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

Good morning, ladies and gentlemen. Traditionally, we -- I'd like to welcome you to the conference devoted to the results of PGE Polska Grupa Energetyczna online devoted to the presentation of the financial and operating results for 2020. I'd like to welcome the participants of today's conference, journalists and analysts. And may I invite you to ask some questions using the forum made available. In today's conference, we will be hosting Mr. Wojciech Dabrowski, CEO of PGE Polska Grupa Energetyczna. Welcome, sir. And Mr. Pawel Straczynski, Vice President and CFO. Good morning. Over to Mr. Wojciech Dabrowski.

Ladies and gentlemen, 2020 will definitely be a memorable year. It was a year full of challenges for the entire energy sector, including PGE Group. But I'm so much more satisfied that we've managed to accomplish what we had planned. After 8 months of very intense work, in October 2020, we announced a new PG Group strategy until 2030 with a view to 2050. In 2020, we also worked on an agreement to cooperate on the development of offshore wind farms with Ørsted, which we signed at the beginning of this year. Also in 2020, we commissioned the first underground electricity storage facility in Rzepedz in Podkarpackie region. We've also increased the power generation capacities. We added wind farms with a total capacity of 140 megawatts. We've developed an investment plan for the conversion of fuel to gas, up to 1,500 electrical megawatts. And in order to create opportunities for development of renewable and prosumer power generation, we also prepared a detailed plan for the necessary modernization and development of the distribution network. As regards the offshore contract, the signing of the agreement with Ørsted on a 50/50 basis was a very important project for PGE Group. The project team worked for many months, producing thousands of pages of documentation detailing the division of responsibilities. In the course of the work on the agreement, we fulfilled all our objectives, i.e., we secured PGE's interests to the maximum degree. And we ensured our knowledge in the offshore area, which we'll be sharing. We have the best market contract with the most experienced company in offshore wind industry in the world. As a result of precise determination of the rules of cooperation with Ørsted, we will first build competencies of PGE's employees; and secondly, we will enable development of Polish companies working for the offshore wind. The objective is to maximize the benefits for Poland's economy. In mid-March, we received the consent to concentration from the antitrust authority. We'll be closing this transaction soon. Ørsted will assume the shares representing 50% of the share capital for PLN 657 million. Additional payments are to be made once we know the exact strike prices for farms, and those payments will be made along with the final investment decisions we can expect in about 2 or 3 years. Pursuant to the objective announced for the group to build 800-megawatt energy storage facilities, we launched a long-term program. We launched the first storage project in Rzepedz in the Podkarpackie region. This investment is a response to the specific needs of PGE's consumers to improve energy quality, energy and backup supply. We are also preparing a large warehouse or storage in Zarnowiec with a capacity of 200 megawatts. We're expecting co-funding from the innovation funds. The total investment is estimated at about PLN 900 million. This is -- this one is on the priority project list for Poland. Hope to expect the consent and hope to be able to pursue it based on EU funding. In the area of onshore wind farms, we have frozen project with a capacity of nearly 150 megawatts in very good locations. As regards the onshore wind, we are the leader, having near on 700 megawatts of installed capacity. We wish to keep that position. We're a long-term investment, and we're not afraid to buy farms that are several year old and are not covered by the auction system. In July, we acquired the Skoczyklody wind farm, and we also looked at other attractive projects. We also intensified our work on the communication system, including the communication network in LTE technology in the 450 megahertz band. At the beginning of March '21, PGE Group Investment Committee issued a positive decision on the implementation of work under LTE450. The planned