PGE Polska Grupa Energetyczna S.A. (PGE) Earnings Call Transcript & Summary

Good morning. Welcome to our cyclical meeting connected with a presentation of financial and operating results this time for 2019. This is a joint conference for journalists and analysts. That's why all of you are welcome to it. Owing to the unique situation that we're confronted with at this moment, we're meeting you only on an online basis. Today's conference is with the participation of Mr. Wojciech Dabrowski, CEO of PGE Polska Grupa Energetyczna and; Mr. Pawel Straczynski, the VP and CFO. As the first one, Mr. Dabrowski, CEO, will speak, who will present the strategic goals he has formulated for the group and present the current situation of PGE under the COVID era. Then Mr. Pawel Straczynski, CFO, will present the operating and financial results for 2019. In the last part, we will propose to you a Q&A session under a different formula than so far. We have enabled asking questions through an online forum. And you're welcome to use it. Over to Mr. Wojciech Dabrowski.

Good morning, ladies and gentlemen, thank you very much for accepting the invitation to today's conference. We're meeting under an extraordinary mode online, which is obvious for you, us and I think for you as well, owing to the precautions connected with coronavirus. On the 20th of February this year, the Supervisory Board entrusted me with the CEO session and on the 24th of July CEO his function. Today, we have the first opportunity to present the results for 2019 and answer your questions owing to the importance of the EU climate policy for PGE. Let me remind you of my stand -- my position, which I've presented already on this, that we are aware of social expectations and the climate goals of neutrality by 2050 and increasing the reduction goals by 2030. Owing to this however, we believe that for various technical socio-economic reasons, such a radical reduction of emission goals by 2030 is basically not feasible in Poland. It's not feasible in PGE Group. Although we sustain the standpoint that the future of Poland and PGE is a substantial increase of renewables in our generation. However, support is necessary for this and in the European climate law, a proportionate principle of increasing funding for the member states with a low GDP per capita should be assumed. Poland is still part of this, although our economy has been growing so far. Although in the situation we're in at this moment, the Poland's economy and the global economy is still a big question mark. However, we are still one of the GDP growth leaders, but I'm sure it will all change once we're over the pandemic that we're confronted with today. Let me repeat it, the green direction while respecting the conventional baseline. This will be supported by the management Board of PGE. They will be growing green. This will assume a leading position in -- on land and sea. As far as when energy is -- we're very much advanced in -- on the Baltic. We already have 550 megawatts, and we'll be increasing by another 27 megawatts. We're interested in acquisitions, if any, attracting proposals appear in the market, we will be actively participating in them. Today, we're involved in talks with several entities. We are recognizing those projects, looking for other attractive targets. So I'd like to ensure you that we will be much more energetic in this respect. We'll also be supporting District Heating segment. We believe this is an opportunity of a stable segment. We're a market leader, and we will be maintaining that position. We're involved in talks with multiple entities in the Polish market. We're interested in acquisitions in this respect, especially in towns and cities where we generate energy as well as others, we're very much advanced in the talks in that direction. And hopefully, they will soon be finalized, and we will be informing the market and you as the journalists as well as shareholders. We will be increasing the thermal waste processing plants. We have one of the most state-of-the-art installations in Rzeszow. We've started the installations in all our localities. We believe that there is a huge potential for this -- these installations and we believe we will be also very active in this respect. Hopefully, we'll soon be able to inform you about the locations where we will be getting more advanced and to prepare for the construction of such installations. We have a huge potential in Poland for such installations. Ours is the most advanced one. Other than green energy, we also favor energy storage and side. By-products of combustion, we'll be working on energy storage. Yesterday on the Board meeting, we made the decision to take on very intense work as part of PGE on the location of