of cable lines is a 41.6% share. We built 400 new substations. Regarding the remote readout meters, we installed in the first six months 460,000 new meters. The increase of the scale of our CAPEX is going up as the scale increases and the involvement of our contractors goes up.

At TAURON, we are conducting regular meetings starting from last year in various areas of our company, meetings with the counterparts, with the contractors, where we give detailed information about the planned investment tasks. We are providing information about the changes to the technical specifications, our criteria for selecting the contractors. We’re conducting an open dialogue during which we are identifying along with our contractors, and we are looking for and eliminating barriers that are happening in our corporation. We introduce such procurement strategies that allow us to make the local markets more active. Regarding the customer issues, as TAURON Distribution is an operator, we offer the lowest charge rates for distribution service in Poland. We perform the analysis of the relationship between our rate versus the average rate in Poland. This ratio, this relationship in each target group, is below our average. We are between 86% and 99%.

What was our approach to that? We selected in each group. Sudden death, excuse me, questions at the end. Life is brutal. The final piece of information regarding the customer, but also very briefly because Piotr already mentioned it, please be merciless. The volume delivered 26 terawatt hours, stable. The biggest deviation, non-completed volume was in the high and medium voltage groups, and a 3% increase in the household segments. Let me take over the baton. Regarding the financial results, they were very good in the first six months. The revenue dropped slightly versus last year, but PLN 17.3 billion came in it. However, let us remember that in that revenue, we also had the compensation payments, and the compensation payments year over year dropped substantially from more than PLN 2,100 million to PLN 630 million.

The compensation payments also are declining due to the declining tariff price, but also due to the number of customers subjected to price freezing have been limited. Regarding EBITDA and net profit, we have a historical, we can boast the historical results. EBITDA for the first half of 2025 topped PLN 4.2 billion. Probably some of you can remember that in 2020, we’re talking about such EBITDA for the full year. This EBITDA definitely went up and is moving closer to the promises that we gave in December when presenting strategies regarding the consensus. We topped by more than PLN 100 billion. The consensus is on EBITDA regarding net profit. We’re talking about a profit of more than PLN 2 billion. This net profit in this first half of the year has not been charged with any right, or we didn’t have any impairment charges related to the coal assets.

Let’s remember that last year we had such impairment charges booked. Regarding the CAPEX, I don’t want to discuss it in more detail because I’ll leave it to Michele. However, the CAPEX came in at PLN 2.3 billion. The net debt to EBITDA ratio is a very good stable level. This net debt to EBITDA ratio was mainly brought down, brought lower due to the increasing EBITDA. Regarding EBITDA, comparable EBITDA year over year, here, not too many one-off events happened. This EBITDA, the reported EBITDA versus comparable EBITDA is very close. Last year, we had a single one-off event. This was a positive interpretation regarding VAT tax. It led to an increase of EBITDA by PLN 100 million. This year, the event that we identify as partially one-off is the settlement of the G tariff.

Let’s remember that the G tariff was typically approved for one and a half years. On July 1, 2024, a tariff was introduced for one and a half years. Last year, six months and a full year this year. This has, in fact, meant that we have a non-uniform spread of revenue and cost. The revenue tariff price is uniform over the entire period where the cost of purchasing last year was higher than this year. Here, we identify an additional revenue for this region in the region of about PLN 200 million in the first six months of 2025. Moving on to the next slide. One can say invariably for a long time now, the distribution is our key segment. 60% of EBITDA generated by TAURON Group over the last six months with EBITDA came in at close to PLN 2.5 billion. Regarding the next spots, they change.

It just happened when this half, first half, we have another two subsidiaries that gave more than half a billion EBITDA generated. It was generated by the supply segment and the generation segment. I will elaborate on that later. The renewables was out of the top three this time. Moving on to the next slide. Here in detail, we’d like to show you which segments generated additional EBITDA versus last year, the first half of last year versus this first half of this year. You can see clearly the distribution generation where the two segments that really gave a big boost for our EBITDA were close to zero or slightly negative year over year.

Moving one by one, what factors had led to our higher EBITDA year over year in the distribution are Mrs. Barbara Hantura, President Barbara Hantura, who has already mentioned, the higher regulatory asset base is the main factor in combination with a slightly higher WACC by 4% led to an increase of the margin on the distribution service. The other important factor in the distribution is the regulatory account. Let us remember, the regulatory account was negative last year. This year, the negative regulatory account is positive. What does this mean? Two years ago, the volume actually distributed in real terms, so if it was distributed, was lower than the one approved under the regulatory offices. Next year, the situation will be the reverse. We’ll reverse, but this year, the EBITDA is boosted significantly due to that because almost PLN 180 million in the first six months of this year.

Regarding the renewables, a simple situation, the declines on the market prices led, unfortunately, to a decline of the revenue in this area in this line of business and the drop of EBITDA. Regarding volume, as Piotr mentioned, is a bit lower due to the weather conditions. The winds were weaker, the hydrological conditions were deteriorated, but in the meantime, we commissioned new capacity of the volume slightly higher year over year. Regarding the generation segment, one can say the very big surprise, positive surprise. All factors had a positive impact upon the increase of the margin. The CDS was better, the decline of the coal prices, what Piotr mentioned. The second one is the increase of the volume that was already mentioned as well. The third thing, the increase of revenue from the balancing market.

Let us remember that the balancing market in the new dimension was launched in June last year. These factors had a uniform, roughly the same impact upon EBITDA, positive impact. Additionally, we had a better margin on sales of heat and a positive impact of the compensation from the insurance companies for the damages from previous year, 2022, if I remember correctly. Regarding the next segment, the heat segment, here we were dealing with a better result, mainly due to a better volume. The heating season was colder for the higher volume of sold and distributed heat that boosted the EBITDA in this area, in this segment. When the supply segment volume, as we also mentioned, was lower, we cleaned up the portfolio, better margin in the business segment, both in the large caps and SMEs.

The negative impact is the higher cost of balancing in the G segment, G tariff, and the one-off event that I mentioned year over year, there was no positive improvement. Of course, a positive impact upon the results of last year in this segment. Let’s move on to the next slide, please. The financial debt, as I mentioned, the net debt to EBITDA ratio had declined significantly, mainly due to EBITDA, because we look at the net debt, which we calculate based on the bank definitions, it went up slightly year over year. If we look at the financial debt, this financial debt declined by close to PLN 1.5 billion year over year. What was the main driver? The main driver, as you can see here, was the decline of the debt due to the need to pay for CO2 emission allowances.

This year, in contrary to last year, we purchased a substantial part of the carbon credits at the end of March, beginning of April. I’m talking about the certificates that are due to be redeemed in September of a given year. This led to a more than close to the PLN 1.5 billion shift on this financial debt. Let me draw attention to one new item. It didn’t appear last year, namely the National Recovery Plan. Why I’m drawing attention to that, it’s probably not very significant this year, but definitely significant in the subsequent years. This difference between the nominal debt due to the National Recovery Plan loan and the debt that could be included in the balance.

