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

Good morning. I think we're online. On behalf of PGE Board, I'd like to welcome you to today's conference devoted to the Q3 2022 results. Thank you for coming to the studio. We're glad to see you. Of course, the conference is devoted to the financial results of Q3, but we will try to address the current events. I think the situation in the power gen sector requires that. At the end of the meeting, we'll have a Q&A session and traditionally, we will start with the questions sent to us for which I wish to thank you, and then we will give the floor over to those -- to the attendees, representatives of the media as well as representatives of the capital market. Today, the conference will be held by the CEO, Wojciech Dabrowski. Good morning. The CFO, Lechoslaw Rojewski and Lechoslaw Rojewski; and Filip Osadczuk, the Finance Director -- Finance Division Director. Over to you, Mr. President.

Thank you very much. Good morning. We're meeting at the summary of Q3. This is another meeting that was very demanding from -- for companies from the energy sector. Today, knowing the scale of changes in the sector, we know that the ensuing one might be even more demanding. I'd like to start on a positive note. It's been 5 years today since the establishment of PGE Energia Ciepla. This is an example of the successful repolarization and integration of district heat. Owing to this, the company that is the change leader in District Heating and regulations, it's working today under quite different standards than 5 years ago. And it's been pursuing its strategy in a consistent way. We're very proud of it because over 5 years, we've been able to shift it towards a state-controlled company that has prospects of development, of growth. It's been 5 years today since PGE bought PGE Energia Ciepla heat energy and integrated it. Then we included other cogeneration plants. And today, it's the single largest heat producer in Poland. It's worth remembering that this activity was one of the reasons of putting forward the NABE project, which is supposed to separate co-based assets and district heating is supposed to be one of the pillars of our activity over the next couple of dozen years. That's our plan. We're supposed to be one of the largest district heat producers in Poland. What have we done to make sure that NABE arises? You always ask these questions. So we've been consistently pursuing all organizational activities to prepare the group for NABE. We have transferred 6 companies that are controlled by PGE GE. So we've also pursued some separation and trading of purchase of raw materials so that NABE can operate on a stand-alone basis, which has been raised in the consultations among analysts. So these activities have to be separated and prepared so that NABE can work on its own. It has to be separated from PGE. We have organized the IT model and regulated the relationships between PGE S.A. and PGE GiEK and the power market. We have prepared the preliminary due diligence reports. So we are actually prepared for the asset separation and we're waiting for any financial reconciliations as well as consultations with the social side -- the consultations with the social party are in progress. So a vast majority of all the issues have been addressed. We have consensus on that. But at the end of the day, this will be communicated once the agreement has been initialed by all the parties. I'd like to address the regulations in the energy market because it's a very important area raised by you as analysts as well as journalists. A lot has been going on in the energy market, especially -- well, in the power gen sector, but especially in the energy market, we're facing the energy crisis that we've been struggling with since the war started in Ukraine, Russia's aggression against Ukraine that caused a dramatic increase in fuel prices and consequently, it contributed largely to the high inflation of the whole world is facing because it impacts all the global markets, especially EU markets, and we are a large country being an EU member states, so we're affected. Generally, the government is running a lot of regulations to impact -- to make sure that this impact is as little perceptible to the society as well as enterprises. Hence, we have many regulations arising in the market. We're analyzing them in depth. We have some concerns just as you have such concerns, we have concerns about maintaining the scale of our investments and consequently, also the rate of energy transformation. You know our plans; you know our ambitious strategy we've been pursuing it on a consistent basis so far without stopping despite the difficult market situation as of today. We've been analyzing those regulations. We don't know the shape of them, at least not all of them and how deep the impact will be of those regulations is still being analyzed by us because in many aspects, there's still some interpretation or still interpretation uncertainties. We have to cover the investments connected with multiple billion CO2 