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

Ladies and gentlemen, welcome to the press conference of PGE, the Polish Energy Group, to sum up our financial and operating results of Q3 2025. We have VP for Operations, Maciej Górski; VP for Financial Matters, Mr. Jastrzebski; and Head of Finance, Piotr Sudol. Traditionally, as always, we will start with the presentation. And after that, there will be time for questions. So now over to VP, Maciej Górski.

Good morning, everyone. As every quarter, it is a pleasure to have you. I would like to especially welcome representatives of our main shareholder. Good morning. And well, you might have had a chance to read our report for Q3. It's been published, and we announced it yesterday. Results for Q3 when it comes to our operations and financials are quite close to what we estimated a dozen or so days ago. But let me just give you a brief overview. In Q3 2025, apart from the fact that we posted good results when it comes to EBITDA, repeatable EBITDA, PLN 3 billion, which is 20% growth compared to the previous year. And what's really important, we have managed to achieve very good results in terms of CapEx. We have spent nearly PLN 2.7 billion, which is an increase of 3% year-on-year. When it comes to our operations, and well, we will also mention CapEx. Our strategy from June 2025 has just amplified the fact that CapEx is really the apple of our eye and there is a lot of organizational efforts that we put into making sure that everything that is linked to our growth or development should be done as efficiently as possible when it comes to Heat and Electricity results are similar to last year. So there is 0.6 terawatt hour, which is a very small variance. And when it comes to Heat again, it's a very, very small variance, practically bordering on statistical error. What was important in Q3? Definitely, there was a supplementary auction 2.6 gigawatt has been contracted. This is an important revenue item in our results. When it comes to investment projects, and I will mention it in a moment, but the most spectacular ones is a tender procedure for new gas units, Gryfino and Rybnik, in both locations we want to add to what already exists. So there is a CCGT plant in Gryfino and in Rybnik. There is one being built, so those tender procedures are ongoing. And well, we need to learn and evaluate bids between the main auction that is planned for December. There was also a tender for a storage facility in Gryfino probably you've been following that. As PGE, we are trying to focus on the largest warehousing -- the largest storage projects. So 400 megawatts, 800-megawatt hours. I mean, these are one of the largest facilities that will be happening in Poland. So we're very happy because we have received 3 bids. It's a competitive procedure. So actually, companies are interested in bidding for us in working with us. When it comes to projects that have been finalized, well, 5 gas engines in Bydgoszcz, and well, maybe not huge success in terms of installed capacity, but when it comes to decarbonization and transformation -- energy transformation process, well, it is a contribution. Projects like this one definitely show that this business line where we're going to spend around PLN 15 billion as well. This business line is moving, and we're doing all kinds of projects, including small projects. Now on this slide, you can see our key projects, our key initiatives. Good news, very good news is that our flagship projects for -- when it comes to renewables, Baltica 2, this project is happening according to schedule, on budget. Last time that we met, we were mentioning that we had a partner who had some challenges at that point. Ørsted was actually during their issuance campaign, but now they've done it, and they are trying to curb their exposure to new projects, and they only focus on projects that are ongoing, that are in progress. And actually, Baltica 2 is something that they describe as a really important project in their portfolio. So we are very happy to be fulfilling our priorities onshore. We're building a station, while Ørsted started working offshore, and we're preparing seabed for cables, for foundations, and we've managed to achieve some tangible results, tangible successes between the sea and land. They had some challenges with drilling on our side, it went very well. I need to mention [indiscernible], which is a Polish company from the region of Silesia, and they are a great example of fantastic local content that's been helping us with that part of the project. I was actually there in person. It looks very impressive. So there is a distance of around 100 meters from the shore, and that's where there is a device, some set of equipment that's doing some guided drilling and then cables appear somewhere 1.2 kilometers away from that particular spot already on the seabed. So it's looking really, really impressive, all the work that's being done there. When we're talking about Baltica 2, there's something else that's very interesting and probably you've noticed it, especially that it's been in the public domain, namely local content. We, as PGE, together with Ørsted, we're working on making sure that dialogue with Polish subcontractors being maintained. I myself went to Zary recently, and I met with [ Smoothers ].They actually work for us. They also do a project for Polenergia, and their work involves special platforms made of secondary steel. If you visit -- if you have a chance to visit a manufacturer like this, really take this opportunity. They have 500 people when it comes to permanent personnel, and there's 200 additional people