In the balance, as a matter of fact, we include, we look at the International Financial Reporting Service, IS20, and we see that the major portion of loans under the recovery plan is very much different from the commercial. We discounted the market conditions. We look at the preferential terms and the difference between both is placed in the accruals and prepayments. Only the main portion of the debt, a certain portion of the debt is placed, is listed as the nominal debt. In the financial debt, we offset this difference and we show the entire National Recovery Plan loan under the nominal value. This is the difference there. In the first half of the year, almost PLN 600 million withdrew. In the balance, about PLN 200 million is sitting as debt, whereas the other almost PLN 400 million is listed as an item in the prepayments and accruals.

The difference between the net debt and the nominal debt, according to the bank definitions, based due to National Recovery Plan loans, will be increasing in the subsequent years due to the fact that, as you remember, a higher level of funds acquired. I will elaborate on the next slide. Let’s move on to the next slide. Let me show you now what the President mentioned at the very beginning. We are delivering on our strategy. As we promised in December, generally, where the major portion, a substantial portion of our funds, 20% to 40% or 30%, will be acquired from the preferential sources. We mentioned that our CAPEX plan is PLN 100 billion, PLN 120 to 130 billion, and out of that, between PLN 20 and 30 billion will be acquired from the preferential funds and subsidies. We said that this would be our main area of interest.

Of course, later supplemented with other financing, such as project finance and the traditional financing and in-house funds, of course, owned funds. I want to say that only after a few months since we announced our strategy, we acquired the subsidies and the preferential financing at the region of almost PLN 17 billion. Only a few months have passed, and 70% of almost 20, at least 20, was acquired. First of all, the National Recovery Plan in the distribution, digitization, a number of smaller subsidies also in the distribution, I know better than Zenk, a preferential loan for renewables. That’s the situation as of now, plus the subsidy in quite a new area, namely the construction of the production of hydrogen facility, production facility.

As I said, we deliver on our strategy and we have a right track to deliver it in the financing area and a small, not important fragment. The first historically in the history of TAURON, the project financing, we probably will not only be focusing on the traditional financing, but some of the financing we will acquire under the off-balance sheet formula. Over the last few weeks, we signed the first agreement based on project finance. We took advantage of very beneficial, favorable market conditions, and we signed the financing in the renewables for slightly more than PLN 200 million first finance projects. That’s all from me here. Let me hand over the floor to Michele, who will speak about the CAPEX. Krzysztof delivered 11 minutes on time. Okay, regarding the CAPEX, our investment outlets went up year over year by 23%, up to PLN 2.3 billion.

Our biggest and most important segment from the CAPEX point of view remains to be distribution. I know business, the details of distribution were elaborated upon by Basia, so let me move on to the renewables. Here in the first six months, we invested about PLN 400 million, out of which 60% was allocated to the construction of three of our largest wind farms that I will elaborate on in more detail, and the construction of two PV farms that we spent about 25% of the CAPEX in this line of business. Year over year, also the generation segment’s CAPEX goes up. Here we are dealing with a natural overhaul cycle and the components required for the overhauls of the units. This year we were dealing with an overhaul of Jaworzno, 910 megawatts, and the capital major overhaul for our second largest unit in Łagisza.

It’s a part of a certain cycle. Both this year and next year, this CAPEX will be higher than in the historical years due to the fact that last year we also had a planned major overhaul of the Jaworzno generation unit, which will require higher spending. Regarding the heat segment, here about PLN 50 million CAPEX, mainly the completion of the up to now investment projects, as well as the network-related projects. In the next year, probably this will accelerate, especially with the large, big investment decisions regarding the larger sites we are facing now. We are at the stage of preparing the commission that will be launched next year. The last one, supply and the other segment here in total, PLN 140 million, the biggest portion being the IT and customer service investment and the lighting in the region of PLN 30 million.

Now, regarding our largest investment projects in renewables, line of segment, let’s start with the Nowa Brodnica project. This is about to be completed, this project. The installation of the turbines has been completed. We got the occupancy permit, so we are acquiring the so-called AIOM, so the operator from the temporary operator for the operation of the installation connected to the grid. We assume that the project will be completed in Q4. Here we are at the final stage. Sieradz wind farm, a similar completion date, Q4, but closer to the end of the year. Here we have six out of eight turbines already mounted. The other two are being mounted now. Move on to the technical acceptances, the occupancy permit. Here we are planning to complete this process this year. The Mińska Górka wind farm, this is our largest project launched last year.

Now we are at the stage of having completed the full foundations. We are about to mount the turbines. We assume that mid-October this process will commence, and the completion date is scheduled mid-year 2027. Regarding the PV farms, the bulk of PV farms, we are at the stage of final finishing works regarding the access roads and the site. We are acquiring the final permits soon. The Postomino PV farm also, we have the occupancy permit from the construction side. The final permits and the project will also be completed at the end of this year. However, what’s important, we launched two four battery energy storage facilities. Probably those facilities are not very impressive, but rather very important. First of all, due to the testing of certain contractual solutions, we managed to contract those projects at a competitive price.

These were projects that could be quickly connected to the grid below the procurement law threshold level. From a professional point of view, we’ll be able to test the management and the maximizing of operating margin on such investment products. We’ll have more and more of those investments as time goes by. We started, wanted to do this proof of concept early and to test the commercial operation management of the battery energy storage facilities. We launched several projects that will be commissioned Q1 next year. Regarding the strategic options, you can’t see everything in CAPEX right away. A lot of things are happening ahead of time. We want to show you the outlook for the implementation of the options that we outlined in the strategy.

I already spoke about the renewables products in the previous slide, but in the strategy, we also indicated a very big option regarding the energy storage facilities, the peaking and backup generation units, Rożnów 2. We have completed a basic engineering design. We have a general design. We have a better estimate of the CAPEX for this project that could come in at more than PLN 6 billion for this project. Hopefully soon, we’ll get the grid conditions and grid connection conditions, and we’ll be moving on with the next steps of this investment project. We also have secured all of the land for the main installation.

We do assume that this installation could get the investment addition in 2027 on the condition that the support mechanism that will be in place will be sufficient for this project to make it sufficiently attractive from its profitability because the level of CAPEX is very high. What’s very important regarding the heat segment, we filed a request for 187 megawatts grid connection in the power-to-heat technology. In our case, these are electrode boilers. The logic is we want to have warm water, hot water based on the electrode base. We use the cheap power from the PV stabilizing system, fill up the energy storage, and then use the hot water to be final users during the summer season, taking advantage of the low electricity prices.

The majority of the investment decisions in this segment that we mentioned in the strategy will be made in 2026, especially the biggest units: Katowice, Wagisza, Tychy, visa business position next year. Regarding the generation segment, here we indicated that we’ll prepare the option of transition for this segment. The biggest option from our point of view is maybe the construction of the peaking units. In our case, we chose the OCGT, open cycle gas turbines. We had the grid connection conditions for the units, 1,400 megawatts: the 600 megawatt unit in Jaworzno, the 400 megawatt unit in Wagiska, the 400 megawatt unit in Wagisza. The launching of this project will be dependent upon the acquiring of a sufficient revenue from the capacity market to make sure that they are economically profitable. Whether it happens depends upon the final decisions and the final parameters of the capacity market auction.