energy storage facilities to obtain regulatory support in this respect because in Europe, this issue has actually, a lot has been said about this, but little has been done. We as PGE Group, we want to be leaders in this respect, and we want to be a very strong player in this respect. We believe in the potential, especially where we're going green, where we want to accumulate energy is necessary to implement some regulations and ensure appropriate support for such projects. It goes without saying that this is also the future of Poland's energy, power generation, not only Poland's energy. But also the energy sector in Europe, we mean to use those energy storage facilities on a commercial basis, which will enable the use of additional revenues and to work for the industry. We also favor the combustion by-product uses to reduce the CO2 emissions. Today, we have 2 major groups controlling roughly 40% of the byproducts in Poland, we want to combine them. We've started that combination project already. It's pretty much advanced. And we've initiated the business line. That's the first time I'm talking about this because so far, we haven't spoken about this as part of PGE. We have opened combustion by-product business line. We're talking about the combination of those 2 companies controlling a total of 40% of combustion by-products in Poland. Another issue that I've already mentioned, some of you may have gotten acquainted with this, PGE is supposed to respect the conventional baseline. But our direction is definitely green. There are several challenges in front of us. In front of PGE, Poland's energy generation and the European energy sector, it is our goal to ensure stability of the energy system in Poland. But we respect the conventional baseline, which is support for renewable energy because it stabilizes the system. The green direction, it goes without question in terms of our future, but we have to do it at the right rate, at the right time because, like I said, we cannot switch the entire energy sector and power generation over 10 years. And today, PGE as the power gen leader in Poland's energy sector. We're not capable of switching off conventional power gen and going totally green, switching to renewables only. However, this is an important direction. We've started already some activities. We started working on the new energy, whose goal is to switch, ultimately to that direction. I'd also like to inform you about how we work under the crisis, which has hit the entire world, the entire economy as well as many of us individually. And I want to ensure you that we, as PGE Group, ensure stable and certain energy supplies. We are involved in ongoing work. We're generating on an ongoing basis. First of all, we want to ensure health of our employees. We're taking as good care of them as possible. Crisis Boards meet each day on the -- in each location where energy is generated. And we will be maintaining the long-term position of PGE in no matter the business cycle. We're also planning on major investments, especially in the area of offshore and onshore wind farms as well as District Heating, we will definitely remain the business leaders. In Polish energy sector, we're cooperating with the government with the Ministry of State Assets, Ministry of Climate, in term -- the Ministry of Health in terms of supporting our society. In the face of a pandemic, we've provided a PLN 5 million support to goals related to stopping the spread of the coronavirus. And it's been used by the Polish Ministry of Health and used only to counteract the pandemic. And many employees, I'd like to take this opportunity to thank them, through the media have gotten involved in volunteering. We are providing support to the National Health Fund call center, we're also supporting retired employees who've worked in our installations. So we're also actively involved in supporting the society in the face of that threat. As I mentioned, a couple of words. Well, a moment ago, we were preparing for the changes in terms of economic, social, regulatory and political, we need a strong management impulse. We cannot do it on our own as the management. We cannot do it as the broad management. We have to do it all. We have to make it happen for PGE Group to be directed to new tracks to stay as the leader of power generation in Poland and to ensure future in terms of profitability for our shareholders as well as ensuring jobs for our employees. And for us to carry out the mission entrusted to us so that we can still be leaders and be responsible for power and heat generation for our fellow countrymen. Thank you very much. Over to my colleague, to Mr. Pawel Straczynski, Vice President for Finance, who will present the financials for 2019.