emissions. Today, the cost will amount to PLN 20 billion. And in 2023, we're talking about PLN 26 billion or even PLN 27 billion. So these are very significant amounts, which will flow out of the company -- of the group. So let's remember that today's the operating costs are higher than our market capitalization. So we have to take care of every single zloty and we will be doing so in the following year, but on a positive note, only until the end of the year, we will have spent over PLN 6.5 billion on CapEx. So let me emphasize that the investment rate -- it has been unhampered, we will be spending PLN 6.5 billion. I think it's a good result given the difficult market situation or global situation. In the next years, our transformation CapEx has to increase in our plans until 2030. We plan to spend PLN 75 billion. In 1.5 months, we'll have 2023. So we have 7 more years to pursue those CapEx projects, we're preparing for it very meticulously. However, those means have to appear and we hope to be able to pursue those investment projects without any obstacles, but there are many components to that. The war in Ukraine has to stop, the crisis we're facing has to stop so we can fully responsively towards our customers, our owners, our shareholders to pursue this policy. I'd like to emphasize that the limitation of price increase for the society is necessary, and that's the right direction because the economy constitutes a whole and if we're facing a difficult situation, we have to spread it to all the areas, all the sectors, we have to spread this difficulty and share the risk. However, I'd like to draw your attention to the fact that despite our realizing that what the situation is, we cannot operate below the cost because this might lead to the company's collapse. And today, in the public sphere, well, it doesn't pertain to you the attendees because we happen to -- we know you, you are the industry journalists, but there are some -- there is some information in the public sphere about excessive profits, extraordinary profits. I hope that today's conference will dispel all sorts of asset rumors, misinformation about our extraordinary margins and profits. We will be soon presenting the specific results because today, we're not talking about any potential extraordinary profits, which is justified by the EBITDA, which is 9% lower on a year-on-year basis, which is evidence to the fact that the fake news that we're struggling with. It's difficult to fight them because today's social media, the Internet is actually something that can hold everything with impunity, it's sometimes very difficult to fight this. The most important projects still if the offshore wind farm project. Recently, we received the environmental conditions on the onshore connection for Baltica 2 and 3 that we obtained and the tendering of the general contract of the onshore project and for the contract engineer for Baltica 2 and 3, also preparing to obtain the building permits for Baltica 1, the environmental studies in the offshore and onshore parts have started, and we have acquired the land in the -- at the Port of Ustka for operations and maintenance base for the companies and the offshore wind energy center. Some of you were present with us at the celebration. It is extremely important to us to have acquired this maintenance harbor at this particular location in the context of our operations on -- and along the Baltic Sea. So we are really satisfied. And we have already announced a tender for program -- operational and maintenance program, and we want to complete this investment as soon as possible. Hard coal, that's also of great interest to you. I'm sure that's of interest to our shareholders and our -- and the journalists for the last 4 months, this has continued in the headlines. We as PGE have been tasked with bridging the gap that was left after the Russian coal disappeared. And PGE has repeatedly offered to keep its promise. And today, the situation bears those promises. We have coal. It is being distributed by us by local distributors through our storage units. And until today, we have supplied almost 5 million tonnes. We have signed agreements with 220 local governments concerning distribution of coal. So coal distribution companies divided Poland into sections, and we were given 600 municipalities for which we are responsible, where we have to provide fuel. With 220 out of those 600, we have already signed contracts for sale and distribution of coal. It should be emphasized that this was a special task, which required a mobilization within the group. This was indeed an uphill operation. All those logistical things are still underway. Let me just remind you that previously, we have only offered a coal for large recipients power plants. And now we went down almost to the level of individual users. So for us, it represented a major organizational challenge. As regards the main issues, that would be roughly it from me, and I hand over to Lechoslaw Rojewski, Vice President of Finance, CFO and then we will be open to address your questions.