working for offshore energy. They were called [ Spomash ]. Today, they're called smoother, and they are a great example of local content, the Polish supply chain working for the offshore energy sector. As I talk to them, I learned that they were creating their own supply chain among Polish companies. So they're a subcontractor working with many partners. So I say that local content in offshore is something that we're very much doing. We also have a project in Rybnik, CCGT in Rybnik done by Polimex and work is actually progressing, is quite advanced. We started already transferring power. And when it comes to Zarnowiec, we formally started the construction of the largest storage facility, 981 megawatt hours. We already have a permit to install the cable to take off the power. We're working with LG very closely, and we're keeping our fingers crossed for them as they're relocating their production capabilities. When it comes to Heat, we are doing a project for -- in Krakow, a very nice project, a large one, 100 megawatts. In gas, we have signed a contract with a contractor. And there is another small project, but there's a lot about it in the media, which is a Heat facility in Gryfino. There is a contract already signed, and it stipulates that by the time we shut down the last 2 units at Dolna Odra, we'll have a new heat source ready. So this project is ongoing. It's happening on schedule, and it will be launched in Q3 next year. When it comes to distribution, we spent most of our money in distribution on a variety of initiatives and tasks. We're doing -- we're connecting, of course, new offtakers. Each new offtaker is like 1 -- is like PLN 19,000. So it's not a lot per offtaker, but we're also cabling our network. So we have another section of 165 kilometers in the previous quarter, and we're installing remote readers -- remote meters. So we installed 186,000 such meters in Q3. These projects are really interesting because they help us enhance and strengthen our network, more cables, then, of course, better quality of our performance. And of course, we have to take into account landscape, right? Our cables -- our cable lines are not disfiguring local landscapes, which is really important for those communities who live there. And of course, when we're talking about remote meters, this is really important. It's a big step towards digitizing our capabilities so that we can be more efficient and more flexible in our operations. If you follow what [indiscernible] says publicly, every single operator becomes -- has more and more significance for our stability. There are parameters like what percentage of our distribution or transmission is happening via which network. Actually, 90% went through PSE until recently. But currently, there are more and more local sources. So the share of power that goes through the transmission network falls to 40%. So our networks, our capabilities sort of start taking over, which goes to show how important our investments are in terms of modernizing our network, in terms of modernizing our substations. So now let me tell you briefly about our revenue side. As I said before, electricity consumption fell by 0.7 terawatt hour. And we can see already in the first month of Q4 that the rebound that happened in September is continuing. So as we're looking at macroeconomic indicators, everything is speeding up. So our local consumption goes up with it. Actually, we have a situation -- we have a reversal of what was happening in Q1 because our neighbors witnessed falling prices of gas, so cheaper energy appeared, and we could import it. So we had a little bit less production on our side, like 1.75 terawatt hour. And then the situation sort of reversed, and we imported over 1 terawatt hour more compared to the previous year. So there was a certain trend, then it reversed. So that was about volumes. When it comes to prices, during Q3, we had a bit of a peak, but it was small, somewhere between PLN 410, PLN 430 per megawatt hour because -- well, but the average price is at the level of PLN 424. In Q3, unfortunately, CO2 increased from EUR 70 to somewhere around EUR 80 per tonne. There was EUR 70 in July and around EUR 80 per tonne in September. So well, our margins when it comes to coal-fired units went down. But on the other hand, we had a favorable situation where margins grew with our gas units, especially Gryfino Dolna Odra were involved. When it comes to -- well, actually, let me go back because there was something about Q2 negative prices, and it was widely commented in the public domain. I mean the weather was not what we expected, especially July. Well, it was not as productive in terms of PV and there was less wind due to, well, seasonality and also -- well, the weather in general was not what we expected. So indeed, we had some what we call negative hours, and there were fewer of them than we expected. So now a brief summary of what I already mentioned. So probably this slide is something that you've seen or these numbers are something that you've seen. So we had higher production in Dolna Odra and less production in lignite-fired units. So we fell from 13.2 to somewhere at the level of 12.5. There is a stable -- in terms of distribution, it's quite stable. Sales towards final offtakers a little bit less, especially when we're talking about B and C tariffs. When it comes to Heat, it's -- the situation was influenced by the temperature because the temperature was -- average temperature was lower by 0.3 degree Celsius compared to the previous year. So this is it when it comes to our operating results and investments. So now over to my colleague, Jastrzebski.