Welcome again, wholeheartedly. I'm sure you've had an opportunity of getting acquainted with the report published, which we published on March 31, presenting the -- both individual as well as consolidated results. With your permission, I will remind you of them. In a nutshell, in 2019, we achieved an EBITDA of PLN 7.1 billion, that's 12% higher than in 2018. The operating cash flow was generated at the level of PLN 6.8 billion. The adjusted net result adjusted by one-offs and provisions, which we also informed you about later was PLN 2.1 billion, that's 17% more than in 2018. As regards the operating results, the net generation was at the level of over 58 terawatt hours, that's 12% less than in 2018. In terms of distribution, 36.4 terawatt hours at a stable level comparable to 2018. The sales to end users amounted to 44 terawatt hours, that's 3% up. Heat sales amounted to over 50 petajoules, that's roughly 2% less than in 2018. A brief information on the trends in the electricity market. Last year was a little bit worse than in 2018. Currently, Q1 2020, especially March, since the announcement of the epidemiological threat and then the epidemic, we've been struggling with a significant decrease in the use of energy. In 2019, the consumption of electricity dropped by almost 1%, 1.5 terawatt hours, which translated into a significant fall of generation of -- by almost 4%, that's 6.4 terawatt hours. Let's remember that the imports amounted to over 10.5 terawatt hours, you could say that the imports volume is comparable to the energy volume, which our sources would be -- would have been capable of producing without any problems. And like I mentioned in 2020, the trend is, unfortunately, negative. In the countries that have already published some statistics, especially Italy, Spain, Germany, since the announcement of the epidemiological threat or implementing measures connected with the coronavirus epidemic, the energy use dropped from 10% to 20%. We've also had to deal with a situation where CO2 emission rights have been dropping as well. This topic will be discussed by me later in greater detail. And as regards, the average price realized in the group in Conventional Generation and District Heating, that was PLN 247 per megawatt hour. The volume of fuels used in 2019, the use of lignite dropped by 17%, of hard coal by 8%. The consumption or the share of low-emission sources grew by 14%. In 2018, out of almost 7 terawatt hours were -- out of 58 terawatt hours, 7.1 terawatt hours were generated from low-emission sources, natural gas and that's hydro and biomass, 13%. So its pump storage is 67%, went to 20% up and biomass 13%. So it grew to 12%. In 2018, it was roughly 10%, like I mentioned. In discussing the details of the key financial data. EBITDA for 2019 amounted to PLN 7.141 billion after eliminating one-off events, such as the admission of free CO2 emission rise of over PLN 1.4 billion. The additional write-offs or the increase in provisions, especially the recultivation provision of over PLN 800 billion, the recurring EBITDA amounted to PLN 6.677 billion, which was 1% less than in 2018, when it amounted to PLN 6,712 billion -- I'm sorry, no, no, it's PLN 800 million, not billion, I'm sorry, said the speaker. The EBIT in 2019 amounted to minus PLN 4.175 billion. However, after eliminating the most important one-off event, that was a write-off of PLN 7.5 billion for conventional energy. For Conventional Generation, the recurring EBIT amounted to PLN 2.841 billion, and it was 12% lower than in 2018. The net profit to equity, which in 2019 amounted to minus PLN 3.9 billion, which was almost over PLN 5 billion less than in 2018. After eliminating the noncash event, one-off event, which was to update the value of the assets in the books, the adjusted net profit to equity excluding impairments was -- amounted to PLN 2.130 billion, which was 17% up as compared to PLN 1.8 billion in 2018, which provides us with earnings per share of minus PLN 2.12. And excluding the impairments, PLN 1.14. The group's net debt grew by PLN 1.8 billion, reaching a level of PLN 11.400 billion at the end of December 2019. The main factors of developing. The EBITDA in 2019 was mostly the increase in the wholesale price of electricity, that grows effect in the revenues translated to a growth of PLN 3.9 billion followed by the price of CO2 emissions and the -- that had an effect of PLN 1.6 million. The decreased volume of electricity, which I already mentioned, that's roughly PLN 1.4 billion in minus. The optimization of the electricity portfolio had a positive effect on EBITDA of over