Okay. Ladies and gentlemen, I would like to briefly comment on our financial results. Of course, our presentation will be traditionally shaped. We will start with a brief overview of what has happened in the national energy system overall, then about prices and then we will talk about the PGE Group itself, zooming in on the results in our 4 principal segments. Then we will briefly talk about investment, debt and obviously, the prospects for the upcoming future in the context of legal regulations that have appeared recently and the regulation on price limits. Let me start briefly with national electrical energy system. With regard to the third quarter 2021, now if we compare 2022 with 2021, we see a decline in production of electrical energy and the drop was on average 4% year-on-year. So if we represent that in volumes at 1.9 terawatt hours. This decrease in production was driven by lower production on hard coal to 0.8 terawatt hours and gas to [ 0.4 ] terawatt hours. It was partially offset by the renewables market. And as I mentioned at our previous presentation, last quarter, we clearly see growth in the number of photovoltaic installations. And this growth in the number of potable takes with good atmospheric conditions contribute to growth in production from those sources quarter-to-quarter. And this growth was at 2 terawatt hours. If we look at energy consumption, also the national energy system shows the quarter-to-quarter consumption was 1.5% lower, which we interpret as being linked above all to the increase in the average daily temperatures by 0.5 degree per day and Poland was the cheapest country in the region in terms of electrical energy prices. The average price was PLN 1,050 per megawatt hour. Let me remind you that in Germany, this price stood at roughly PLN 177 -- PLN 770, in the Czech Republic more than PLN 1,800 per megawatt hour. However, the increased consumption compared with national output forced us to change the directions of our international exchange. And in the third quarter 2023 as compared -- 2022 as compared with the third quarter (sic) [ '23 ] was shifted towards imports of 1.2 terawatt hours was the net result. If we now move on to the price. In all months of the third quarter, we recorded growth in the price of electrical energy. And the price was over PLN 1,500 per megawatt hour. And we link that with growing prices of raw materials, commodities. In connection with the armed conflict in Ukraine, the price for contracts on hard coal ARA was at USD 400 per tonne initially. We also recorded major variability in the prices of gas within a record period of price of gas reached EUR 300 per megawatt hour. Let me also remind you that an additional factor which contributed was CO2. CO2 also fluctuated between EUR 70 and EUR 100. So all of these factors contributed to this high price on the base market but also a high price in the spot market. Price at the spot market on spot contracts for 2023, reached PLN [ 2500 ] per megawatt hour. And today, after the introduction of the recent regulation, the price dropped to more or less PLN 100 per megawatt hour. As the CEO has already mentioned, those prices matured significantly for the economy. Hence there have been certain constraints, which resulted in the decrease of this price and quite a considerable decrease of the price. You might have noticed that the commodities exchange obligation was lifted. If we look at our group specifically, and focused on our 4 pillars and that is production, distribution, sales and heating sales, you will notice that as the national system, also in our group we recorded decreases on generation by about 10% compared with the same period 2021. And here, the decrease on hard coal, 22% on gas, more or less 50%. and on lignite, we had demand from the operator to use our units on lignite. And at this time, we also had to restore our stock on hard coal. So we had to work in parallel. Also, consumption and distribution of electrical energy, a 3% drop as we call it. And that was related, first of all, with the higher share of photovoltaics. And -- on the other hand, that was related to the structure of recipients in our region. The structure being different from the structural recipients serviced by other groups. In general, in our region, there are more individual customers and fewer industrialists. When it comes to retail sales, sales to end users also in Q3, as in the previous ones, we observed a drop by 10%, and that's mostly in tariff B as well as tariff G. And in this case, we observed that this was, first of all, owing to the increase in energy collected by prosumers who generate PV energy. We also observed decrease in heat sales by 3%, owing to higher average temperatures vis-a-vis of comparable period of 2021 by 1.7 degrees Celsius. If we now take a look at the major factors or major value drivers. For our EBITDA, we observed an increase in the positive effect for electricity and power generation. And owing to this, we had a higher lignite generation as compared to hard coal. Owing to this, we observed a higher price increase dynamics, compared to the variable cost of power generation, and that positive effect translated into PLN 709 million also in the annualized period. Our power generation revenues increased by PLN 4.7 billion, which also reflects the high price dynamics in the market. Let me remind you that the price increased by PLN 333 per megawatt hour vis-a-vis the comparable period. This price increase also -- was also reflected by the increase in the CO2 emission rights by PLN 169 per tonne and also a significant increase in fuel prices by PLN 1.3 billion. Also in Q3, we observed a drop in the power market as well as the systemic service prices, which amounted to PLN 55 million. Personnel costs owing to the signature of social contracts increased by PLN 171 million. And the item presented here as other, we had, first of all, the effect of external services, which followed the increase in inflation, environmental fees as well as lower capitalized costs. We have to emphasize that the EBITDA level, we had a drop by PLN 184 million in Q3. We also need to emphasize that we had a change in the recultivation provision of -- to PLN 422 million, which reflected the update of the inflation level as well as the update of long term -- the long-term discount rate. Because let me remind you that we compare it to 3 periods and in the longest periods for 25 years, there have been slight decreases. As we pass on to CapEx for the first time for a longer time, we can say that the CapEx has significantly grown on a quarter-to-quarter basis by almost PLN 1 billion, actually 3 investment projects that have been pursued in 3 segments, which was Conventional Generation, we incurred large CapEx for the gas unit in Dolna Odra. It has been separated from Conventional Generation, the Gryfino -- PGE Gryfino 2050 company. Another driver that caused such a significant increase was distribution in CapEx -- was distribution and the cabling for low voltage grids as well as the connection of new customers. And the third driver was renewable energy. And here, we have the modernization project of the hydropower plant, Debe and the pumped-storage power plant Porabka-Zar. As we take a look at our indebtedness, our indebtedness versus the comparable period of 2021 dropped by PLN 1.26 billion. The cash balance at the end of Q3 '23 amounts to PLN 1.3 billion. But if we take a look at this, PLN 1.84 billion -- but as we take a look at this, and this, unfortunately, this amount has grown as compared to the previous period by PLN 1.3 billion and this indebtedness at this moment amounts to PLN 11.1 billion, which means that our net debt to EBITDA is at the level of PLN 1.31 billion. And to wind up, let me tell you that the prospects for 2023, which are quite demanding. The outlook for 2023, we don't expect that the EBITDA might be at comparable levels at the end of 2023, we expect that the EBITDA will be decreasing for most of the segments. As you can see, practically in 4 segments: Conventional Generation, District Heating, Renewables and Supply, we have dropping claims, which stem from the implementation of the act on extraordinary measures and the price cap of electricity and district heat. And in District Heating, you should pay attention to the fact that the increase in the raw material prices is not translated to write-off. It is with some delay. So we are also skeptical in terms of district heating, only distribution is our segment is the only segment where we are taking -- we have a stable outlook for distribution and we expect that ERO might increase the WACC to 7.8%. We also expect a possible additional investment -- premium for reinvestments and the significant investment project, the money that we obtained for recapitalizing prompt us to expect for this segment to grow. Thank you very much, and I'm ready to take your questions.