budget for the investment phase will amount to several hundred million zlotys, and the budget will be expanded over the next couple of years. In the next couple of weeks, we mean to launch the tender for the infrastructure for this project. As regards District Heating or the heating industry, in 2020, we worked intensely on the plan for District Heating. Right now, we're pursuing the projects on new gas-fired co-generation sources in Siechnice, Bydgoszcz, Kielce and Zgierz. As I mentioned, we're talking about the capacity of -- electric capacity of nearly 100 MWe. In 2030, we'll have commissioned the installation, which will result in a complete shift away from coal fuel. One of such initiatives is just our investment in Czechnica near Wroclaw. At the beginning of February 2021, PGE Group's Investment Committee issued a positive recommendation for the execution phase of that project, which is called construction of the Czechnica CHP plant. In February, we also finished the evaluation of tender submitted for the -- under the tender procedure. The most favorable offer was submitted by Polimex-Mostostal, with power of 180 MWe and 220 MWt, together with peak capacity contract value of PLN 1.1 billion. The new strategy of PGE Group has also created a framework for our own development. We've prepared the group for transformation, and we are awaiting owner decisions on conventional assets. Today, the power industry is facing 2 challenges, as you will know, we need to have investments in Polish renewable resources as well as stable sources of energy until a nuclear power plant is built. This can be ensured by a strategic goal. We have communicated and postulated this on multiple occasions. We need to have a strategic coal reserve in place managed by the state treasury and parallel investment in RES. Energy transformation is inextricably linked with the transformation of regions where conventional energy and mining are the most important element of the economic activity. And most important, employers as part of the work for the equitable transition team, we created such a team. For the transformation concept of the Belchatów region, the PGE Investment Committee issued positive recommendations for the preparation of the first projects, among others, [indiscernible] wind farms, PV farms. These projects are growing. We also have some ideas about taking care of the byproducts from firing or incineration. The planned value of CapEx in the first phase will be about, until 2030, we will disclose PLN 5 billion. Ladies and gentlemen, an equitable transformation is one that begins with taking care of people and creating opportunities for their development. Several years ago, on March 18, together with the Head of the [indiscernible] we signed an LOI starting work on the competence development center in Belchatów. This will be launched in September this year, and we will be opening -- it should start operating this year, and it will create an opportunity to develop the so-called professions for the future. And we also are working on the transformation plan for Turów. We have submitted also a plan for equitable transformation to the provincial local government. They include wind farms, PV farms, energy storage facilities, the provision of thermal cogeneration for the residents of Bogatynia. Ladies and gentlemen, I'm addressing part of you as our investors to express my thanks for considering our efforts by you, by the investors. We have maintained the highest credit ratings among the companies with a Fitch rating at BBB+; Moody's, it's Baa1. Under such difficult market conditions, this is a success, and I'd like to express my thanks for the entire organization. Owing to this, it will be possible to fund PGE's investment program worth PLN 75 billion at a competitive cost, especially that the rating agencies have maintained a stable outlook. We are also maintaining a high growth of the stock exchange price, which currently has been stabilized at the level of roughly PLN 7. We perceive it as your confidence in our operations. Let me assure you that the direction we have assumed to transform PGE and ensure a stable future for it, including the strong market position, will be continued. We know where we are going, and we will be achieving what we have assumed. Owing to this, yourselves, as investors, will be able to duly take advantage of the money invested in our shares. Thank you very much.