PLN 400 million. Recurring EBITDA, as we presented it in the previous slide in 2019, was PLN 6.6 billion. And after eliminating the one-offs, which increased the result of -- by almost PLN 0.5 billion. We reached a reported EBITDA of PLN 7.1 billion. In terms of the generation assets, conventional, as compared to 2018, we're talking here about a decrease on to the situation in the national electricity system. Let me remind you that the entire conventional energy sector, well, by and large, these are centrally managed entities. So we have a major share of the national operator in terms of using them. In terms of availability, in terms of lignite, it decreased by 4%, in terms of Conventional Generation in hard -- in terms of hard coal, we're talking about a 3 percentage point decrease. In District Heating we -- here we had an increase by 3 percentage points. The utilization capacity factor, it grew by 14% in hard coal and in HCP (sic) [ CHP ] plants we had an increase by 1.5% roughly. In terms of the availability and capacity of wind farms, it definitely improved in 2019, availability was maintained at a comparable level. However, owing to the definitely higher windiness, in 2019, the capacity factor in 2019 grew from less than 24% to 28%. In terms of distribution assets, we had a similar volume of energy, it was at the level of 36.4 terawatt hours. We decreased the network losses over the year by roughly 7%. Currently, the network loss -- losses account for 4.8%, in 2018, it was above 5%. The SAIDI and SAIFI factors have also improved. In terms of SAIDI, that was a decrease by 15%, down to the unplanned switch offs. The average of 167 for unplanned and for planned 49 minutes. In SAIFI, the average frequency dropped in 2019. For unplanned, we achieved a level of 3.45, in terms of planned 0.27, and connection time dropped by 6% from 211 to 199 days. And a quick overview of CapEx. For 2019, it amounted to roughly PLN 7 billion, whereof PLN 2.3 in Conventional Generation, modernizations, roughly PLN 1 billion. Also in Conventional Generation for new projects in terms of District Heating, it amounted to over PLN 0.5 billion, renewables, PLN 151 million and a lot of CapEx. For distribution, PLN 2.2 billion. And in terms of key projects, as regards 2019, in the conventional energy sector, that was the construction of units 5 and 6. In Opole, roughly PLN 900 million. And in Turów over -- that's unit 7, roughly PLN 527 million. For the modernization of distribution assets, PLN 1.2 billion and new projects into the distribution sector, almost PLN 0.9 billion. The outlook for 2019 in terms of reported EBITDA. For conventional energy, we're expecting a decrease in the EBITDA. And the situation which has hit us additionally today, i.e., the impact of the coronavirus and the epidemic unfortunately, has a negative impact for the entire sector, actually, the entire economy, including the power generation energy sector, electricity sector. As I mentioned, the decreases in March in the countries hit by the epidemic amounted to between -- or range from 10% to 20%. It will be crucial how long the limitations or the restrictions last. Of course, the shorter they take, the better, and we hope that Poland's economy, after this difficult period will be growing fast enough for the consumption of electricity to grow adequately, which will also allow us to eliminate the impact of the situation. In terms of District Heating, we also expect a lower EBITDA than in 2019. The turn of 2020, the winter has been exceptionally warm. We've had places where not a single flake of snow has dropped. The average temperature was higher on average by 3.5 degree centigrades, which had an impact on the heat sold. In terms of renewables, this is largely controlled by weather conditions that we're not controlling. If the impact of the coronavirus is maintained and the electricity consumption likewise, it will also have an impact on the renewables. In terms of the negative impacts, in terms of EBITDA, we're also expecting this in supply -- in the supply segment. Because that's where we have to deal with 2 major factors. The first one, which I already mentioned many a time, is the impact of the coronavirus into the reduction in energy consumption, but also since we're expecting decrease in the liquidity of our numerous customers, we also expect a growth in the receivables written down for the bills issued for electricity, owing to the COVID. In terms of distribution, it should stay at a comparable level. We don't expect any extraordinary negative events [ except in ] the coronavirus. Thank you very much.