However, this auction is ready from the point of view of the grid connection conditions. We also acquired at the generation source siting the grid connection conditions for the facility, energy storage facilities. We are also talking about the SMRs. We are talking about considering eight sites for this location, but we assume it’s going to be one or two SMR projects. Also, we’ll try the project for Jaworzno. We are preparing that we got the $240 million in subsidies. In our strategy, we indicated one of the important elements for the renewables to assist the acceleration of in-house development projects, looking at the implementation of strategic objectives. Now we have a gap in all technologies. The first time we are showing also our pipeline of projects under preparation using our in-house resources. We can see that this gap does exist in all segments.

The projects, especially regarding the wind project, whereas PV projects and the energy storage facility projects, we have a big in-house portfolio that can implement a large portion of our strategy. Moving on to the details of our pipeline of projects under development, we have 3.6 GW of projects that are currently in our preparation portfolio. The majority of these are the energy storage facilities. We also have about 400 MW in wind projects and more in the PV projects. What we did recently is increase the capacity of our team preparations, procedures, checklists, regarding solutions, system solutions that can enable us to scale our own development. We can see in-house development. We see some effects already, but the key is to increase the number of wind projects in our pipeline to meet our strategic obligations, commitments. I promised to return for one slide, the outlook slide.

So far, we have showed to you the outlook only once a year during the full year earnings conference. This year, we decided to change the up-to-now practice, and we decided to show what’s the view of the outlook of our group, the bid outlook, and the ratios after the first six months. Here, let me note, let me draw attention to what has changed versus the previous outlook. Now, taking into account the earnings in the generation heat lines of business, we changed the direction of those arrows, especially in the generation. We do believe that the EBITDA year over year will be better. Here, all the factors that I mentioned before will be the same for the full year.

The CDS issue due to the decline of the fuel prices and the issue of revenue generated from the balancing market in combination with a better volume, in our opinion, will allow us to achieve better EBITDA year over year. The second issue is the heat segment. Here also, we are improving, maybe not going straight up in this area, but from the expectation of a decline in this segment, we expect EBITDA to be stable, to be flat year over year, especially due to the volume that I mentioned, the lower outdoor temperatures in the heating season, and thus the better results in this segment. Effectively, EBITDA overall for the group should be better and thus the net debt to EBITDA. We do believe that it’s going to be close to being flat year over year. That is the updated outlook. The other things practically haven’t changed.

The only thing that we have changed is the expectation regarding the supply volume. It’s lower, as Piotr mentioned, but it doesn’t have an impact upon the deterioration of the segment itself. It had an impact, the balancing issue of balancing in the G segment had an impact upon the earnings. That’s all regarding the presentation. It seems like we made it within the promised hour. Yes, delivered. So 51 minutes. I do hope that the shareholders, investors will appreciate that. Yeah, it was ideal. One more thing that is highly important is regarding the issue that Michal mentioned regarding CAPEX projects. Very courageously, and we seriously treat the local impact issue. We are looking at the projects that we do. We try to do around our core, being the distribution grid and the places where our conventional energy is implemented.

For each site of our conventional energy projects, we have prepared it and it’s working, the development project for the new energy world. So Łagisza, Jaworzno, Łagisza, Siersza. In each of those sites, we are working today in order to be able to take part in the 2027-2028 capacity market auction. This is competition to win it. Irrespective of that, we know that past beyond 2028 is going to get more and more difficult. Therefore, my colleagues mentioned already this year, very specific works are being carried out to build new life there so that the new world could replace what’s there today, so that the local community could have a job, so that people could work. On the other hand, to develop business there. This for us is natural.

This is applicable to Upper Silesia, Małopolska, Lower Silesia, where we are implementing an enormous project of an upgrade of the Piechowice dam that combines safety with the business being the production of electricity from renewables, hydro in this case. Let me put it this way. We are showing the economic result, the financial results of the group. We are very good. Sometimes the questions are why these results are so good. Very good earnings mean that such companies are always able to invest. That’s a natural thing. If there are no good financial results, automatically it has an impact upon the investment capabilities. The fact that we have good financial results and we are stable gives us a chance that we can build economy, not only in Poland, first of all, in the areas that we operate in.

This is an enormous impact, but any money that we spend on the distribution grid, 99% goes to the local businesses. All the subsidies by the distribution grid in the heat or generation, this is a supply chain of local businesses, and this is very important. If you look at the financial results that we are showing, the numbers, EBIT, profit, this is very interesting, but please take note of the fact that during that time, the actions related to the customers are performed. Very interesting questions when Piotr will have a very nice challenge, but this is a matter of improving the customer service, the investments in customer service, enormous systems, new rates that are much lower than what was offered before. This is an enormous investment in the distribution line of business. This is the work related to the flood safety solutions in Lower Silesia.

These are the programs that we are launching for the human resources development, our workforce development. Today, that’s one of the most important projects that I have on my shoulders, the workforce development, so that this company could operate not only in the subsequent years, but also over the next decades because of the best investment that we can make in their competence and the engagement and their developing corporate culture that will be long-lasting for years. This is a matter of people, human resources, and also this just transition. As you look at that, if we took part in the capacity market auctions, we’re taking into account issues not only related to money, of course, that has to be in place always, but also issues related to Poland’s energy security.

We’re also taking this into account and the issues related to the fact that the transition that we are implementing could find social approval. This is quite simple and clear, but electricity generated by people, for people. Without the social acceptance, society’s acceptance, we cannot implement the transition. The social transition requires the social acceptance. People will follow us if they see that we deliver on our promises and we convince them. The examples of our meetings with our workforce on the hydropower dams on Wagisza and Sierrza mean that those people, when they see the plans, they understand those plans and they can see that we deliver on our commitments and then follow us and help us. This is a very highly inspirational thing, a new experience that we also gained over the last year, and that’s what I’d like to leave you with. Thank you very much.

Thank you very much for the presentation. Now, the time for questions. First of all, I’d like to ask the questions from the persons present in this room and those who are online. Please send your questions via the form available on the websites. Probably some have already been sent. Bartomiszewiczki from the Response Point, I have several questions. In the management board report for the first half of this year, we can read, although later it turned out what I missed in the report for the full year last year, that out of impairment tests over generation units, we are planning that the Jaworzno power plant will be operational until 2040. Let me remind you that the capacity market is valid until 2035. Wągizsa until 2030. As I can remember, the capacity market doesn’t include 2030 regarding this power plant.

I want to ask, where is your optimism coming from in your saying that these power plants will be operated for so long? Regarding the capacity market, you have managed to contract everything that you submitted, but did you submit everything that works until the end of this year? Which units out of the four sites will be shut down by the end of this year because you simply didn’t report them, submit them for the capacity market auctions? I would also like to ask about the issue related to the cost of balancing the renewables. I’m talking about here the cost of the production profile and the system cost. Your market competitors are estimating this currently at the level of PLN 100, PLN 120 per megawatt hour regarding the renewables. I wanted to ask, what is your situation, your point of view on that? Thank you. Let me start.

I’m going to hand over the floor to Piotr. I’m going to assume to start. Three questions. The topic regarding the optimism regarding Wągizsa and Nowa Jaworzno, you were right noting that the capacity market we have is shorter than the period of operation that we assumed. These are, let me remind you, high-efficiency units, and taking into account our analysis, we think that they can economically generate electricity as they do now. The support from the capacity market is not necessary here for such a unit to make money and to cover its costs. That’s the answer to the first question regarding the capacity market. Here both the questions that we can see on our screens and yours are interrelated. We submitted 10 units to the supplementary auctions, and within our strategy of using those units, here I take into account our backup units.