Thank you very much to the Board members. We will try to start by addressing the questions traditionally that have been sent online. Let me try to take the questions that have not been addressed in the presentation. One of such topics is obviously, nuclear energy. So someone is asking for the presentation of the actual status of work for nuclear power plants.

Well, the only thing we can say is what you know from public information, the LOI has been sent. And in the LOI, we have agreed that by the end of this year, along with the partners, we will be develop -- drafting development plan for this location. So first of all, it's about checking whether at the end of the day, a nuclear power plant can be built in the location on the site, whether geological conditions permit that. Secondly, in the development plan, there are supposed to be an initial plan, including the financial model and the schedule or time line. The work is underway. The group of our Korean partners have visited the site in Patnow. I think it was 10 days ago. So the Koreans perceived that location very positively, at least on a preliminary basis now, analyses will follow whether that location meets the geological and seismic conditions because this is the most important requirement for taking further steps in this investment project. To continue along that line. Hopefully, we will finish on that. The key question is why PGE wants to invest again in atomic and nuclear energy since it was not part of the strategy? There have been extraordinary events, the war broke out beyond our eastern border and this cause for us not only us, actually, I think most companies have reviewed the strategic -- strategic assumptions, not only power gen companies but also, I think it's true for all the major companies operating in the market, broadly understood market, not only state-owned companies or state-controlled companies. They are verifying their strategies. But I think that our major assumption is to pursue the strategy towards climate neutrality. Obviously, the role around the role of gas as the transitional fuel because we have been analyzing it, and it's very hard to plan on it in a longer -- on a longer-term basis when it comes to the availability of that fuel compared to other low-emission fuels. Before you ask those questions, we obtained an offer to build a power plant in Rybnik. We are analyzing this -- but the ultimate decisions are still ahead of us. Right now, we're analyzing the offers that have been or bids that have been submitted to us. Let me remind you that since the publication of the report, the gas and other fuel prices have grown fivefold. CO2 emissions threefold. Of course, the energy prices have to follow versus natural. And there are a significant factor impacting the ultimate price. It all changes the economics of the projects. And in terms of thinking about nuclear energy that the increase in fuel prices has meant that investments into nuclear generation has become comparable to other sorts of power generation, of course, with the proviso for the initial CapEx because in terms of nuclear power plants. The initial cost is much higher, but in terms of the longer term -- today, nuclear power plants have become more attractive. Hence, our interest in the potential construction and being a partner in the construction of nuclear power plants. It's also important to observe the increasing social acceptance. When we run such a survey 2 years ago or even more about the social acceptance for nuclear power plants, then only around 25% of the society express their approval. Today, it's 85%. This shows how the threat that we have beyond our eastern border has increased the consciousness. But there's also the education from the media, from the state go a long way. We're also trying to add to this about how the energy transformation is supposed to look like to be safe to generate at an acceptable price for customers. Hence, I think that 85% of support for nuclear power plants, also results from this. Let me remind you that this project will be pursued as a government -- no, I should correct myself also a government project will be implemented. The one that we are implementing right now is commercial business project. And in terms of the model of financing, we will be able talk about the details once we've come to the stage of details. But the pace at which of those things are developing is very rapid. Our Korean partner is also a proven partner with a track record of building a nuclear power plant in Korea and in Saudi Arabia. So -- and also done on schedule and within the budget. So we will see how the situation develops.

Another topic that has already been mentioned when we talk about our outlook for 2023, but it is so essential for our company that we will address another question concerning our overall assessment of the impact of regulations on energy prices on the result of the company in 2023 and also how it will affect our individual segments. Maybe Mr. Rojewski address this?

Ladies and gentlemen, as I have said, as of today, the exact assessment of impact of this regulatory document that is intended to protect consumers of electrical energy cannot be provided today. We are not able to give you any details on this because, first of all, we are analyzing the provisions of this loan, and we are making an effort to interpret the provisions of individual regulations correctly. On the other hand, we still do not know how the macroeconomic environment is going to develop. We do not know what the market situation will be. And also, we are analyzing our cost levels. But as I said before, in those 4 segments, those things will have a major impact on our EBITDA level. So that is what we are expecting. But we cannot say as of now how big this impact is going to be. For sure, the next year 2023 is going to be a major challenge both in conventional energy sources and in renewable energy in trade. And we'll be able to present more realistic impacts for us next year once we have completed all those studies. Theme that goes across various topics. There have been concerns that maybe PGE would be left with high prices of imported coal for next year without the cost being carried over in the light of this special means regulation. We will not be left with coal. And secondly, I cannot imagine a situation and we do not carry over the cost of assessments of our coal costs. So definitely, this cost will be -- including the total cost.

Thank you for this comment. I think that should clarify this point. And a question regarding capital market. One of our competitors informed about regulations on freezing energy prices in 2023 is not permitting to cover the costs. What is the price with [indiscernible] comparison with a PLN 7.8 post?