Thank you very much. Now ladies and gentlemen, it's the time for your questions. Please allow us to only touch upon those threads, which have not been touched upon during the presentation since we have a total of 1 hour in total at our disposal. This will allow us to convey information that has not been conveyed so far.

Let's pass to the first question. Let me touch upon several items. What about the options offshore Zloczew and nuclear.

Out of those 3 projects, offshore is most advanced. We have an environmental permit and the feasibility study. As regards Zloczew, we're approaching it in a very responsible manner. Towards the end of May, we should be provided with a concession. We're analyzing this with regard to social threats as well as hopes as well as prospects for the future. Let me emphasize that concession does not mean the starting of a project. We'll be commencing our analysis and all the issues mentioned by you will be taken into account. But as each business project, it has to display a positive result. As regards the nuclear energy ore, we are working on this. We're preparing the -- this investment project, but let me just tell you that the size of the investment will surpass our capacities. And we, as PGE will certainly not be able to bear the cost of constructing nuclear power plant. First of all, a political decision has to be made, and it hasn't been made yet, but through PGE [ Energetyka Konwencjonalna 1 ], we're working on the preparatory project. Thank you.

Next project, the State Asset Ministry is suggesting a further consolidation of the industry. What's the position of the company? Will -- are you contemplating any specific targets and will the calling off of Minister [ Govinda ] speed up the project?

The ministry is responsible for the consolidation of our sector, both the generation, power gen and mining sector. And we, as the leader of electricity and power generation, were part of the processes defined by the ministry, and we will be conveying any information that can be supportive to the State Administration in this respect. Was there anything else?

Well, it was the question about Minister [ Govinda ].

As regards to Minister [ Govinda ], we're not commenting any personal decisions made at the governmental level here in our company.

Next question, are you contemplating the -- taking over of CEZ, AL-KO and Skawina groups?

As I mentioned, we're interested in acquisitions. We are talking to many entities, if such proposals appear in the market, if CEZ indeed announces the interest in selling those assets, we will be analyzing this. Let me tell you that in Krakow, we are one of the largest players in District Heating and CEZ is generating their -- generating heat there. Like I said, we're interested in District Heating and networks, especially where we're not present, but since CEZ has not announced the sales of its assets in Poland, there's nothing to discuss at this moment.

PGE, will PGE increase its stake in PGG, if the financial situation of PGG diminishes? It is possible to acquire PGG?

Today, PGE is a shareholder of PGG. So PGG's problems are PGE's problems. At this moment, we're not contemplating increasing the capital or the acquisition of PGG or increasing our stake.

Are you identifying any threats to the CapEx projects and any delays connected with the COVID pandemic?

Like I mentioned, we are monitoring the generation as well as overhauls and modernizations in PGE. Yes, we can see such threats. The pandemic has hit the entire market segment and the global economy. So we perceive the major threats. In terms of the construction of unit 7 in Turów, which is at the final stage, there is a possible threat of the running in work and access to specialists who are supposed to come abroad, many of whom are supposed to come abroad, but we can see situations and in extraordinary situations, we will be appealing to the national authorities to enable the passage of such specialists for them to enter Poland to be able to start the unit. As regards Dolna Odra, that's our major investment underway in our group. In terms of generation, we're not identifying any risks owing to the early stage of the works. We are also expecting that the market disturbances that we're talking about and the epidemic will not hit the Baltic pipe. As regards the land wind farms, we are expecting some delays in terms of the permits to use the wind farms. That's in -- on an -- in administrative terms. As regards the sea wind farms, in terms of offshore, we're negotiating it with a partner. In terms of selling the shares, we're not identifying any such risks because we're talking on an ongoing basis by the electronic means of communication, and there is no need to talk to them directly as regards the sea wind farms, we don't see any such threats altogether.

The next question. What about the selling -- the payout of the dividend for 2019? I think it's to the CEO.