Thank you. So again, let me give you some analytical data around our EBITDA in Q3. EBITDA, as it's been mentioned before, in Q3 this year is nearly PLN 3 billion, which constitutes a growth of around 20% year-on-year. In this quarter, in the quarter that we're discussing, for the first time in the whole year, we saw a lower margin in segments that were based on conventional sources, around PLN 380 million. That's the amount we're talking about. Why? Mostly because margin was lower on coal and lignite -- what we generated based on coal and lignite. There was less demand on power, higher imports and lower prices. Basically, revenue was lower by around PLN 1.5 billion. This was due to lower prices, PLN 90 per megawatt hour. It was a negative change. It was a drop. And our sales volume also fell by 0.7 terawatt hour. So these were the main factors that contributed to the change that I'm talking about, the change in revenue. It has been compensated partially by lower CO2 cost that was around PLN 1 billion or around -- that's around PLN 0.5 billion and lower cost of fuel around PLN 100 million. But basically, the change that I'm talking about is negative. We could see a lower margin in coal-based production, but gas and -- well, especially Gryfino, but also Heat we're doing well. A big and important source of revenue are all kinds of market mechanisms, the balancing mechanisms. In Q3, we noted an increase of total margin by PLN 166 million year-on-year. And there's additional revenue coming from supplementary auctions for the second half of 2025. However, in Q3 '25, there was a decrease of revenue from the balancing market. When it comes to electricity and sales to end offtakers, final offtakers, well, we had a lower base, and we were trying to catch up after what happened with tariff G in the second half of 2024. When it comes to other elements of our EBITDA, this is a positive result on our distribution activities. PGE distributed is plus PLN 104 million and Energetyka Kolejowa of the railway part, it's also several million Polish zlote. Also, we had a higher balance of a provision that was dissolved from Q3 '24. We're talking about PLN 110 million. All the other factors are not really material or significant, so I will skip them. When it comes to CapEx in Q3 '25, as has been mentioned, we've seen an increase. The largest increase in spending and probably it's not a surprise for you, what happened in renewables. It's over PLN 980 million more. And here, we're mostly talking about Baltica 2. We spent on delivery and installing of the foundations, and we had onshore and offshore substations installed. When it comes to Heat production, there was an increase by PLN 182 million. We spent more on Gdynia and Czechnica. In distribution our growth was PLN 44 million, and this was mostly because we connected new offtakers, and we spent money on remote meters and cabling work. But there was a drop over PLN 840 million and it happened in gas. And it comes from the fact that the projects that we're doing currently simply have a very specific schedule. For example, in Rybnik, work is quite advanced already at this point. And there was quite a lot of spend in Gryfino Dolna Odra. So the base was really, really very high to begin with. When it comes to railways, we have a drop, but it's a very special area. We do not fully control the spend schedule. We are, in a way, dependent to what the railway company, PLK is doing. So they're modernizing their systems. and building new substations. So that's the result. When it comes to coal, and we've been stressing this a few times already, it is our policy to be very disciplined in terms of spending. We spent mostly on maintenance and the decrease that we noted in Q3 '25 is actually proof that this policy is working and that we're doing it consistently. So actually, we spent nearly PLN 260 million more compared to Q3 '24. And well, that's the direction that we're going to maintain. So the dynamic will grow simply because it's aligned with the strategy that we announced in June. So now let's talk about net debt. As of the end of Q3, it was PLN 400 million, and it was PLN 9.1 billion less than at the end of 2024. And well, our net debt was mostly shaped by the fact that EBITDA was PLN 10.6 billion. So it contributed to less debt. There was a change of PLN 4.8 billion due to CO2 settlement and clearing of CO2 contract. So again, lower debt. We spent PLN 7.2 billion, and that was investment, which increases our debt. Income tax, PLN 1.4 billion, again, higher debt, and there was a loan from the national recovery plan, PLN 2.3 billion. We talked about it during our last conference, and I remember analysts had a number of questions about it. This is -- well, the difference is between the amount that we received and fair value. When it comes to the future in Q4, we are due PLN 7.4 billion for CO2. So again, this goes -- this indicates a certain direction in which our debt will go -- net debt will increase. When we take into account CO2 payments, our debt quarter-to-quarter will increase by around PLN 800 million. And our economic debt as of the end of the quarter that we're discussing is PLN 15.5 billion and net debt to LTM EBITDA is 1.1x. As we always do at every conference, we're trying to tell you about our outlook for the coming future and how we feel our EBITDA will shape up. So this is what we're doing on this slide. When it comes to Renewables, we expect that EBITDA should fall, and it will be mostly impacted by less revenue from the balancing market, and we'll see some negative impact from our revenue coming from Green Certificates. And well, the price of these Green Certificates should change. When it comes to Gas, we expect steady EBITDA that will be impacted by higher margin from energy, from the sales of energy, but we'll have less revenue from the balancing market. When it comes to Coal, we are expecting a drop in EBITDA mostly because margins on electric should fall. So I would say renewables will be growing, will be developing which will have a negative impact on the use of our assets, especially conventional assets. There Will be lower volumes produced through conventional assets and there will be continued pressure on energy prices, so actually coal will see lower EBITDA. In terms of heat, we expect steady EBITDA and we expect lower revenue from electricity will be compensated by lower cost of fuel and CO2 emission credits. We expect higher revenue coming from higher performance cogeneration because at Czechnica will have had its full year of operations. We also have new assets in Bydgoszcz plus new engines will be introduced to the Gdynia location. In terms of revenue from Heat, we expect lower rates, lower electricity prices. In terms of distribution, we expect that our EBITDA will be stable, steady, but there's a natural risk in the sense that we're still discussing, and we're not sure about our WACC. And we don't know what the regulator will dictate, which is -- which adds uncertainty. We're expecting stable EBITDA from distribution. But again, we don't know about the weighted average cost of capital, WACC in next year. So our regulatory value of assets should increase. In terms of our Railway segment, we expect stable EBITDA. But again, we don't know about WACC. This is key data for the next year that we don't have. And in terms of trade, we -- well, we have a higher base in '25. We were trying to catch up after 2024. So because the base was high, if there's an adjustment, it could be negative. The following slide, which is an additional slide that we believe you should see. When we published our estimates, the media started picking it up and talking about lower net profit in Q3 that we estimated. The media was saying that the net profit was much lower than the market consensus. But well, the market consensus is something that we don't have any control over. It's a group of analysts that come up with it. But what we want to tell you now is how and why this difference appeared. When it comes to EBITDA, no one had any doubts. The reported EBITDA was well within that sort of consensus corridor. So what about our net profit? Our revenue, financial revenue and cost, the balance was PLN 0.7 billion, negative, which, of course, influenced our net performance, our net result. And it was impacted negatively by the valuation of derivatives, which are part of our CfD on Baltica 2. So right now, we believe that the CfD that this contract fulfills all the requirements for a subvention according to accounting standards, there were 2 instruments -- there were 2 derivatives. And those derivatives are -- they result from the very CfD as a mechanism. So part of the CfD price can be set in euro. And there is an inflation index that is used to refer it to the Polish zloty, which means that on a regular basis, we need to evaluate those instruments. And then, of course, the values that we arrived at impact our net results. The parameters that have to be taken into account for those evaluations are outside of our control, like, for example, euro to zloty exchange rate projection or expected inflation in the euro area and in Poland. These are parameters that we don't have any control over. What's really important is that those changes, those differences come from accounting operations, but this is strictly noncash. As we're looking at CfD contracts, which are a way to fund our offshore projects long term, there is still discussion ongoing between experts, renowned reputable auditors. So they discuss the international accounting standards and certain things are not precisely described in said accounting standards. So maybe over time, there will be some new standards that will emerge telling us how to approach the matter. And maybe then the market and analysts will find it easier to plug that into their financial models. But for now, the situation with international accounting standards is what it is. Hopefully, I've managed to explain the matter of net profit. So this is it for now. Let us move on to the following part of our conversation.