Mr. Rojewski, the unit costs for 9 months of 2022 and throughout 2021, stood at similar levels to what the long suggest that they were within the range, PLN 7 and PLN 8 gigajoule. On 3/4 of output costs are fixed costs. And the main driver of those fixed costs are the headcount costs. So those unit costs depend first of all, and to a large extent, on the assumptions that we made on volumes and on inflation levels. because that translates into cost increase. How that will impact 2023? It's something that we are currently analyzing. But I can say unequivocally that there is a major risk. And in fact, the price of PLN 7.8 per gigajoule, which is stated in the law will not be sufficient to cover this cost, unfortunately.

Thank you. Among the topics that we have not addressed yet, there is something that might be of interest to you as well, PKP Energetyka. Can you add anything on the talks that are in progress regarding the entity PKP Energetyka.

I can just say that we are looking for opportunities to acquire new entities. And have we made any specific commitment we would have communicated that to our shareholders, that's our obligation. So if we make any key decisions whatsoever that might affect the functioning of the company on the expenses of the company, immediately, this information will be provided to you and the market.

Thank you. There are a lot more questions. But we would also like to give the opportunity to the representatives of media and capital market present in the room. So the floor is yours.

Mr. President, I would like, first of all, to ask you about imports of coal for individual users. But in the context of the contract that you were supposed conclude with the Ministry of Climate and Environment precisely to cover the cost. At which stage are you in the talks with the Ministry of Climate? What amount can we talk about? And this dynamically changing price of hard coal, ARA coal, maybe this will affect the dynamics of the whole process. We know that imports usually were more expensive. In some cases, that was profitable. Yet the question arises whether the task -- the hugeness of this task with a decreasing price of coal may deteriorate your whole business concept here.

As regards to our business concept, this was somewhat forced. Let me just remind you that we were all that specifically by Prime Minister Mateusz Morawiecki to engage in this project in order to bridge the gap that was left when Russian coal disappeared. And we chose contracts in October -- September. Of course, the price of coal was completely different than [Audio Gap] We had a highly unpredictable situation regarding the heating season that is the season we are in right now. Hence, the contracts were concluded at higher prices. It is natural. Well, that's the global market, we are part of the global economy. Today, of course, the price of forward contracts is higher. Most contracts were concluded in [Audio Gap] And this agreement that you specifically asked about will ask all costs, all differences that will appear between the price at which we sell to individual customers or local government and the price at which we buy, that is the cost because it is not just the purchase price, transport shifting, all that counts. We are now at the final stages. of consultations with the Ministry of Climate and Environment. And I hope within the upcoming days, we will sign this agreement. This agreement will cover all our extraordinary costs that might appear in this situation. And it has covered all differences between the set statutory price and the actually incurred costs. So we will not sustain any loss whatsoever.

[indiscernible] I have a few questions regarding coal. The data show that you have seen a great cost in coal, about PLN 25 up per gigajoule. And I would like to ask which portion of coal in that period came from imports? I mean, coal that was used in PGE power plants. I'm not talking about entire coal, but only what the coal that you actually consumed in your power plants.

As regards to the price, it follows from the fact that we negotiated the agreement with Pasco Group Gornicza and we informed the market about that. We are now in talks about deliveries for 2023. As for imports, frankly speaking, I do -- well, it would be difficult to give a share percentage. You know that historically, we have used imported coal along the coast line, but that is with cogeneration. So we didn't have any deviations there. The weather helped us. The atmosphere in which we all found ourselves also helped the whole market, but also it helped the society and consumers who can afford to spend less on energy because the weather is warmer. And the situation in which Polish and the European economy has found itself is actually helped by the weather conditions. Paradoxically, the energy company should want to have the temperatures to be lower than they are now. But from the point of view, broadly understood interest of our climate. And if you look at our long-term operations, of course, our objective is not to kill Polish clients and to stay for Polish business. As you know, our objective is to support Polish business and Polish economy. We have a majority stake of state in our shareholding structure. And so we run our operations in the optimum way. So as to satisfy both our majority shareholder and our minority shareholders. Coming back to this question about the percent that depends on what portion PGG delivers so that's not delivered to us.

Let me be more specific about my question. Out of this almost PLN 8 growth of price per gigajoule. Most results from the growth of price at PGG rather than imported coal. Okay. So that means that now the coal costs about PLN 40 per gigajoule. Where at PGG?

It was PLN 14 plus PLN 27, you get over PLN 40. You have to ask PGG, probably they have various rates and various prices for various clients. But on average, that is the result for you. We assume that PGG would treat us as its biggest recipient, therefore, giving us somewhat different treatment from -- as compared with the rest of the market. Now the year is coming to an end. We will also complete our negotiations regarding the price for next year. Well, maybe the actual price is similar to what you calculate.

Will you want to accept such a price for next year?

We are now in talks. I will not make any comments on the numbers that you have mentioned. You should ask PGG and ask them about their offer. We have presented ours, but this is not the right time for me to discuss the price per gigajoule. We are still in negotiations that would be against simple rules of negotiations. And the offer for end users of businesses for next year. If you analyze the impact of the law, will you be able to -- you are still analyzing it. Will we be able to prepare an offer for businesses that are not covered with the shield where the prices higher than the protected.