Thank you very much, Mr. President. Now over to Mr. Pawel Straczynski.

Good morning again. Also traditionally, let me present the most important facts and figures for the market in a couple of slides and whatever has happened in PGE in 2020. The market situation is very well known to you. The entire year was influenced by the COVID-19 pandemic, the drop in the demand by 22% and the output by 4% at the same time. At the same time, what worried us as power generators was the ever-growing net import in 2020. It represented over 13 terawatt hours. That's over 25% more than in 2019. 13 terawatt hours, that's power which is higher than what could be delivered by -- actually by the Belchatów complex working at its full capacity. So this is a very significant issue, which we are also observing with some concern. In 2021, after the initial stabilization of the situation as regards the energy imports, there was some normalization. I don't think this is the right word, actually, but a normalization in the sense that the negative factors or trends for us as the power generators, I mean, a return of imports of about 1 terawatt hour is already observed. In Q4, we also observed some positive trends, a reversal of the generation drops and the reversal of the decrease in energy demand. As regards to the price situation in Q4, it was maintained at roughly PLN 281 per megawatt hours. That's the average wholesale price realized by Conventional Generation and District Heating. At the same time, along with the increase in CO2 prices by over PLN 43 per terawatt hours -- megawatt hours, we have simplified CDS without considering the fuel prices, without prime energy prices, which is unfortunately permanently decreasing. Consequently, we're also observing a strong decrease in forward contracts by over PLN 35 for 2021, given the output volume of the Conventional Generation. Lowering the margin by PLN 35 would mean a decrease in the margin by PLN 1.6 billion. The current increase in the base price for 2022 of roughly PLN 300, there's no reason to rejoice for us either. The effect for us is a correlation of the electricity price, with the price denominated in PLN with CO2 emission prices. The very increase in the price is no reason to celebrate because it did not necessarily translate into higher margins. And a rough summary of the generation distribution and sales of energy as compared to 2019, mostly owing to the full operation of the new units in Opole. We have a drop by 0.2 terawatt hours. In distribution, the volume was lowered by 0.7 terawatt hours. And sales to end users, we accounted for a drop of minus 2.8 terawatt hours. In A tariff, it was by 0.5. B, it was less than 1 terawatt hour. The highest drop we had in C+R, 1.5. And in G, it was maintained at 9.8 terawatt hours. As regards to the heat sales, we had a slight decrease by 0.2 petajoules. As regards to the group's financial results published yesterday, recurring EBITDA was lowered by PLN 453 million, with the major impact of one-offs as compared to 2019. In 2019, we had an additional PLN 1.5 billion from one-off provision of CO2 emissions, and we had a drop of the recultivation provision by PLN 0.2 billion. So it was lowered by PLN 0.3 billion. And we had one-off effect of ZEDO reversal for about PLN 1 million -- PLN 100 million. The operating result in 2019 was distorted by asset impairment, impairment charges in Conventional Generation. The highest decline was observed in 2020 in the Conventional Generation that -- over 30% less in EBITDA. We're talking about roughly PLN 800 million. In the remaining segments, the effect is very much limited. In 2020, the key activity as regards to recurring EBITDA was Distribution. As regards to the indebtedness, compared to 2019, net debt was lower to PLN 8.4 billion. We started off at a level of PLN 11.4 billion. And as regards to the non-transitory effect in debt reduction, it's at PLN 2.2 billion. The difference between PLN 3 billion and PLN 2.2 billion is an additional money to be appropriated to meeting the obligation of CO2 right amortization attributable to 2020 and settled in March 2021. The main -- major value factors for the development of EBITDA in 2020 as compared to 2019 is, of course, the result on the generation of wholesale electricity was PLN 1.8 billion. It was, however, reduced significantly by PLN 2.3 billion in the CO2 costs and less free allowance by PLN 0.6 billion. So the total negative result was PLN 2.6 billion. PLN 59 million was lower fuel cost, plus the accumulated effect of the lower natural gas price, coupled with its higher consumption and a higher consumption of the hard coal. As regards personnel cost, PLN 20 million higher group-wide as compared to 2019. Let me remind you that personnel costs represent the third largest group of expenditure in the capital group, right after CO2 allowance. So it's PLN 5.5 billion. The increase in personnel costs have been reduced. It only amounted to PLN 20 million. We also have the group margin on retail market was the adjustment of compensation of about PLN 107 million. Also, ancillary services, mostly it resulted from ORM in Rybnik and Opole. The result on distribution was slightly higher, PLN 57 million and other factors, plus PLN 23 million. After the elimination of one-offs at the level of PLN 118 million, whereof the recultivation provision and the reversal of the CO2 provision in ZEDO or Dolna Odra power plant of PLN 121 million caused for us to have an EBITDA reported at the level of PLN 5.966 billion. CapEx, as regards to the effect of CapEx lowering by PLN 850 million, that's the effect of what we announced at the beginning of 2020 when we announced a review of investment projects and other projects and the closure of those projects that did not ensure a rate of return, which was high enough, as well as those projects that did not fit our basic activity. In the Conventional Generation segment, we lowered CapEx by PLN 1.3 billion. Let's remember that this year almost PLN 650 million was appropriated to the settlement of the contract from the new Opole units and the ongoing construction of the units in Turów. We increased our expenditure on low-emission and zero-emission assets over PLN 600 million that appeared in 2020. These are expenditures connected with the capacities, CCGT capacities at Dolna Odra. PLN 195 million plus in District Heating; PLN 82 million plus in Renewables; almost PLN 400 million lower CapEx in distribution, which I also mentioned on multiple occasions as I was meeting you. In the case of supply and other factors, these are insignificant amounts of -- with a total effect of PLN 23 million. Consequently, the total CapEx of the capital group in 2020 ended up at the level of PLN 6.052 billion. And as for the outlook for reported EBITDA in 2021, for all the main segments, except in Conventional Generation, the prospects are positive. In District Heating, we have an increase in the tariff, which includes the historical CO2 emission price or emission cost. We hope that, along with the increase in the CO2 allowances, this cost will be just as quickly included by the regulator in the tariffs. In Renewables, we have an increase of installed power as well as the increase in the price, which drives the profitability up. As in Distribution, that's mostly the regulatory asset base, RAB, which is higher. We should at least maintain the EBITDA for 2020. In the segment of supply, the prospects are, shall I say, neutral. We have many unknowns there. The tariff approved by the -- regulatory tariff G for 2021 does not fully satisfy us. Actually, the only positive effect of it is the first ever or for a longer time, the full inclusion of the cost of electricity purchased, which was not so obvious before. And the only negative prospect is in Conventional Generation, which was -- is triggered by the lower CDS, unfortunately not mitigated by the revenues from the power market where we can observe a decrease in the prices, even including the revenues from the power market that did not -- that were not observed in 2021. Thank you very much.