All right. Thank you, gentlemen. You have -- we have listened to questions or we were looking at questions that were coming to us. So we will actually ask 2 first questions ourselves because they come from among the most frequently asked questions coming from you. One question is about our projects like Gryfino and Rybnik gas units as well as the storage facility. Where are we? What about selection of contractors and so on? Right. As I have mentioned before, when it comes to these 3 projects, Everything is going on schedule, according to plan. We are processing one of our gas -- the gas units, both in Gryfino and Rybnik. We're processing it in such a way that we are going to get bids from contractors before the main auction. So for now, as far as I remember, the bids are due by the 3rd of December, and we will see what we're going to get, but we're optimistic. We already went through dialogue. We received remarks to draft contracts that we prepared. So we have reason to believe that potential contractors are interested in joining those projects, which makes us very happy. And we are hoping that we will receive those bids. And we know what's happening with turbines all around the world because gas turbines are a rare commodity these days. Production slots at Siemens, at Mitsubishi, at [indiscernible], GE, those slots are booked not only by European companies. We do know that Germany has very ambitious plans, increasingly ambitious plans to develop gas, but also the United States are in the picture. Gas turbines play a big role in the United States, supporting their data centers. that are very much driven by AI and this -- the fact that AI is booming plus there's so many projects, gas turbine and gas unit projects ongoing all around the world. So these are all competitors. And there is another paradox. There is one specific component of turbines, blades, there is a huge competition coming from aviation, civil aviation and military aviation. And again, it's a global trend that everyone is competing not only for turbines, but also blades. So turbine manufacturers have their capacity blocked for different competing projects all around the world. And then their suppliers have their capacity blocked for -- specifically for blades for all kinds of sectors all around the world. So that's what's happening. And the manufacturers of gas turbines is their time to shine, so to speak. Everyone end with them and their production slots are really very hot. So we're trying to be as transparent as possible in our processes, and we give bidders as much time as they need to prepare all the documents to submit all the documents. And I do feel that we're going to get bids that will allow us to participate in the auctions that I mentioned. What's special about all those different projects is that there is a lot of comments coming from turbine suppliers that Poland is special in terms of companies who can do EPC. So very often, they mentioned Polimex-Mostostal, we PGE, we have their shares and we are doing big projects together. They've actually done Dolna Odra for us. They've done Rybnik for us, CCGT. They've done Czechnica. They've done Bydgoszcz for us. And they're doing -- they're participating in an offshore project as well. So we don't only use their capabilities, but turbine suppliers notice that and they say, it's wonderful that Poland has companies, have players who can do EPC to such an extent. So this is something good for us. This is something in our favor. And hopefully, we will have local content provided for. We'll have a Polish designer, Polish contractor among those bids that will come to us, hopefully, and we'll see how things will go, and we will keep you informed. When it comes to our storage facility in Gryfino, we got 3 bids. As you may know, these bids are quite competitive. They are different because some of them are based on Korea -- something is based on Korean technology, something is based on Chinese technology, American technology. I would say the Chinese technologies, I would say, debatable or dubious. But again, it goes to show that there are Chinese companies that can participate in a public tender procedure. But what I appreciate is in that all those bids, there are Polish contractors present. Polish companies that we've seen before, that we've done projects with before. And we know that these are reputable players who deliver good quality on time and on budget. On the other hand, it shows that Polish companies are trying to learn. They are trying to learn the ropes and do very innovative projects in Poland. I mean, apart from Zarnowiec no one has ever done anything the size of this. There hasn't been a storage facility this big. So it's wonderful to see that there are consortium groups of Polish companies that can go for it. They can design and do such large projects in storage. So hopefully, we'll select something from the bids that we've received. We do need a little bit of time to technically and economically evaluate the bids that we've received. All of them are above our budget, but we do have the right as the buyer to run our analysis and still choose one of these bids. Thank you.