Ladies and gentlemen, the dividend policy announced several years back still applies for some time. Well, there was a decision made on withholding the payment of dividends, the condition of dividend payout or actually the Board's recommendation because the decision is made by the general meeting of the shareholders, but the recommendation has to take into account liquidity factors, i.e. companies indebtedness, the expected CapEx level and potential acquisitions. In 2019, the operating cash flow generated was entirely appropriated to the investment activity. The financial cash flow net is oscillating -- is ranging around 0. It's hard to talk about any drastic changes in terms of the dividend policy conducted so far. In the individual report of PGE S.A., the net loss was [ disclosed ] of PLN 1.25 billion and the source of covering that loss should be the supplementary capital, as indicated by the Board. So it's hard to talk about any major revision of the so far dividend payout policy. Thank you.

Next question, the impact on low interest rates, on the rate of return for distribution in the next 2 years?

Yes, the very drop in the interest rates, it does not correspond to the decrease in our funding costs. That's not a straightforward or a simple correspondence. What we are focusing on is the contract to the ERO, we're talking to ERO. And we believe that taking into account various quantifiable risks will have an impact on the price tariffs, depending on which costs or which expenditures incurred by us will be accepted by ERO as qualifiable. It will be depending on whether that's the weighted average cost of capital will be taken into account in terms of distribution as well as the profitability of those projects.

And let's pass on to the next question. In the operating cash flow of the company, for 2019, do we have the revenues from the sales of the additional CO2 emissions?

In 2019, the company got additional CO2 emission rights, which were recognized in the P&L and the cash settlement of the transaction will take place in 2020. I can say that it already has been settled in Q1.

Let's pass on to the next one. Which assets have been written off, owing to the impairment tests? Were the new units in Opole and Turów written down?

Ladies and gentlemen, of course, the write-down in the conventional segment has aroused a lot of emotions in the market. Our activities have also been commented on broadly. The additional energy companies have also recalculated their co-based assets. We have taken a close look at the comprehensive picture of conventional energy or power generation not only as the entire compound, but also on the individual units and impairment tests have disclosed that the units in Belchatów and Turów have lower value stemming from the discounted cash flows. As in Turów was PLN 4 billion -- Turów was PLN 3.4 billion. However, the write-downs related to the old units. The new assets have not been written down, neither unit 8 in Turów nor unit 14 in Belchatów. The total amount of write-down in conventional energy amounted to PLN 7.5 billion. At the same time, we have reversed a write-down in renewables. There the reversal amounted to roughly PLN 400 million. So the net impact of write-downs amounted to PLN 7.1 billion.

The next question. Where did the -- such a high provision for the recalculation stem from? As regards the discount rate, it shouldn't be so high.

As regards to recultivation provision, we've had to deal with 2 factors, the -- let me call it an excel factor. That's the way it has been calculated in an excel sheet. These are the calculations by using the appropriate discount rates. And as you observed, the very application of the discount rate reduced from 3.7 to 2.8. It does not provide justification for such a high increase in the provision. What had a major impact on the provision level was a review which we prepare every 3 years in terms of our recultivation provisions based on technical documentation. Such a publication was prepared for Turów in 2019, which, without any doubt, prompted that the expenditure in kind will have to increase for Turów because even the lows of land, that will have to be removed, has grown by 130%. This is the important increase in the expenditure in kind that will have to be incurred. Also, let me remind you that as per the model, the most important expenditure on recultivation, it will be incurred from 2037 to 2065. So we're talking about such a remote future that we don't even have such far-reaching projections in terms of discount rates, so we're basically extrapolating the discount rates. At this level, we are applying the 10-year Treasury bill profitability as the discount rate. Of course, the closer to that period, probably the recultivation provision will also change in terms of its level. At this moment, we're estimating the expenditure, which will be necessary for recultivation.

Next questions. What does the concession mean issued for the Turów mine? Why has it been issued for 10 years only? Do you mean to fire lignite despite the energy policy? It has started being profitable. Does it still make sense to use lignite as the combustion source? How do you approach the process by the Germans and Czechs in terms of water?