Have a next question, whether you'll be taking part in the tenders for local governments, whether it pays off?

Starting with the last question, we've been analyzing all the regulations. They have not all come into force yet. We are generally part of the tenders, but we're also analyzing the impact of the regulations on our offers because they will be impacting the bidding process. And when it comes to energy prices owing to the systemic regulation that we also partially initiated too. Impact of the price limitations in the market because in August, there was a moment where some offerings appeared in and owing to this system when the highest top fuel price determined the price of a day. It was mostly gas-based prices, not ours actually. It wasn't us who determined the price. We were also accused by some people from the media of it. Well, the market is organized in such a way that it's transparent and it determined the price, but we didn't actually sell energy at so high price. Today, the price is, I believe -- well, forward contract is about PLN 1,000. I haven't checked it today, but I think it's around PLN 1,000. This is probably the price that we will be bidding on -- at the market price, it would be hard for us to bid on a lower price, but these are individuals -- yes. But I mean, the margin, which is defined tax official in the regulation. I'm sure we will be observing the law and the provisions and regulations to be implemented. Like I mentioned, they are all being analyzed, not all of them have come into force, but we will be definitely bidding at such prices to abide by the regulations first and secondly, to cover our costs.

But have you prepared the proposals for new customers? -- for 2023?

The negotiations are underway. The supply company is in contact with the customers. I'm sure there are different -- these are different proposals for different periods and different customers. Contrary to come and believe the energy market is complex like people present different drawings and we are attacked for this. There are some graphs showing the high prices without providing the volume. As you know, the market is very complex. So such news that appear is basically disinformation against us, which is shown by the results presented today. There are no extraordinary profits, no extraordinary margins. But in a situation of an energy crisis, we believe most of the society believe that -- that it's -- that the crisis arose as a result of the war in Ukraine. But these activities are aimed at causing uncertainty staring emotions in Poland, which is in the interest of those from outside Poland. We are pursuing a rational policy and pursuing our strategy on a consistent basis, and we're determined to provide energy to Poland until the end of the world. It is our goal to -- it's not our goal to maximize our profits and to kill our customers because at the end of the day, it would probably hamper the financial standing of our customers. So it's not in our interest quite conversely.

The next question is about the obligations. You mentioned the launch of the trading platform. When could it possibly be launched? Have you talked to ORLEN, TAURON other operators? What would it look like?

We have actually -- we're supposed to receive it in a couple of days. We're building this platform internally. Our IT company is dealing with it. And we will be trading through a brokerage house. This platform will be part of the brokerage house. So it will be a pure transparent market presenting the proposals, the bids and matching customers. That's the way it's going to look. So it's our ambitious goal to launch it as of January 1. As of today, it seems realistic. So I cannot say that anything is wrong about the project. We assume it will be launched as of January 1.

Have you talked to other major players and generators to be part of it?

Frankly speaking, well, we offer such services to other customers. But whether we are in dialogue with any major generator. I could not tell it to you. I don't think so, but we'll be open to this. Generally, we will be dealing with matching customers. If someone wants to join our service, I think it would be feasible for us to also sell the energy generated by someone else. It's -- this is aimed at matching transactions. We will not be servicing those transactions. It will only be about the matching.

Perhaps we should give an opportunity to someone else?

Well, I believe that if the price increases grow so much, then the PGE will be earning a lot of profit.

Why did you sell it for PLN 1 if you could just increase it?

You just relate to this. You are addressing a situation from several months ago. The realities were -- then were quite different. Let's remember that we're in the same boat as coal mining. There wouldn't be power gen without coal mining and vice versa. We're happy to see our colleagues experiencing a better time and I wish for them to keep it going forward when we need more polished coal. So we don't have to import it. Well, thank you very much for those in-depth questions. We'll be happy to listen to someone else.

[indiscernible] virtual industry. I'd like to ask you how the coal import is funded? If it's based on a loan, which institutions are providing that loan? Is the plan still enforce -- in place so that by April, it should reach 10 million tonnes? And secondly, have the group companies submitted tariff applications to the ERO President?

When it comes to prices, well, maybe not -- it's of less importance when it comes to households, prices for households. But when it comes to distribution, it's about the he evaluation of the regulatory agreement and whether it will be reflected anyhow in the tariffs for 2023 when it comes to the return on capital. When it comes to the -- the coal prices, we're analyzing the process. So far, we have sold -- we have delivered to customers. 4.7 million tonnes, half of what we've declared. The volume of 10 million is still to be pursued. We are in the process of doing so. And it seems that the entire volume has been ordered. When it comes to the tariff applications, they have been submitted. We are in the progress of -- in the process of dialogue with ERO. I would like to share any details as long as the dialogue is in progress. We're not publishing anything. When it comes to funding, we're being funded by BGK, we're being supported. So we have external support for that process. And additionally, we have state treasury guarantees and the agreement or regulatory agreement for distribution -- energy distribution.