None of the units that have not been submitted to the auction will be liquidated. That’s the answer. To add, to be in front of our eyes, a slide regarding the revenue contracted under the capacity market. We contracted 3% more revenue for 2026 than in the year 2025. We have five auctions, a lot of auctions, so we have additional supplementary catch-up auctions, second help supplementary, and the main auction for 2030. The activity is very high in this area. Unless we have a handful to complete these tasks, so far we’ve been successful. Let me just add, there was a question about Wagisza. As we’re recalling, Wagisza is a lot farther than 60 megawatts of installed capacity, so the effects for spare units are much lower.

First of all, it’s a unit that also has an added heating component that, in fact, is a combined heat and power plant and feeds the entire system between Margonica, Będzin, Sosnowiec, Katowice, and Chorzów. It works on a large heating distribution system that has a large load, and therefore it operates in the cogeneration mode for the majority part of it. The economics of that is closer to the combined heat and power plant than the strictly system power plant. For the needs of the heat generation, it will be operational until 2030, and subsequently it will be replaced with a cogeneration gas-fired unit. That’s our investment plan. That’s why the economics is different than for a classic traditional system of 200 megawatt units. With 110 megawatt units, we’re mentioning that we do not assume that the power plant will generate a major value between 2035 and 2040.

We had a lot of discussions in that regard. Technically, this unit can be operational much longer until 2060. We have KPK where a certain portion of generation from coal will be convenient with the highest efficiency rate in Poland at the gas level. From this point of view, it could be the last coal-fired unit shut down in Poland. 2060, technically, it doesn’t mean that it’s going to be operated. If the conditions permit, it could work longer. From the current point of view, we’re limited to 2040 as of today. If it was to be shorter until 2035, it will not have a major impact upon its value because you assume that this power plant will be generating major additional inflows in this area. What Michal mentioned, let me just confirm. If we looked historically at the impairment test, historically, we were supposed to operate until 2060.

Then in early 2024, we limited the durability of the economic lifecycle of this power plant until 2030. If we discounted the revenue until 2040 and 2035, it would be very similar. Irrespective of which year we picked, the results in the impairment tests will be very similar. The difference will be very small. That’s the answer. We assume that those most, the highest efficiency rate units will be operated in Poland until 2040. That’s our assumption. Cost of balancing for PV farm is PLN 50 per megawatt hour, and for wind, it’s about PLN 15 per megawatt hour. If you were kind enough to give more details, I’m not sure if I understood correctly the perimeter dimension. I mean here the cost of balancing the production profile and the cost for the system. Let me put it this way.

Regarding the cost of the profile of the farm as one perimeter, and for the system, it seems that it’s in the region of PLN 50 up to PLN 100 per megawatt hour. I don’t have detailed information about what’s the number for our fleet in this regard. Thank you very much. Next question, please, from the audience.

Let me start with the question to the CEO. 60 billion by 2045 or 2040... I misspoke. I confirm what the strategy said. Once we know it, one must notice that up to now the CAPEX spending is not overwhelming, not dazzling. Question to Mr. President. What increase in regulatory asset base and what rate of capital do you expect for next year? I assume this year you took into account 1 billion, which is 35% of next year’s spending, which would suggest that next year’s spending is 2.8 billion. That’s what the estimate says and your slides. We are getting lost here, please ask next year’s regulatory asset base and next year’s WACC, some early estimates.

WACC, we have guaranteed to start with, we have guaranteed the minimum level is 8.5%, the base is 7.5%, plus a 1% premium for reinvestments, and the level of this WACC is dependent, of course, upon the CAPEX agreed upon with the President of the Energy Regulatory Office. We are in the process of agreeing upon the expansion plan, development plan, and I think this level will be known once we approve the tariff for next year. Regarding this CAPEX, 35% of CAPEX, this was the value of 35%. This is the CAPEX that we have in our expansion plan, but in the 2023-2028 Plan, these are the amounts updated. At least we applied for such updates in the new plan. To further question and how difficult it is, the position of the company is in this situation. I will not be pressing on with this topic.

I understand that 1.4 GW of CGT will take part with that. It’s submitted in the December auction. The second question, whether development, because you’re showing the percentage of the expansion of your renewables capacity, is it equivalent to the CAPEX spend? CAPEX spending, or do you have divergent ways? You account differently for how... 33%. That means that one third of the CAPEX was spent or you calculated differently somehow. Regarding the gas peaking units, gas fires, from the permitting point of view, we are ready for certification. We can take part in the December auction. The final gateway is the payment and the auction deposit payment, which takes place in November. By the time you need to make a decision, the project is ready to take part in the auction if the expected conditions are for us sufficiently attractive and we have such option.

We are ready to take part in the auction. Regarding the progress, work progress, I would have to confirm. Basically, it’s based on the outlays. That’s what you pay also is the spending reporting. Some advanced payments are also included in those projects. In fact, from the spending point of view, this progress is higher for the renewable energy projects. From the outlays point of view, it reflects the elements that are already assets. Let me confirm that in the renewable energy segment, the fact that you have to order ahead of time the turbines is advanced payment. Generally speaking, the spending is not equal to the outlays. In the distribution, it is a very similar level, up to PLN 100 million for the distribution CAPEX. However, in the renewable energy segment, the difference is several hundred million PLN, PLN 300 million, PLN 400 million.

The product progress could be in place cash versus outlays. Now we have PLN 400 million difference of the first six months. We have more spending than outlays. The final question from me to Mr. President, because after Q1 there was a statement made if the subsequent quarters are solid, then we’ll consider accelerating the payout of the dividend. We can see how you’re boasting, how good results you have. I do not expect anything bad in the subsequent two quarters. I understand that dividend in 2026, we can already discount it. Put it this way, at that time I said that we’ll be considering, and I promise we will be considering very seriously. We spoke before about the fact that the ambition of every manager that runs such a business as ours is the ability to persistently pay out dividend.

This is the best encouragement, best incentive for shareholders and customers to invest and link with this company. I uphold our will and dreams, but I cannot give you such a direct question. I give you a straight answer, but we are considering very strongly and this is definitely our ambition, manager’s ambition. Thank you. Good afternoon, Curt Juskiewicz from Citibank. I have several questions. The first question regarding the accounting treatment of the National Recovery Plan loan. It’s a very interesting debt. Once you spend it, can I assume that you’ll have PLN 5 billion coming into net debt and PLN 10 billion will be somewhere in the prepayments and accruals? Next to that, PLN 10 billion net, in fact, will not have an impact, will be shown in the net debt to EBITDA ratio. My question related to that, in your strategy, you showed three times the ratio.

At that time, you had in your backup handed those PLN 10 billion. All of a sudden, you found this PLN 10 billion space that you can allocate to something else. Not to link it with the question that was posed by Pablo. Do you have all of a sudden PLN 10 billion in your balance to be spent or not? Let me answer the first question. Theoretically, it may happen so, but it’s not obvious because, as I said, we are looking at the current interest rates difference. If interest rates are declining, then the difference, of course, will be declining. We cannot ahead of time assume it’s going to be the same ratio, but the method will be the same. Generally speaking, a major portion of it will be an item under prepayments and accruals. I confirm, but in numbers, there could be a difference.