Thank you. The other topic that you would like to -- that we would like to mention right now because it sparks interest, namely the efficiency team for improving the efficiency of shaping tariffs. This is an interesting question, I guess. So let us talk about it.

Well, this topic has been quite interesting, let's say and popular. And just like we were saying during the presentation, I would like to mention that WACC for us in distribution is really a key component when it comes to our EBITDA shapes up. And we've been talking about it time and time again that distribution -- the area of distribution generates such high levels of EBITDA, which in turn translates into a very intensive investment process, and it is no secret that distribution generally and the distribution network still requires quite a lot of investment. We need to connect new sources these, these projects were to slow down, then automatically the positive impact of them stretch over time and the scale of possible connections will be lower and undoubtedly any movement on WACC will automatically be linked to EBITDA and that will be linked to our investment plans. And secondly, when it comes to the team, it is too early to talk about how it will impact things. It's been just appointed and of course, as much as we can, we will be participating in the workings of that team. But even look at different calendars. When we're talking about establishing WACC for the next year, we're talking about mid-December, while the team, it has just been established. It has to do some work. It has to come up with some analysis before it has an opinion. So probably these calendars will not coincide. So we're talking, I guess, the first quarter at the earliest next year for the team to really come up with some concepts and ideas. And then we will be able to say more to whatever is suggested by the team and how it could impact our performance, especially in distribution.

Thank you. Thank you very much. I think that now we've reached the point where we can allow questions from the room, but we do have some time restrictions. [Operator Instructions]

Julia Cydejko, Polityka Insight. I've 3 questions actually. So we'll see how it will go. But all these questions are about the new energy facility. So my question is at what stage is Ostrów Wielkopolski, will you be interested in repowering of wind farms or wind facilities in the coming years, especially that there are some legislative changes that may make it easier for you. And my question is about storage for the distribution network and the pump storage water facility. There is this new draft of the Grid Act that talks about just 1 provision where distributors will be able to build own storage facility. So I wonder whether you're going to use that possibility when it comes.