So this license means, first of all, safety and safety -- it makes sense to invest in safety, we will be doing so because it will be a stable source of income for PGE and also for you as shareholders. It is a certain a source of safety that we, as the group will be able to earn stable revenues going forward. Let me remind you that the Turów coal mine was opened 26 years ago, and this is only an extension of the concession or license. Today, we are doing this as GiEK conventional energy and mining, allowing us to obtain the next supplies until the end of the lignite deposits available there. So this is only for the availability. And this proceeding was done in line with the Polish and international law with consultations were carried out with the German and Czech parties. And also in terms of monitoring the water on the Czech side, there's a subterraneous screen being built to protect that area from the potential impact of the activity in Turów. And let me remind you that the Czechs are generating their energy in the roughly 50% from lignite and the Germans have roughly 20% of that generation. And we've heard that recently, they've started the building of another major lignite mine. So this concession means safety and stability of the system as well as ensuring the stable source of income -- source of revenues for PGE Group.

Next question. Isn't it too late in Poland for large-scale nuclears and can SMRs be an alternative?

In terms of the nuclear energy, I've already said a couple of words before, isn't it too late? That's -- this question should be actually asked of the decision makers. First of all, the government administration, because the government will define the ultimate energy mix. In the energy program until 2040, we're also determined by the document, which will probably soon be published to the public or will be presented to the public. And that document will contain the energy also in terms of nuclear energy and whether SMRs can be an alternative, like they always can. But first of all, what we'll be taking into account is the cost of the project, profitability of the project. That's, first of all, the project of funding CapEx. Well, generally, nuclear energy, that's a matter of CapEx because the variable costs are low, but the initial CapEx is very high and under the -- given the atmosphere of and probably economic slowdown, this issue will most probably be very thoroughly analyzed and verified. There can be some alternatives contemplated, but these are very expensive projects. Probably, as a society, we're not prepared to go for SMRs, although such solutions are contemplated by a private entity. Well, let's wait and see at the -- for the final effect.

I think we can take one more question. Is PGE still not collecting the coal contracted from PGG?

Ladies and gentlemen, we are collecting the coal from PGG in line with the agreement concluded with them -- the contracts concluded. There are no clashes in terms of our cooperation with PGG. As you know, we are also a shareholder of that group. So we're collecting coal in line with the contracts.

Since we've been quite fast, I think we can take one more question. Why can't you see an impact of low natural gas prices to the fuel prices? I think it's for the CFO.

Ladies and gentlemen, PGE has been pursuing a policy of risk mitigation. Risks are mitigated wherever possible. These are both risks of energy sales, risks of fuel purchases, the CO2 emissions risks. And today's situation, be it of natural gas or fossil fuels or CO2 emission rights. Today, they have no impact on the group's bottom line. Why? Because the gas fuels CO2, they have been contracted. They were contracted 1 or 2 years ago. Of course, today's decrease in the prices will have an impact on the bottom line in the next years because today, we're also concluding hedge transactions for primary energy contained in the fuels as well as CO2. That's to say, the emission rights. Let me expand this question without only focusing on gas -- or natural gas but also on CO2 emission rights. Because as you -- you are perfectly aware, this cost category is very significant in our P&L. And today's falling CO2 emission prices also involve the drop in the energy prices. So the margin on the energy sold does not increase. And the fact that we're saving on the cheaper emission rights, which we're still hedging on the open portfolio for 2021, '22 or the next years. This is obviously one thing. And at the same time, as you can see, on the market quotes, the energy prices is also dropping. So you can compare the margin very easily. It's at the same level or even decreasing. There are no major impacts either positive or negative, actually.

Ladies and gentlemen, we will be drawing to a close. Not all the questions have been asked. I'm sorry, but the interest is immense. We're at your disposal, both the press office as well as the Investor Relations office after the conference. Thank you very much for your presence and we are already inviting you for the presentation of the results for Q1 2020, which will be held in May. Thank you, and goodbye.

Thank you very much for being with us despite the difficulties. As it was mentioned by our colleagues, you are all invited to the next meeting. Hopefully, we'll be able to meet you in person. Thank you very much. Goodbye. See you next time. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]