Regarding the less than three times, if you said three times, you had this PLN 10 billion, you’re realistically thinking about the addition of 3.5 or now you’ll land on 2.5? We have room for on the balance. Generally speaking, of course, in the strategy, we’re thinking more about, in this case, about the financial debt, not the entire economic debt that we present against, including the CO2. However, more we’re thinking about including the nominal amount of the National Recovery Plan debt. I have a completely different question about this peaking and pump storage facility. How big will be the capacity of that pump storage project to make it profitable to spend the PLN 6 billion? How many times you have to turn it over? What spread you need to generate so that you make a commitment to spend PLN 6 billion on this pump storage project?

Regarding the capacity, we are at the stage for which we have a minimum and maximum capacity of a tank of a reservoir, but we have ahead of us the geological test. It’s mainly the moving of land masses and that’s the project. Depending upon the rock structure underneath, then we’ll adjust the size, but the order of magnitude is more than 3 gigawatt hours, between 3 and 3.5. That’s the range that we can speak of realistically in the most probable variance, but our final knowledge will be there once the geological tests are finished. We’re looking from two sides, economics of the product itself, but also looking at the relative economics of the size of the lithium-ion batteries. Here, the batteries are sufficiently cheaper technology.

The pump storage pipeline is how it has been in the phase, but what would make this investment decision easier would be to close this gap. We can see in the Western Europe discussions in place and the long-duration energy storage support schemes moving beyond the battery’s horizon can be heard and discussion about the support mechanisms and the solutions that we present in the new capital markets. In the past 2020-2030 timeframe, it’s of key importance for this next project to be doable. We have a financial, we have quite a lot of strong interest from foreign investors. It’s a large investment project, so relatively bigger, and it did not want to do a single wind farm, so onshore wind farms in Poland. I also wanted to solve a support system, the financial solution, and the support mechanisms past 2030.

We’re talking about a longer construction process and commissioning roughly around 2033. Before the investment decision, we’ll have a little question mark resolved. Final question to give more time for my colleague to ask about your opinion of the PV market. You can see that something broke on this market and various developers are much more cautious than they were two or three years back. In your presentation, you are showing that you want to build the capacity, developers’ capacity. Is it possible within the structure of a state treasury company to compete against the fast-running independent developers? How do you see with a share, with a share of a state treasury? Cost of generation, the market. That’s my first question. The second one, whether you have second thoughts whether to develop this pipeline and to invest in the PV business.

Let me start and you will comment as well afterwards. First of all, regarding PV from the investment point of view, that’s true. We can confirm there’s an oversupply of projects. Few people are buying PV projects. The prices for the paperwork dropped three or four times versus what we observed two or three years ago. That’s true. There’s an oversupply. We can see that as well. Definitely we’ll be cautious here. Now we are trying for our PV business, first of all, to take advantage of the in-house development with some synergies, look for preferential solutions from the financing point of view. With our PV project that will be developed, even with the price trajectory paths that assume further deviation of the profit, it could remain competitive. What we can see in parallel is a small load from the procurement for the sector.

CAPEX is declining once the lithium and iron batteries come in. They can ensure a certain stability of the spreads in the system. We are not big enthusiasts of PV, but the projects that we have ready from our in-house development with the use of the preferential financing, we can see that they could make sense. Regarding in-house development, I think are we able to be flexible enough? I think the market regarding the in-house development is changing. Namely, the project that will have the grid connection conditions already issued, 70 GW energy storage facility, about 50 GW. It stops being a rare resource. In the short time, we demonstrated that we can deliver in-house development projects to be ready to build more on a larger scale to the Mediterranean sources with 170 MW. That’s the one the capacity auctions came from in-house development.

Further 500 MW we obtained on the generation site. We are able to develop those projects, but we can see that more and more important, for the person that leads the land and developer is a matter of social dialogue and the probability of completion of investment from a technical point of view. When you start the development of a wind project, we are paying a small upfront fee or we pay nothing and we are promising the person that is leasing land to us that we will pay them a lot of money once we physically start the construction and once then the farm is operational. From the point of view of such a person, of key importance is the fact that we have an entity that’s on the other side. It makes it probable that we’ll reach a certain point which will ensure further cash flow for this.

In this respect, I think we are an entity that could be much more stable. Much higher probability we guarantee. The second thing is the social protest. That’s in the case of wind farms are becoming a more and more bigger problem. It’s a matter of convincing the local authorities. Also, protests regarding PV cells have started to appear that two or three years ago didn’t exist at all. We can see that we believe that we are able to be an entity that is able to, in a better way, convince the local community to demonstrate that we are able to carry out sustainable projects and to be an active party side in the social network.

We have these competitive advantages here, but from a regulatory point of view, we try to ensure sufficient scalability, flexibility of the solutions, and the condition that will not be far from different from the market reasons. Probably will not be that aggressive in bidding for plots, but that’s not the point. At the end of the day, our development is to make sure that a larger portion of the value creation for the entire renewables project will come to us and we try to do that. We have to make sure that we choose projects that enable the optimum mix and are based on our competitive advantage. Let me frame here that we’ll be looking for partners here. Let me invite you on the 23rd of September.

We are signing the letter of intent with COVRA regarding the cooperation regarding the land that KOWR has regarding the development of wind farms. We can see certain competitive advantages that we want to base our operations on and we believe we can win in this segment. Let me just add to what we have mentioned is worth emphasizing how the CAPEX dropped off for those projects. I think within two or three years, the CAPEX went down by half on the PV projects. It’s a big change on the market. The second thing is the fact that COVRA has a couple of competitions opened under the National Recovery Plan where it was possible to submit petitions for financing for the renewables projects, of course, PV and possibly wind projects. Let me just say that TAURON has actively submitted as many petitions as we could.

What will be the final outcome, we don’t know, but it will definitely help the economics of finance of those projects. That’s the new industry question to two questions. The President Gołębiewski regarding, if I understand correctly, due to the results of a supplementary auction, TAURON by the end of 2026 at least will not shut down any coal-fired units. Let me ask, how many coal-fired units you had? What capacity that could have lost the capacity market as of the end of 2025? How much of that has been submitted to the supplementary auction and won? As a consequence, how many are still left of those coal-fired units outside of the capacity market that will stay out as of the beginning of 2026? To Mr. President Hanczarek, question regarding what roughly speaking is happening in the grid, in your grid regarding the renewables grid connections.

What was the level of connected capacity as of the end of June? If you remember, if you have said data, what may happen there further on? How many active connection agreements were signed but not implemented? What capacity and the grid connection conditions? What was the capacity under those conditions? Already issued. We submitted 10 installations. Referring to the level of profitability topic that is a precondition for further operation of a unit. As you know, all of the units under this auction, except for the DSR units with the price taker status, none of those units could not leave the auction before the price takers. That was PLN 307. That was the level of the auction priced PLN 346. Therefore, fourth round, supposedly some units, DSR units left, which enabled closing of auction.