Thank you very much. By virtue of the same, we have finished the main part of the presentation. And by standard, we are actually at your disposal for the Q&A session. We'll start with the questions that were sent to us yesterday, and then we'll be passing on to the forum where you asked us questions.

The first question is from Mr. Michal Kozak from Trigon. When the company is expecting the government -- government's decision on the separation of coal assets? And what are the concepts of separating debt? Over to Mr. Dabrowski.

Thank you very much. We've communicated on multiple occasions that PGE is not an immediate party to the process. That's the Ministry of State Assets. Hopefully, over the next couple of weeks, we will learn the detailed separation plans. We've produced our postulates, but of course, the host of it is the Ministry of State Assets. The person responsible is [indiscernible] of Mining and Power Generation Assets, the Minister [indiscernible]. And in line with this declaration, work is focused on -- work focused on the separation of assets is very much advanced. Today, the ministry is working on the separation process. And most importantly, I'd like to say that we consider the approval of our employees as key. So the coordination with the -- of the process with a social side and the employees to whom we explain that the process will not involve layoffs. And I'm convinced that the functioning of the assets to ensure the stability of the power sector because that's the idea for the new entity to guarantee energy stability to Poland. I think this is as an -- this is best solution, not only for the company, but also for the employees because it will ensure work, ensure jobs basically. On the organizational basis, we have to remember District Heating, which is key to our activity. An important element of the potential separation was also the transfer of debt connected with coal-related assets. We incurred some debt to construct the units in Opole and Turów. And it's obvious that the debt should be repaid from the operations of those units, so -- which have 15 years guarantee. So it would be obvious. We ensure that the assets will be transferred along with debt. We're also talking with banks about taking care of the ascription of debt to PGE and it's transferred to the new entity.

Thank you very much. The next question -- you are asking us a lot of questions on CO2 emission increases. We have a general question. The abrupt increase of CO2 price, how do you proceed with it? It's a question to Mr. Straczynski.