If you could just make it more precise because we're not quite sure what you mean. It's about the agreement that the distributors have signed with ERO.

Sorry, we don't hear the question. It's off the mic. May I ask you for some patience. As the President said, the applications have been submitted and they are being negotiated. Well, if we sign -- if we signed it, we will have to pursue it. It's about the replacement of remote meters, a different calculation of return on capital employed. I think it will be more advantageous than today. And companies that invest in the grid will be promoted when it comes to investments in the grid. I'm sure we'll be pursuing it as assumed and that investment will definitely be favored next year, and we'll be pursuing what we have signed. It would be difficult for us to sign something that we are not going to pursue. This is a good assumption. The discussion is also good. It has been observed that it's important. A lot is being spoken about generation, about gas, but people forget about the supply. The energy has to reach the customers. So this will be pursued by us. We have a broad program of meter replacement to have the remote meters. These represent billions of PLN in CapEx. So we are mainly interested in a stable regulatory framework to be established that will allow us to make long-term decisions.

With reference to the topic of the platform, and PGE, I would like to ask what will be PGE's policy regarding those trading platforms? Because companies within the industry are worried whether the market price would be representative or not.

Well, I think these concerns are not justified. The purpose of the platform will be to set market prices. The process will be fully transparent. It will consist in matching offers of sellers and buyers. The underlying assumption is that this should be benchmarked to the market and realistic. We want to have real prices. And this way, we want to ensure that this trading is fully transparent. If we indeed decide to reduce our trading in the commodities exchange, we want to proceed in a moment let it transparent. We will not negotiate prices with potential buyers. We actually decided immediately when there were first reports of the possibility of this exchange being closed.

And what portion of your energy will be sold through this platform?

I do not know; these are the decisions made as part of our sales strategy. Now we are working on our sales strategy for 2023. Please remember that the market changes for us because we have this NABE prices. So we will also be the buyer. PGE will not be just the major generator, but we also buy energy in the market. Now we are working on our strategy for next year and also for the following years. But mainly, that will be linked to another functioning and our operation in this market.

But a huge company like yours, could give us some comment on the role of prices at this PGE platform, which is the underlying factor of transactions in this type of market? What will that be like in the future when NABE limits trade?

Well, if it does limit trading and PGE, it will not limit us on the platform. The -- for us, the primary objective is to trade in a transparent manner. That is a necessary condition for our operations in the market.

If there are any constraints or if we are not allowed to trade in the exchange, we will trade on the platform?

We will see how it works once it is launched, then will be the right time to comment on it. But we hope that -- this will allow us to conclude transactions at balanced price, reflecting the actual situation.

Will you publish indices on the platform?

Well, that should be. So -- there will be some benchmarks. There must be some benchmark. Please bear in mind that this is to be done by a brokerage house. So as the CEO said, that will be fully transparent because there will be full access to it. So if -- you mentioned the exchange. But if we do that through a brokerage house, we have full transparency, full availability. So there is no possibility for any constraints or any preferences as compared to what is happening in the exchange. For the time being, we plan to launch this platform for ourselves, but we do not exclude the possibility of admitting also other generators to the platform. We think it can be possible, but we have not talked about it yet. It is possible, though.

And the last question, you said PGE was ready to hand over its assets to NABE. What can you tell us today about the future economic model or business model of the functioning of this entity? You will buy from this entity? I think 12 months ago, you were planning to organize a conference about that.

Yes, we assume that we will buy from this entity, but also maybe from other generators. That's not excluded.

The model, I think, is well known of its operation. Will NABE as a third-party sell on this platform?

Yes, potentially, as any other third party should be able to use this service. But we have not discussed it internally yet. We focus, first of all, on ensuring this possibility of transparent trading for our sales but providing this kind of service of matching offers will also be available to other customers, including NABE.

[ Tomasz Czarnecki ], cleaner energy. If you allow me, I would like to come back to the nuclear project. Well, the fact that PGE joins the consortium means that nuclear energy will replace low emissions sources such as gas and well, you're joining the consortium and the building of the power plant mean acceleration or just maintenance of the climate neutrality targets that you have in your strategy.