From my point of view, everything that we submitted, one will have a capacity contract, both our units as well as the other units. Our unit is 1567 and four units are left, but we’ll be providing backup. Let me remind you of the four units that are there in place. It’s depending upon the strategy of dispatching the units. Let me remind you of over 2026 auction capacity. We have other units. We have a lot of them, but I mean here the ones that they lost, they didn’t win. Four are left without the capacity market, correct? The total capacity is, I think, I think one important thing. By definition, we do not submit all of the units for capacity market without to be left because there is some backup, some reserve. About 2 GW was submitted.

Four 200 MW units, not full because without capacity market, but it is planned. It’s going to be repeated sequentially for 2027, 2028. If nothing changes in our analysis, those four units we foresee will be backing up the units that are under the capacity market. We’ll be able, the shifting of the obligation will be able to use them. 910 units as well, and we have four units that by 2028 already have capacity markets. These are the upgraded, refurbished units that have a five-year capacity market since 2024. Regarding the end of June, microinstallations, we 467,000 microinstallations, total capacity is 4.2 GW. The total entire renewables, including I’ll already provide it. Let give me a moment on the slide. We gave this information 510 entire renewables in the first half up to reach 7.7 GW at the end of.

I don’t have information about the grid connection conditions, exact date. Thank you. I’ll talk about the write-offs on coal. We didn’t have them as of the first for the first six months, and the current conditions do not change 100 GW. I can assume that at the end of the year, there will be no employment charges that make things more probable. There will be no reason not to pay out the dividend because there will be a net loss for the entire year. That’s one question. Second question, what’s your understanding? What will be the change of the capital market beyond 2028? We are talking about the substitute mechanism, or do you have any opinion on that? What may be introduced and how it will change? What will be its impact upon your cash flow versus current years and beyond 2028? Thank you.

Regarding the employment charges, as we said, the major employment charges were booked in previous years. The main balance value is the new year for us. Now we are not talking about any change because the capacity market has changed. It will not change until 2035. Of course, changed based on inflation. However, the other coal units, the 910 MW units, we also measure the market component. A lot depends upon the visit price trajectory paths in the subsequent years. If the capital market doesn’t change, nothing will change regarding the employment charges, but the market is relatively stable. I don’t want to determine the decision makers as of the end of the year will be employment charges or not. Definitely, the employment test will be conducted. However, the major portion of those assets have already been written down.

As you said, if you look at the balance, standalone TAURON, yeah, yeah, balance, the share of those subsidiaries have been written down to zero. There’s only the loan value, but for the assets, we’re looking at the consultant statements. It’s PLN 2.8 billion and the gross amount of that is a gross portion of that is fair. Now we are boasting. We would like to know what’s going to be like. A lot has been talked about the substitution. For us, in the strategy, we’ll align with what is going to happen. On one hand, what we are discussing now and thinking about now, and it’s nationwide, as a matter of fact, the next three years that you already have established, the capital market is clearly laid out until the end of 2028. Subsequently, there will be a capacity gap there.

Depending upon what will happen on the supply side in the near future, I think the discussion will be conducted about the 2029, 2030. We looked at our assets. We are able commercially, of course, to provide such service. Not defining our strategy, but we are looking at the first supplier. You can always try to trade if it’s okay. That’s the first, that’s one view, one point. However, we are counting on it, and from our point of view, it’ll be an interesting solution. If there’s a demand for the service of such units as our 200 megawatt units, then as you have this substitution system, market, substitution market, there’s going to be a market or a different scheme, but we’ll take into account the geopod fluctuation security. A lot of things are happening now.

I know what’s going to happen in the month or two, three, where there’s a demand on the capacity side or other prospects that may turn up. It seems to me that the development of such a model and maintaining commercially such units in exchange for declared specific plans regarding the construction of those gas-fired units we’re talking about, that will be a very interesting solution for us because we have this continuity of operations. On one hand, we are building assets in the form of gas-fired units and then the storage facilities. Building this as an entire system, and in the meantime, we have still operation or functioning on an ongoing basis in another technical, different technical way, guaranteeing the ability to take advantage of those units. Talking about this spinning reserve or some kind of reserve, different names could be used depending upon the technology and the needs.

That would give us a chance to build, maintain security on the other hand, also transition the entire part related to the human resources because there’s an opportunity to take advantage, to use the human resources to take part in the construction, shutting down. It’s an interesting project, but thanks to that could be put in place. If I were to make a choice, I would choose something like that. To building in the future, maintaining the security here now, from my point of view, would be an ideal solution. What will happen, we’ll see. For us, this capital market mechanism is of critical importance. We are beginning to work on that because for two or three weeks, we are working on 2027 because of the capacity auction, whether it comes in June or September. The first thing is we have to prepare the take part or not take part.

We have to have economic justification to take part and submit the bid. I assume it’s going to be a price taker market. That’s one element. Second thing, if we take a decision that we take part in the capacity market, then we have to do the optimization efforts to increase the probability of winning the capacity market auction. It’s a big challenge that we have in front of us. Let me just tell you that we’ve been doing it for several weeks now. Let me just add regarding the substitution, the substitution we took part in, the process carried out by the Minister of Energy in developing certain assumptions for the system, so that you could confront it with the European Commission. We are saying that we started, we meet those criteria based on what we know.

Speaking directly, we want to build instead of liquidated conventional units, gas-fired units, and the substitution mechanism makes sure that this event can happen. It’s feasible until the time the gas-fired unit is built. The conventional unit has the financing for a certain part of its cost, and they’re going to make a decision on which part it is. That is the mechanism. Our intention is to get the legislature regarding this area comes up before the second edition of the capacity market. If we assume the national continuity that next year in September there will be a certification for the 2030 auction under a new mechanism, those mechanisms are a bit separate.

One can imagine that the, or in our gas-fired unit that we want to build in 2035 is taking part in this auction, but also we can imagine that gas-fired units taking part in this auction built in place of a liquidated or a shutdown unit will give us an opportunity. The substitution mechanism is already implemented in place. It would enable maintaining in the capacity deficit 2029-2030 timeframe. It will enable maintaining a unit that could provide support for the energy security in this location, this hub. Excuse me for explaining this in a complex way, but a very important mechanism, what you said, for us and for the power sector in general, I think. Thank you very much. Any other questions from the audience? Let’s move on to the questions asked online. Some of those questions are repeated. Let me read the ones that are new ones.

The first question, what is the criterion for maximizing the expansion investment project in the distribution segment? In case of a 5-6% cost of capital, the decline of WACC, the premium for investment up to 8%, still justified in maximizing of investment efforts in this area. Ladies and gentlemen, I think that it’s worth remembering one thing. Those investment projects in the distribution line of business, these are not on paper. We are not building any empty buildings or anything like that. The process goes like this, we talk to the regulator, the effective efficient transition of the grid card towards a product that indicated certain investment needs and the mechanism of compensation for those CAPEX. We can see that from a statistical point of view, there are needs for investments, both strengthening the grid to make it more flexible. There is more variability with renewables production.

This grid requires investment. It is growing in age, and from the upgrade refurbishment point of view, there are certain needs due to certain historical legacies. It’s needed, required from the scope of the regulatory side as well. Propose a certain compensation or premium for investment. We are functioning with this mechanism in place. The grid requires investment, and for that investment to take place, the compensation must be sufficiently attractive. This mechanism is aimed at reducing all those historical legacy difficulties. From the security point of view, the grid is of key importance regarding the security of the operation of the power system, both at the physical level as well as to a large degree the military level. We can see that we are a flexible grid that is robust, resilient.