Right so I can select 2 out of 3. I think you might have asked 4 questions. Well, when it comes to your first question, the Ostrów Wielkopolski facility for sure, very much so this project is being developed. And from our point of view, this project really looks good, nice, decent location where we have access to the gas network by gas system. We also have a way to take off power. So we're working on this project. It's one of our priorities. As I said, we are trying to develop more and more gas projects. We have a dozen or so different locations where we could develop new gas sources. But indeed, Ostrów Wielkopolski is -- well, I think it's really a good one because we can quite easily shape it and plan it based on Gryfino and based on Rybnik. I'm talking about CCGTs because well, we have had some idea that it could be a project that it could be done as a simple cycle facility. So actually based on progress in Ostrów one could say clearly that this project will be -- well, it is actually next in line after Gryfino and after Dolna Odra. So that was your first question answered. And now question 2, repowering. Repowering is still something that we have to look at that we have to monitor. In our fleet, we have 23 locations, 23 in terms of onshore wind. We have around 800 megawatt installed capacity, but some of these locations are older, I could say. So on the one hand, we would like to take advantage of all those locations of those assets as much as possible because if there is a turbine that's been installed, it would be good for it to pay itself off. But we have like an internal project that's all about identifying, designating locations that could be analyzed from the point of view of repowering, but it's early days. This process is at its very early stages. So if I were to say something today, repowering wouldn't be a big driver or a big lever leading to higher capacity installed in onshore wind. Actually a bigger driver to increase capacity in onshore wind would be through acquisitions. So we are maintaining our ambition to indeed acquire other onshore wind projects at any stage of development. And of course, the later the stage of development or something that's operating, something that's operational, the better for us. We would be really comfortable. We don't have a problem to purchase an installation an asset that's been operating for a few years because it's complementary to our existing fleet. So we are in a privileged situation currently because we have the largest servicing and maintenance organizations for wind farms. We have nearly 200 people at work, which really leads to some cost advantage. And this allows us to enjoy decent margins on this part of our business. And the third question you asked was about storage. I'm not sure if it's such a great idea because I think that electricity or energy storage to be efficient to make sense, it has to have more than one reason to exist. Distribution, and the distribution organization cannot engage in trade. I don't know how legislation would look at our revenue from system services, especially balancing related services. So when we look at our utility scale storage facilities that are connected to mid-voltage or higher voltage -- high voltage, we devote quite a lot of time and thought into bringing all these revenue streams together. It's really very difficult to get storage to make sense if you don't have 3 other revenue sources like capacity market, arbitrage and system services. Of course, looking at how the capacity market develops, we see the derating factor and what's happening and how this revenue stream is actually eroding for every storage facility, any new storage facility. But still, we end up with 2 revenue streams that are intertwined or interdependent because they cannibalize one another, but still, there's a lot of revenue, there's a lot of margin there. So from our point of view, commercial storage facilities, for sure, is a way to go. That's what we want to explore with any available trusted technology. But having energy storage linked to distribution then one would have to really precisely know what the role is and maybe they may make certain things more expensive, making distribution costs and transmission costs too high, then we would have to get it back through tariffs and then it could lead to some kind of inflation of our tariffs. The water facility definitely qualifies when it comes to what we can do. It's one of the best pump storage facilities that we have. So whenever we have good favorable regulatory environment, I mean, awaiting favorable regulatory environment, we're continuing to spend money and time on this project. We would like to build the water facility, the pump storage water facility. So if we can get some sort of a support system, especially that it cannot be financed from the existing capacity market. So well, if we find support for it, we would like to build it. And we're very happy that there are other storage pump projects in Poland, and we can see that there are developers, players who are interested in such facilities. So hopefully, some new regulatory solutions will appear that will make it easier to do those projects.

All right. There was another person who wanted to add something?

I have two questions. One is about distribution. There is this draft law from the President and there are discussions with representatives of the President Administration and there were 2 arguments for the lowering of WACC. The first argument was that WACC doesn't take into account the influx of cheap money from Eastern Europe and why dividend for parent companies is so high. Distribution paid like PLN 2 billion. So this money doesn't stay in the group or in the companies. And the other question is about tariff G. We have 2 tariffs that have been approved. They are around PLN 500 plus there is the trading fee. So there is this idea from the government that such a fee could be introduced, and those tariffs would be at the level of PLN 500. So these 2 things coming together. Would it be satisfactory for you?

When it comes to -- well, I'll go back to something that I said before, cheap money, influx of cheap money. We're talking about the national recovery plan and loans that have very, very favorable interest like 0.5% on an annual basis, long-term loans, very nice. Yes, but we are looking at this as a whole in totality. We have certain investment needs. We have to modernize our distribution network. We have to develop it, grow it further. But for us, it's not either or it's not a substitute for WACC or for tariff. Our policy is whatever we earn, we spend, we invest. So now moving to your question about the dividend. Basically, any dividends in our group that are paid, that's part of our way to manage our liquidity within the group. So the money comes back to the distribution organization in the form of loans. So it's not like taking money away, taking money of distribution companies to fund some other business areas. No. Suffice it to say, look at our EBITDA, look at how much we're investing, look at it on a yearly basis, and you will easily see that this money comes back. This money gets reinvested to a very large extent. And there was something else, I guess, G tariff, right? For now, we wouldn't like to say anything because it's a process. We're in the middle of it. So any calculations attempt to quote any specific numbers, it's too early. But very soon, we'll just know for certain what the situation is. Well, no one has ever proposed it. It's difficult for us to make any comments on ideas that have never been -- that have never reached any stage of the legislative process. There's plenty of different ideas how one could try and lower. Well, we're waiting, and we're still in dialogue with the other party, but let's not ask -- let's not answer questions about ideas that emerge only when something is in the legislative process, then we can answer, we can comment on it. We can engage in formal consultations.