EUR 42 -- a year ago or half a year ago, I wouldn't have said that this was a realistic solution. Our scenarios assumed an increase to EUR 40, EUR 50 -- even EUR 50 per ton in the next years. However, in our wildest dreams, we would not have expected a price of EUR 42 per ton at the beginning of 2021. It goes without saying that entities absolutely interested only in generating profits on speculations, which are absolutely not involved in generation. These transactions cannot be ascribed to any of the generators. This -- the phenomenon that we have observed today, it's a distortion of the idea of emission allowances. The Commission, aside from issuing certain -- several grants that it would take a look at the system and try to reduce the area for manipulating the price, still has not taken care of the problem. The system of natural regulation is not working. That -- I mean, one that we had in the case of the Polish RES system where there are certificates. Of course, and the replacement allowance. Well, we can discuss whether it was right or wrong. But however, it would curtail certain or eliminate certain behavior from market participants who only bought those instruments to generate profits on the trade. Well, quite simply, if the certificate price surpassed the replacement fee, no one would buy them. Of course, ETS also assumes such a mechanism. However, the cost of it is EUR 100, which means that the room for speculative transactions is still significant. I mean, if the European Commission does not implement any activities to bring the CO2 emission level down to the natural market level, we can be facing a very difficult situation in the energy sector, Conventional Generation sector, which will cause a further increase in wholesale prices, that have already surpassed PLN 300 this year, and it will trigger the increase in imports owing to the growing price differences between the Polish market and the neighboring countries' markets. And under the worst-case scenario, this can cause an uncontrolled closure of all conventional assets, which would be a threat to the energy security of the country.

Thank you very much. The next question that we have is from Bank Handlowy Brokerage House. Two years ago, Polish district heating companies had a problem transferring CO2 cost to customers. It has been resolved, but it took some time. Are we not facing a similar situation in 2021? This is a question for Mr. Straczynski.

Yes, by all means. The regulator resolved the problem on an ad hoc basis rather than on a systemic basis. That means they included some types of expenditure in the tariff. Today, the phenomenon has been repeated. We have an increase from EUR 25 to EUR 42. And we expect that this time the regulator will respond much quicker. It's actually pretty much the same case. As I said, it's not systemically regulated. We know that the Chair of ERO has instituted a special team. It would be better to develop a systemic solution rather than ad hoc activities. Often, in the investors' views that I've been following on various forums, there have been such voices that the Chair of ERO won't see the real market situation. The increase of CO2 cost is a fact. And without including this fact, the largest cost incurred by PGE as a capital group will trigger the complication of the situation. I mean, this is a financial situation. And at the same time, we will have to seek money to cover the additional expenditure, among others, in investments into distribution, into renewable energy. And such activities will definitely not speed up the accomplishment of the program of departure from fossil fuels. And I believe that the faster the regulator observes that problem, I mean, really observe, the faster and more efficient the Polish transformation will be.

Thank you very much. The next question also to Mr. Straczynski. That's a question asked by Mr. Michal Kozak from DM Trigon. What is roughly the IRR of the investments in offshore, given the maximum price within the brackets of PLN 301 and PLN 326 per megawatt hours?

Ladies and gentlemen, the final investment decisions will be made at the turn of 2024. And to address such a question, we have to know all the variables of a very complex equation. Today, we're not capable of answering this question because we still don't know a specific support level. We have not gone through the entire procedure. It's first the ERO, then the European Commission, then back to ERO. To answer this question today would be premature. I'm not capable of responding to that question with full responsibility.

Thank you very much. A collective question, another question. What's the work like on the new distribution level on -- distribution model from 2021? Over to Mr. Straczynski.