Climate neutrality overriding goal in our strategy, and we will consistently implement our strategy in order to achieve climate neutrality going through individual stages, written milestones that we set our strategy. Today, we are facing an extraordinary situation, namely the wall, which forced us to revise our thinking about the future to some extent. But let me reiterate with emphasis that most definitely as Polska Grupa Energetyczna we have always communicated that only nuclear energy can provide energy security for Poland and consequently, can allow us to replace fossil fuels with clean energy. We as PGE want to approach this project in the context of what is happening in the gas market. Its price is unpredictable today. We do not know to be at a gunpoint and be forced to make decisions. We don't want to build a gas-based generation so as to have a future problem. Dolna Odra is not at risk. No, Dolna Odra is moving on schedule and the Rybnik I cannot tell you whether Rybnik is at risk or not, we have just opened the bids once we have analyzed them. We will see the details, Polimex and consortium with Zemax offering a lower price, that is no secret, then the next bid is significantly higher. So we -- we've not made the final decision yet. And then there is this power market and placing Rybnik somewhere in this power market. In general, we would like to complete this project, but not at any cost, not at any cost. At the end profitability of the project will determine whether we go for it or not. But responsible planning of profitability is also very hard these days. The situation and the market is changing dynamically. So the situation may change significantly a year from now. On this assumption, we might say that the safest course of action would be to do nothing at all. But obviously, we cannot do nothing at all. We need to pursue energy transformation, which means making decisions that are tough but they have to be responsible and thought through. We -- one thing is certain, we need to achieve energy transformation, climate neutrality and to achieve climate neutrality, energy transformation is instrumental. I hope and dream that the next generation of Poles can get PGE as the principal supplier of energy and that principal supplier remains in Polish hands rather than a foreign capital because that's what means an uncertain situation. Hence, it is extremely important right now to maintain the level of investments that we are making at PGE. And for that, we need to maintain profitability of our operations. And today, unfortunately, there are some concerns in the market. Nevertheless, we do not have any talks about any major cuts in our CapEx or any radical moves aimed at slowing down or discontinuing our investment activities. However, the situation is dynamic when analyzing and events that occurred this year, we plan to spend PLN 6.5 billion in CapEx. And I think it is a very significant amount. In this hard situation in which I believe it is a success for PGE to spend PLN 6.5 billion and CapEx, we have already spent over PLN 4 billion. So everything seems to indicate that by the end of the year, we will meet this target. The situation is difficult, yet we will pursue our investments. We want to reach climate neutrality, and we are not declining on this.

Let me just make sure, you said the teams were working on this nuclear project, Korean want to have everything done on budget and on schedule. And you also intend on achieving this within those parameters. And your target by the end of the year is to get a preliminary tentative agreement on the schedule and model of funding. Will that be reflected in the strategy of the company? Or does it mean that -- does it mean that you will communicate to the market, adding a new component to your strategy, the nuclear component to your path of arriving at climate neutrality? And when can we expect such an announcement?

If we decide to take the next steps in this investment, for sure, we will also revise our strategy. And for sure, we will present this revised strategy to you. In fact, such a major investment would be hardly possible without strategy revision. If there is an inspection within the company and audit, they start with looking at the strategy, and they check whether the Management Board is implementing the strategy and that might be the first step for further inspection by tax authorities by audit -- Supreme Audit Chamber and so on. So we have to be careful about that. If we decide to go for this project to continue with this project will show in the first quarter. We'll definitely have a strategy revision. We'll try to go about it as fast as we can. And of course, the whole team is working on it, and the whole team will then approve the strategy. It is not just the Management Board. But I assume that the strategy revision will not divert significantly from what is included in the strategy today. We will probably make a short-term focus on certain areas for shore. Distribution for offshore, and that is going to be something that will remain unchanged. And we will also have large-scale nuclear energy as well as gas. So that will require some decisions. We continue with gas at the current share in the strategy or will the share of gas diminish to the benefit of nuclear power.

Okay. Given our time limit. If you have any further questions, we can take 1 or 2 more.

Mr. [ Savitzky ], [indiscernible]. There's been an option presented -- well, so you give me that opportunity. Let me take it. I'd like to drill on the topic of CapEx for next year. So I understand that you don't know yet how much you will devote to your CapEx because it will depend on the -- your estimation of the impact of new energy prices on your capacities. However, which CapEx projects are must-haves for you? The distribution and offshore -- what we have started. So Rybnik is not such an option yet?

No, it's not because we don't even know whether the proposals submitted by our -- by our partners meet our expectations. That's a difference of about PLN 3 billion, PLN 4 billion. I'm not even talking about the budget. I assume that the very high proposal. Well, if something turned out to be wrong, I'm sure we won't be pursuing it at the higher price. I can tell you, write-off. But we will open the bids and we will see.

What about the PV projects? Likewise, it's a constant, right?

Yes, definitely. The PV project will definitely be pursued. Even in a couple of days, we'll be inviting you to a major project event pursued by us. Okay. So by the way, is the onshore wind farm projects also a must have. Well, we are not strong enough to act instead of the legislator. We as PGE don't have that in place as yet.

Okay. Thank you very much. So for the end, last question, please. We don't hear it, unfortunately. It's off of the mic.

You were talking about the large interpretation doubts when it comes to the extraordinary measure at -- and you mentioned that you were analyzing it. It's maybe it should be amended. It's supposed to come into force on December 1.

It's not the first act to be amended before it came into force. Well, no comment. I'm sorry. Okay. Thank you very much for coming, I think we have reviewed all the aspects of our group's operations through the Q&A session. If we have not addressed any of the questions, we will try to do so through our press office and you are all invited to the conference devoted to the results for the complete year of 2022. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]