Right. I would like to say that I envy people who can allow themselves to just talk about a specific subject that's part of a bigger picture. I think that what's been recently discussed publicly, tariff and WACC, now everyone seems to be an expert on WACC. I mean Polish people have been experts on football, then on ski jumping, then lots of people became specialists on COVID. Later, a lot of people started being experts on defense because of the war against Ukraine. And now everyone seems to have something to say about WACC. But joking aside, I think it makes sense to talk about the energy sector and the electricity sector in Poland. Let's look at it and let's think about our distribution and transmission systems, how flexible they are. You know that there is yet another conference and there is a conference, all kinds of developers of energy sources come in and they complain saying that PSC refuses to issue terms of connection that it takes time to connect new offtakers like industrial parks. There are discussions around poor quality of energy -- of electricity transmission and so on and so on. But actually, it's not about us having higher profits. At the end of the day, unless we can execute a project that improves our grid, makes it more flexible, makes it more modern. I mean certain things, you don't even see them like remote meters. No one gets excited about it, but it's a must, and we are spending hundreds of millions just like laying cables. Laying cables, not very exciting. Someone puts cables on the ground, making sure that new sections of the network are free from impact of the weather. Well, we had an example in the [indiscernible] region recently with the weather. So well, we are aware that the reason why this discussion even began is that our industry is less and less competitive, and especially those energy intensive sectors may have high costs. So we are very much interested in dialogue in being in conversation about the level of WACC, about the level of money from the National Recovery Plan is treated and how we shape tariffs. But if we are in a dialogue, let's never forget the context just like Mr. [indiscernible] said, there is -- well, our grid is just different. The way it operates is different. We can still connect new sources. We have ambition to connect new offtakers, be it industrial enterprises or individual households, but we have to remember about the context. We have to remember about the optics of getting a reward from investments, getting some return on investment on capital. That's all logic. We're not thinking just about the President and the discussion that he started and then the Ministry of Energy that talks about dialogue around distribution and transmission tariffs. But we look at midterm and long-term perspectives as well, which means that at the end of the day, someone has to spend the money to make our economy more modern. To make our customers to -- give them access to modern green and renewable energy sources. But actually, those new energy sources require a completely different grid than the one we've been used to. For example, the fact that we have around 25 gigawatts of PV, 11 gigawatt of onshore wind, very soon several gigawatts of offshore. That's not the end. We'll see more and more PV. We'll see increasingly more wind, even though there might be some regulatory restrictions, and well, of course, everything changes so when -- or if ultra-wind starts appearing. So we will see we would like to build storage facilities. We would like to build data centers. So distribution and transmission networks have to be invested in. Money has to be spent. There's no other way around it. And that's the other side of the coin called WACC. On the one hand is our EBITDA or EBITDA of our distribution operations. And of course, on the other hand, we have CapEx. We as well as other utilities, we believe that these things are a priority for us.

[indiscernible]. I have 2 questions in the context of our national specialty namely distribution. As you are indicating in your report, WACC is 12.96%. Basically, it's the highest of all the companies in the group. What would happen with investing if it went down to 8.5%. Would you stop investing? Would you restrict limit investing on Monday? And said -- and because usually your conference comes after [indiscernible] conference, I'm quoting [indiscernible] conference to you again. WACC for their distribution is around -- is 20%, and it's around 10% of their performance overall. And what about Dolna Odra 1? Because I think that the court repealed the environmental decision for it. So what would happen with this facility? It's been operating for 2 years.

Well, going to your first question, I wouldn't like to talk about all those levels that you mentioned because you talked about 8%. You spoke quite quietly. We would not like to get into this discussion, 8.5%, 9.5% or 10.5%. Let's wait. Let's not engage in a discussion. It's really going to be known very soon. Cards will be on the table very soon. But anyway, regardless of what's the share of WACC in the regulated revenue because, well, our regulated revenue is really minority. But our process, our investment programs are calculated and designed in such a way that most of our EBITDA gets reinvested. So if this EBITDA gets somehow in any way impacted or affected as a result of those decisions, we will have to sit down and think about it. But not guessing WACC, simply knowing when we know what it is, then we will think about possible adjustments. But if this changes slight, probably we'll find a way to compensate for it. If WACC goes way down, then it could. It indeed could have an impact on our investment program in distribution because our strategy involves a number of areas where we have quite ambitious CapEx plans. So well, then we'd have to choose, I guess. But for now, we're not assuming that other areas of our operations should fund CapEx in distribution. We would prefer to continue the policy of reinvesting what the distribution segment makes. And that's the way to go. And let's -- when we know all the data, we can get back to this discussion.

And ORLEN says that for them 1 percentage point of WACC less, it's minus PLN 200 million revenue. Is the scale, the proportion more or less similar with you?

I would say more or less. You just -- there is a simple equation. And if you round it like this, yes, we're talking about hundreds of millions, yes. One could assume that more or less.