It’s of key importance for the system to expand for the transition of the energy sector to take place. If as of today, the main board were to update the strategic objectives, what would happen versus the time of publication of December last year? Nothing. Full determination as we deliver the strategy that we presented. We are fully determined to implement it. We can discuss whether to go more to the left or more to the right, but the strategy doesn’t define, it’s not an Excel. It’s a certain assumption, faith in certain changes, certain actions. As we are showing every quarter and as every day with our own work, we believe in what we have written and we are fully determined to carry it out. We are more determined and we’re trying the strategy. Just like a strategic option is we’re talking about the picking units.

At that time, we already anticipated that it was going to be an interesting thing, interesting business. We can see that we’re at that stage where we believe more and more and we want to implement it. As you mentioned, in this November, decisions will be made whether to take part in the capacity market, but in a moment, it’s going to be specific money behind it. I think that we need to invest strategy. We spoke about something like that, that there are similar strategic options. We are already taking part in the technological dialogue. We’re discussing various solutions. We do believe in this technology. We are waiting when we can go to the store and go ask for two SMRs, good morning, or do a tender for, yes, for an SMR. Waiting for the time when we can trade, not just discuss. Thank you.

Our talks conducted with the manager of the office regarding including the component of the National Recovery Plan in the WACC methodology for the distribution line of energy. We expect WACC to be lower next year. We handle this unbundling. We didn’t know nothing of that. We’re not conducting to an energy regulatory office in this topic regarding the second part of the question. We expect such a WACC that will enable us to implement our CAPEX projects. Another question, who are you buying from the remote readout meters? Let me start by saying that all contracts active as of the end of June, purchase procurement contracts, 99.7% contracts with the contracts. First of all, from Poland, only a few from the European Union, and 0.3% of our contracts are from outside the European Union. They are related to the meters. Meters are selected by way of specific tenders.

Regarding dynamic tariff, do we have a lower profitability in the trading segment than from the entire tariff price? What implications we may expect regarding the profitability of the trading segment as the share of dynamic tariffs are growing? The margin is neutral, so the price in the dynamic tariff thing is following the day ahead market price. If the margin is linear, is added to each megawatt hour, so the number of megawatt hours taken advantage as a part of the dynamic tariffs does not, will not reduce that margin or will not increase that margin either. It’s neutral. We do expect that the number of customers will be rising and we are, I think it’s an opportunity both for us and for the customers.

It’s an important thing that Scott mentioned that if we get engaged, if the society gets engaged, the customer on the other hand, there will be supply on our side. It must be followed by technology. That’s why the AMI meters that were strong investments of distribution, information on the consumption of electricity, those are big operations that we provide to the customers. Systematic education means that practically today, any household today, any company, systematically, and because as of the end of the year, 50% of customers will have AMI meters. They know exactly how much electricity they consume. If you link it with the price of electricity at a given hour, we have everything at our fingertips. We expect the new customer, new technologies will come, but the so-called smart home has already been implemented. Regarding the way it works, still a lot ahead of us.

One says that the biggest difference between the hours and the exact information about the consumption of electricity, new tools will come to being that will control the devices instead of us. For us, we do it ourselves, but any change requires some change, some time. If I’m inspected D-Day, everything will happen in a single day. Our involvement will not happen for us. For now, it requires our own behavior, our own involvement, engagement, but in some time, technology will provide support. Competition is the best solution. It’ll all happen quickly. Thank you. Coal assets are written down to zero today. Part of the answer to this question, as I said, at the unit level, all the shares in the conventional generation line of business are written down to zero. However, versus the consolidated statements, the answer is no.

The main part being TAURON, and the total value of all these assets, coal assets in the group, is about PLN 2.8 billion. What contribution to the bid in the generation came from the energy buyback, electricity buybacks, and the sales on the balancing market? How much did it come in at in the second quarter of 2025? The effect on the electricity buyback and the balancing market in the generation and renewables. Regarding, I don’t have data regarding quarters, but for the first half, we earned on electricity buybacks about PLN 200 million. Let me remind you that the electricity buybacks are taking place due to the lack of availability rate, availability of units, and we have a contract that can transfer it to a different unit. All institutional variable costs are higher than the electricity price. These are the cases when such buybacks take place.

I don’t know about 1.7 terawatt hours we bought back in the first six months. I’m talking not only about the TAURON generation, but also the heat and renewables segments. Assets. Just to add, one must save it. We’re looking at this market in a comprehensive manner. You cannot just save it. Here it’s better to sell, here it’s better to buy back. Of course, at the end of the day, that’s what we do, but it’s a mix of different actions. Sale on time and then check if we’re buying back this electricity. Of course, the value of the spread on the buyback was declining because the prices were declining. If the price is higher, then the room, even in extreme cases, the zero negative price is beginning to get smaller. Respectively smaller space, but it’s a mix of an impact.

As I said, I’m talking about the generation earnings, whether the generation earnings were impacted by the buybacks and the EF margin on electricity sold, increase of the volume and the results from the balancing market. Of course, in the PIOTS line of business, we’re optimizing so that we can achieve this result in that line of business as good as possible. Thank you. The next question we have from Mr. Andrzej Rembelski from the brokerage house. I’m going to say in the first half of 2024, why did you take advantage of such a small portion of a cheap financing from the National Recovery Plan despite the positive decision announced in December 2024? What is the schedule of transferring successive tranches to TAURON? Answer this question in the following way. First of all, we have this mechanism of refinancing, and this refinancing is applicable to any spending.

First of all, we incur an expense in order to get any refund. It’s not so the tranches paid out upfront and then it’s accounted for, but first we have to make an outlay and then to get the refund. In the first tranche, because we’re looking at the differences between the energy groups, the first tranche we had relatively small amounts. Some energy groups had relatively higher amounts. They could go back to 2022. However, there were certain exceptions. The exceptions were such that we couldn’t use the funds that were any European funds. Since our group in the past was using a lot, partly the subsidies, but first of all, the EAB funds, we couldn’t do a one-off, a single large refinance at the very beginning. We can only take funds that we spend on a going basis.

The funds that we spend on a going basis are also reduced, first of all, by the subsidies that I mentioned and the potential use of other EU funds. However, at the same time, they have a certain category that you can use. Such categories are like transportation and some things that are not eligible for those funds. What we can say is definitely we’ll substantially speed up the drawdown of those funds in the subsequent years and the expectation in the first tranche. The 11 billion PLN that we signed a contract for in December, as we said, we intend to spend it within roughly four years. If we had to vet, this annex that we signed this year, almost 16 billion PLN. In total, we’re planning to spend it or draw down those funds within the next six years.

A natural question arises, whether there’s a risk that those funds will be lost. No, because the maximum timeframe is 2036 of use of those funds. If we say six years before 2030, we plan to take advantage of all of those funds. Thank you. Next question. How much could be the effect on the regulatory realm in the second half of 2025 and in 2026? Let me say as follows. It’s a uniform distribution. The effect, as you can see, it was almost 180 million PLN year-over-year effect. We’re talking about this effect or six months versus six months, what we said, what we showed. It’ll be a similar distribution in the subsequent six months. As of now, we are not providing the forecast for 2026.