Yes. Whereas, the dialogue with the Chair of ERO for 2021 inspired some optimism, those talks were very constructive and arrived at the -- made us arrive in a tact where both OSD and the regulator reached a compromise. Unfortunately, we cannot see any reasons for optimism as regards to new model -- new tariff model for 2021. First of all, we don't observe a full understanding for our position in distribution decisions. Often -- I've spoken about this on multiple occasions. The pursuit of investments, we announced it, OSD has to obtain a fair return on the capital invested. At the same time, investments are necessary for the transformation for Poland energy generation. We also indicated it in our strategy. The goal of OSD is to ensure ongoing supplies for recipients. This requires ongoing CapEx. We cannot involve our capital in projects where the ROI is lower than the cost of capital. We don't see any full understanding from the regulator regarding this negative trend for us. We're still in the course of negotiations. Well, maybe negotiations is the right -- is not the right word, but we're in the course of a dialogue. We've presented a new mode of investment funding to the Chair of ERO, with the support of entities -- low cost of capital entities that would be interested in long-term investments in the grid infrastructure. Even though the initial signals from ERO were very positive, where we got down to details, unfortunately, it was no longer so optimistic. And that's where we can also observe some concerns with regard to allowing investments funded in a hybrid -- on a hybrid basis. Building modern power generation requires a new approach also to investment funding. That's what we expect from the regulator. That's what we expect from the Chair of ERO to also allow a slightly different mode of investment funding in the grid than those applied by -- over the last couple of years.

Thank you very much. We finished the pool of questions asked yesterday. Now let's pass on to the forum that you used on an ongoing basis. Question #1, why is PGE involved in the purchase of Fortum, CEZ coal assets. Over to Mr. Dabrowski.

As I mentioned, we're interested in acquisitions. We want to expand our market presence. As regards to Fortum and CEZ assets, if the acquisition takes place, they will also be included in the great plan that we have in PGE, which is the conversion of coal-based assets to gas-based assets. As for Fortum, we are interested in the network as in Kraków and CEZ Skawina because as you all know, we are the main generator of heat and electricity in Kraków and Skawina. We would be interested in that resources and those resources to expand and support our position in the city. But let me emphasize that as regards the -- if the acquisition takes place, the sources will be transferred to gas.

Thank you very much. Next question from Mr. Puchalski from Santander Brokerage House. Do I understand it right that the units where PGE is -- plan -- it will not be subject to carve-out processes?

I can take it. Ladies and gentlemen, we've emphasized it on multiple occasions as well as in the strategy, the energy transformation of PGE will be based on mostly in -- especially in District Heating on the transitory fuel, which is natural gas. We have the first taxonomic information from Brussels. It's not exactly optimistic. There's no possibility, and I hardly need to explain. To launch all the gas-based investments until 2025, I hope the European officials will realize that they are expecting what's impossible and that the solutions put forward are definitely not conducive to energy transformation in Poland. The entire District Heating segment is supposed to be converted through the transitory fuel, which is natural gas, into the ultimate fuel, which is probably -- which will probably be hydrogen, green hydrogen, red hydrogen. Well, today, we're not capable of saying that. However, the new gas-fired power plant, Dolna Odra, is already pursued on as part of the SPV, which is part of PGE. All the sources based on low-emissions and zero-emission sources, whereas the carve-out will be covering those assets which use hard coal and lignite as the energy source.

Thank you very much. Next question from Ms. [indiscernible] Business. So when will the tender be launched for offshore farms, technology provider? And when should it be -- when should the provider be chosen?

I understand that this is a question about the turbines. We have the schedule in place. It will be done together with our business partner, representatives of Ørsted. And as regards to turbines, this is the most cost-intensive component of the entire project. We've already started the preparation of assumptions for the tender. And as regards to the remaining elements, it's done -- it's being done in line with the schedule. We are on schedule. So there are no reasons for concern not to launch the generation as assumed.

Thank you very much. Next question is from Mr. [indiscernible]. Has PGE already submitted a request to ERO based on the Offshore Act?

Yes, we were the first one to file. We did it on the first day when it was possible. We're waiting for the decision, as mentioned by Mr. Straczynski. It was done on time and we're waiting for the decisions, which will hopefully be positive for us.

Thank you very much for your answer. The next question is from an analyst, Mr. Chris [indiscernible] from BDM. What is your opinion about the maximum price in the offshore regulation?