But I think that we should sort of demystify certain things. What we're talking about is not WACC. Talking about WACC is a simplification to find a common denominator for all the different questions. But I would say the problem in Poland is the cost of electricity for businesses, for the enterprise sector. I'm talking about large enterprises who are exposed to high cost of electricity. And because of that, their competiveness is under threat. When it comes to customers under tariff G, we are being very responsible, very conscious. We do not have any intention to make individual households costs higher. So this discussion will not affect them. I guess everyone in the energy sector, but also the government or regulators try to do everything that's possible to make cost of electricity for households rational, affordable. From our point of view, this has been addressed. Well, cost of electricity for businesses was the very reason why the team that we talked about before was appointed because we're talking about competitiveness, especially of energy-intensive sectors of this economy. And -- but it goes way beyond WACC. There's something else, for example, power exchange and certain minimum levels that have to be achieved. We're talking about 55%, maybe a little bit less after some shutdowns. But still, we sell our electricity in a way that's transparent and competitive. But there's something else, gas and obligatory levels of gas. Maybe not everyone is aware of the fact that we have the most expensive gas in the world. So looking at how the electricity and energy sectors change and probably you've talked about it and you have similar questions to [indiscernible], we're not the only ones who want to invest in new gas units. And we're not talking about clean dark spreads. We'll start talking about clean spark spreads as well very soon. So again, all kinds of initiatives that lead to making the Polish economy more competitive. These initiatives should be maintained, should be executed because as a result, the price, especially for the energy-intensive sectors will become lower. But that's the true name of the game or name of the problem. And we are more than open to all kinds of discussions, all kinds of conversations, and we are very much in favor of introducing certain regulations about gas and about certain obligatory level of gas because maybe this could lead to better competitiveness. We're also a good customer that can take good advantage of gas. So I think these are the things you have to take into account. I mean, when you know what WACC is, it's easy to mention it and give it meaning, but it goes way more -- way beyond WACC. There's also tariffs that we have to think of, and we are more than open to conversations to communication and we don't want to overcomplicate things, and we don't want to engage in discussions like, oh, when WACC goes down, we will stop investing. Of course, it will not happen. And these are things that are interconnected, interdependent. Of course, we might have to adjust or modify our investment program given tariffs, and we always do that. We are in a habit of doing that. You mentioned ORLEN who started also adjusting and doing some calculations. And well, they did. But please remember that there's something else here, for example, financial levers and financial leverage because EBITDA is a parameter, a performance measure that allows you to maybe take on debt if you need that. If -- so well, you invest not only the money that you have made, you may invest some money that you borrowed. I'm talking about it at length because I don't have much to say about the Dolna Odra project or the Dolna Odra facility, which was your second question. I know that there is something about the integrated permit. You called it Dolna Odra 1, but actually, it might be Dolna Odra 2 because Dolna Odra 1 was called, we call it PGE Gryfino Dolna Odra. That's our name for it, that sort of reflects the new -- the old and the new. And of course, we are there, we are working. We are doing detailed analysis of what happened there. You need to remember that these events that unfolded, they actually unfolded before 2024, but the facility has been operating for a year now. So it is our intent to clear this matter up to really settle it once and for all. And we are right now engaging in -- engaging with our legal advisers, and we've opened -- we've initiated dialogue with the government sector to understand better why this decision, this court verdict took place. So for now -- well, we're not seeing a big threat for the operation, the functioning of that facility. But we do know that there is some sort of regulatory and organizational effort that needs to be involved to get back to the right regulatory conditions that will allow us to operate that facility properly and smoothly. Thank you. Do you have any more questions? Well, you may have a single question, you may ask it. Well, or we maybe take away some of your questions from the next conference, joking.

Well, I have -- I would like to ask about something else, not gas, not distribution, coal. So how long will your open cut facility in Belchatów? How long will it be operated? Is it nearly over? And then [indiscernible] will be the only one that's left? Do you have any idea when you will stop Belchatów? And do you have any idea or plans to recultivate this area?

Well, not much has changed when it comes to moving from Belchatów to the other facility, but it's running low. Will it be this year? Will it finish next year? I will answer to you via e-mail because I have to check the schedule. When it comes to recultivation, our environmental permit stipulates clearly that we have to recultivate this area both Belchatów and Turów. So for now there is a plan -- this initial plan has never changed that we would try -- we would get those areas to the required state. We would recultivate those areas by flooding them.

Right. But what about costs? What about investment?

Well, yes, of course, according to regulations, we establish provisions for cultivation, and we do know that this area will need to be recultivated for sure. Well, it's a tricky question or well, I haven't prepared to encounter a question like this. But if you're really curious, we will deliver this information to you. It's a very niche topic. So we'll tell you more. We will write you an e-mail, and we'll respond. Thank you.

I'm looking at the room. I don't see any more questions. Thank you very much for coming. Thank you to those of you who are watching us online. And of course, see you at our next conference. Thank you. Have a good day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]