Of course, one could try to do that because, as I said, it’s a matter of going back one year back because in 2026, we’ll be talking about 2024. As of now, we didn’t provide these estimates. I don’t know. Probably we didn’t make such calculations anywhere. Major CAPEX plan regarding energy storage facilities for the coming years. What CAPEX per megawatt one should expect today and what capacities you are assuming? Whether for eight on average regarding energy storage facilities. That is one of the earlier beginnings, less than 1 million PLN per megawatt hour. In practice, our contracts for the first projects were in the region of 800,000 PLN per megawatt hour, 850,000 PLN. That was the range for the small project that we have implemented so far. Regarding capacities themselves, the capacity market required the four-hour configuration.

That’s why 270 megawatts of product that one of the capacity markets are configured that way. However, in practice, this capacity could vary, namely depending upon whether it’s a facility directly connected to the grid or co-located with a renewable investment project. Its function, its capacity may vary. However, such typical facilities, storage facilities, work out better in case of today’s limited capacity market support in the two-hour configuration. In practice, the set of energy facilities, storage facilities, will be implemented. The 2 billion will be a certain mix between four-hour, two-hour, or indirect capacity with respect to the storage facilities co-located with the renewable sources. Thank you. Another question. Is there a question to comment on the words of Mr. Apachinska?

Now, the nuclear power project, one should also include in that project the state of the companies in return for the supply of steel professional prices in the future. One shouldn’t comment such statements, but someone’s statements. The topic is as follows. We are very open to build SMRs on the condition that such a commercial offer, technological offer, is ready. The second thing is that we are very open to the PPAs. As you remember, in our strategy, we are saying we are building our assets, our balance, but based on the project finances and salaries, we are open to any type of forms of cooperation. Either on the JV project, we can do it on a partnership basis. That’s okay for us, and we have it scheduled and planned. We are also open to sign the futures contracts or entire PPA contracts.

We could sign such a PPA contract on a very specific one. The goal is that 20-40-100% of electricity sold to our electricity should be green, cheap electricity, green electricity. Green understood not only renewable, but also nuclear. That’s how we presented it. Therefore, it’s of coming up with a model how electricity generated by a nuclear power plant is sold. It’s going to be under PPAs or on the exchange that’s ahead of us. We can trade in various forms if we can guarantee for our customers the electricity that’s climate neutral at the lowest possible price. We can sit down at the table and negotiate. In connection with the company earnings, how they are planning in real terms the wage increases. We are praying for negotiations on wages. I will not comment on that because one of my colleagues could ask such a question.

A good financial result and the growth of the company is a derivative of a strong cost discipline. The compensation must be in line with the market, follow the purchasing power of us as employees, but also in inflation-related issues. We have all of that in front of us. We definitely want to compensate our workforce in line with the conditions we are terms that we are offering for them to be a competitive employer and to have this to be named as the employer of choice, preferred employer. Minimum wages don’t have an impact. There is always some impact, but it’s not something that determines the financial results. There is always some impact, but those ties and majority of regulations are not tied to the minimum wage. We will have to take this into account, the increase of the minimum wage, but it doesn’t distort the operations.

It’s not a major impact. As we spoke before about other parameters, it’s happening, but it doesn’t break down the system. If you think this is small, then it’s beneficial for you due to the fact that it’s lower, increased than what you expected before. Let’s leave it for now. We have negotiations ahead of us. The main element we’re talking about is inflation is the main parameter that is our benchmark. Because one thing is to maintain the purchasing power of our workforce. Inflation is such and such, then we are trying to take this into account. The second thing is the bonus success fee, and these are two different perspectives. How to tie it all up? People must know that their work is appreciated. The cost is here now, and we cannot guarantee that in the future, because no one can guarantee anything.

Such a benefit due to the fact that we are successful in our operations motivates all of us to do our best to be engaged in generating the company’s results. The question seems to be quite important because in our company, each employee is tied on the managerial level a bit. We have one holy parameter. If we’re discussing about results during the business review meetings, every employee knows that whatever happens, we have to deliver the EBIT. This is the component that builds the narrative and the way of thinking in our organization. Therefore, we’re talking about the fact that on one hand, it’s a purchasing power versus a standard element. The second thing is incentivizing and rewarding the workforce for the results and encouraging them to generate more results.

It also has an impact upon what we do next year because, listen, we all have to get involved in our entire TAURON generation business unit to make a lot of effort to be able to take part in the capacity market auctions in the subsequent years and to increase our probability to win those auctions. Without the engagement of all the people and allowing for changes, it will not be successful. I have a declaration from the social side that they will be strongly engaged in competing. It is also a competition for jobs. It is competition. We have to compete. I’m trying to motivate everyone. Another question. Do you see a potential for a reduction of the TAURON bill of PLN 500 per megawatt hour in 2026? Do we see a potential?

I can see a potential for the fixed price that the customers consume today should be significantly below PLN 400. The situation is such. I encourage everyone to be. My answer is we don’t have to wait absolutely for the delegated decision for the legislature and so on. You just enter the www.tauron.pl, click on Cheap Hours, and you have it. It is already happening. I don’t just see the potential, but it’s already in place here and now. 12,000, you said. It’s a good beginning, good start. I encourage to invest in our shares and also in that you use our products. Worth moving from Eastern, from anywhere, it’s worth moving. Switching on to you. I also encourage to also move to our area of operations, as Basha showed, the cheapest distribution. You have the double benefits, not only distribution, reliable, flexible, available, cheap, and green energy from us.

Excellent customer service, motivated people. What else can I say? Thank you very much. One more question ahead of us. Revenue from the capacity market in the region of PLN 340,000 per megawatt hours cover currently the fixed cost of operations. Let me answer this question. First of all, we have to look not just at PLN 346,000 per megawatt because we are just only talking about the sum of the units we have in the new year volume, but already it’s taking part in the capacity market for a long time and 200 megawatt units that Piotr mentioned. They’re also part of the capacity market. It’s not a full calculation. If the slide, we probably didn’t have time to discuss, but it was closed almost PLN 1 billion in generation and PLN 950 million that was the revenue from the capacity market per annum.

It’s quite close to the fixed cost of the segment. You add to that the revenue from the balancing market, then you can say that the fixed costs are close to being covered. Of course, it’s difficult to foresee what the balancing market will be like in the future, but a major portion of fixed costs is covered by various costs. I mentioned that with the appropriate cost discipline, I think that we should be able to balance it within the Sierre Shell itself. I talk about the entire generation, not just Sierre Shell itself, but the approach we had to do the capital market auction this year is such that all the costs must be covered, plus the mandatory CAPEX outlays that are related to the maintenance of those units. We approach it from the cash outlays side, not from the EBITDA. We have covered all the questions.

We declare that as we are sitting here, we are at your service, also after the conference. I think I will now close this part. We made it within two hours of the presentation plus Q&As. I hope that we have delivered on the task. Ladies and gentlemen, thank you very much. That’s all for today. Thank you very much for coming, both here in the room as well as all of you who have connected with us online. See you during the next conference.

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