Well, it was mentioned by my colleague, but obviously, we don't know all the decisions here yet because the ultimate decision will be made by us once we were aware of all the data. So first, we will know the ultimate price for the difference -- differential contract. We'll also be determining technologies. That's when we'll be making the ultimate decisions. Today, the maximum level presented by the Ministry of Climate, in coordination with the Ministry of State Assets, seems quite satisfactory. However, all the decisions and the market information will be communicated after the tenders have been settled.

Thank you very much. The next 2 questions, I see. What are the one-offs for 2019, 2020 presented in the bridge diagram for distribution? And the second question, what do you think about EBITDA in the Distribution segment for 2021? What are the factors behind it? And what will the volumes be like in the near future? Over to Mr. Straczynski.

If I remember well, in terms of distributions as far as one-offs are concerned, of course, I will also ask our analysts to double check it if I haven't -- if I don't remember it correctly, but I think there are only assets on actuarial provisions. I think these are only the changes to the discount rate. I can't remember any significant one-off events, but -- and what we think about the future situation, I mentioned this for a while, as I was discussing the slides for the EBITDA process for 2021. Ladies and gentlemen, the tariff has been approved. The market is fully regulated. What is important in 2021 is, first and foremost, strict control of distribution costs, increasing the -- its efficiency, transferring the cost of the tariff that's controlling the investments to make sure that the Distribution segment could indeed invest in those areas which require such investments, rather than pursuing only such investments as to pursue development plans which don't bring any significant economic effect. And as regards to any possible turmoil in volumes, it will all depend on the pandemic situation globally and in Poland. So far, we have not been observing any major decreases in volumes. If the pandemic is controlled, it seems that increase scenarios of the energy volumes distributed can be expected in conjunction with the economic growth, which will certainly happen after the pandemic is over.

Thank you very much. The next question, why did not PGE do any write-offs at the end of 2021? That's also a question for Mr. Straczynski.

Ladies and gentlemen, I'm sure you remember that the term of this Board was started with the decision to redo the impairment tests, especially in conventional energy, which ended up in over PLN 7 billion write-offs -- PLN 7 billion worth of write-offs in the conventional assets. We also ran such tests at the end of this year. The market situation had not changed all that much for new factors to arise that would be a reason for a certain -- for new write-offs. But as I mentioned, the market situation and the profitability of conventional assets is still lowering. And the fact that there have been no write-offs -- that there were no write-offs in 2020, it does not mean that there would be none in 2021, whereas majority of that -- the allowance prices from EUR 14 to EUR 20, EUR 24 per ton, it was necessary to write them off at PLN 7.5 billion. Now the situation where the CO2 price rose from EUR 24 to EUR 42 and the margin dropped, it will definitely be a factor conditioning the impairment write-offs. And we cannot exclude the possibility of further write-offs at the end of 2021.

Thank you very much. We're drawing to a close of our conference, but we have one more question, which we will take. That's returning to the cogeneration plant of Czechnica. How is PGE contemplating to ensure the profitability of cogeneration plant, such as Czechnica? Is the model sufficient? That's for Mr. Dabrowski.

Ladies and gentlemen, we wouldn't have made the investment decision if we had not included the price of cogeneration support price supported -- put forward by the Chair of the ERO. This is an investment project with a positive NPV. It's satisfactory to us. So we can be -- we have a comfort about the future. I'm sure we will be ensuring modern energy, low-emissions energy generated from a low-emission energy source for the south of Wroclaw. And it's a profitable investment.

Thank you very much. By virtue of the same, we have exhausted the Q&A session. If you have not asked any specific question, we're at your disposal. Thank you very much for your participation in today's meeting. Naturally, the press office and the investor relationships -- relations office is at your disposal. And we -- may we invite you to a next meeting devoted to the presentation of Q1 results in May. Thank you very much for your -- for being with us. Goodbye.

Goodbye. [Statements in English on this transcript were spoken by an interpreter present on the live call.]