TAURON Polska Energia S.A. (TPE) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. I'd like to welcome you to the earnings conference for investors and analysts related to TAURON Group's Full Year 2019 Financial Results. Due to the epidemiologic conditions, our meeting is done today in the form of a video conference. We are hosted today by Mr. Filip Grzegorczyk, the CEO of TAURON Polska Energia S.A.; and Marek Wadowski, the CFO, who will discuss, present the key results and highlights of last year. My name is Marcin Lauer, and I am working for the Investor Relations team. The presentation will be conducted in Polish and simultaneously interpreted into English. Besides the broadcast, you can also listen to today's meeting via the conference call. Mr. President, please start the presentation.

Thank you very much. Good afternoon, ladies and gentlemen. We have the pleasure to present you today the financial results and operating results achieved by TAURON Group in 2019 and in Q4 alone of last year. As it was mentioned, for safety reasons, according to the epidemiologic guidelines, our meeting is held via video conference. It means I would like to assure you at the same time that TAURON Group has undertaken a number of action steps of preventive nature aimed at organizational and material aspects, aimed at protecting the employees of the individual subsidiaries of TAURON Group and maintenance of operations of Grzegorz construction in particular. At the TAURON entity level, we set up a dedicated crisis management team tasked with evaluating the situation in the individual areas of the operations of TAURON and preparing the contingency plans -- detailed contingency plans in case the key processes performed by TAURON Group are disrupted. It should be emphasized, that the COVID-19 situation is very changeable. The Management Board of the company is monitoring and will be monitoring the potential impact and will undertake any possible steps to mitigate the negative impact of COVID-19 on TAURON Group. As of now, the reevaluation of the consequences of the pandemic is difficult to make. It's important to know how long it will take, its intensity and the impact on Polish GDP growth rate in short as well as in the long term. After this introduction, ladies and gentlemen, I'd like to present the overall situation of our group, and I will present the highlights. In closing, the activities undertaken as part of the Green Turn of TAURON as well as the CapEx activities. Whereas the CFO, Mr. Marek Wadowski, will present the macroeconomic market situation and will present in detail the financial results broken down into individual segments. Ladies and gentlemen, first of all, I should emphasize that in 2019, TAURON Group posted solid financial results. It was better than market expectations. The financial and the liquidity position of the group has maintained -- will be maintained at a safe and stable level, and we also carried out record-breaking capital expenditures. Moving on to the data that you can see on the slide. In 2019, the sales to revenue went up year-over-year by 8% and achieving almost PLN 20 billion. It was primarily a consequence of higher revenue from the electricity sales achieved, thanks to the higher wholesale electricity prices as well as retail electricity prices. The group posted PLN 3.6 billion of EBITDA, which means 3% up year-over-year. Net profit was under the pressure of impairment charges in the Mining and Generation segments cap, so achieved -- reached more than PLN 4 billion. It was 8% higher. This change was due to the increase in CapEx in the Generation and Mining segments. Net debt-to-EBITDA ratio, calculated by excluding the issued subordinated bonds at the end of December 2019, reached 2.8. Details related to the debt and financing will be presented later by the CFO, Mr. Marek Wadowski. Moving on to the operating data. As compared to 2018, TAURON Group maintained a stable distribution volume. In 2019, we observed an increase of electricity consumption by the medium-sized enterprises and households, which will offset the decline of demand among the large and small enterprises. In the period under review, TAURON Group produced in total almost 14 terawatt hours of electricity. The production decline -- decline of the production from conventional sources is in line with overall downward trends that can be observed in the entire conventional electricity production segment. It's worth noting that the share of renewables production in TAURON Group year-over-year went up by 42%. However, the increase of electricity produced only from wind farms was higher by as much as 66%. This is the result of the acquisition in September last year of the wind farms, the total capacity of 180 megawatts and better wind and hydrological conditions. The heat production volume was declined slightly as a consequence of higher outdoor temperatures in 2019 versus 2018. The commercial coal production volume achieved last year was a result of a difficult mining and geological conditions and the large number of coal-based retoolings. I'd like to emphasize here that in the first quarter of this year, we can see clearly the positive results of the optimization efforts, which will lead to an increase of coal production volume. In March, the average extraction by 3 coal mines of TAURON exceeded 20,000 tons per day. Next slide presents the financial and operating data achieved in Q4 alone in 2019. The trends observed in this period were similar to the ones observed for the whole year. On the next slide, we are presenting several highlights that took place last year, the majority of them I already had the pleasure to present to you during the previous meeting. Therefore, let me just remind you that in May last year, we announced the update of the strategic directions of TAURON Group, where we assumed that the base, the foundation for the expansion of TAURON will be to grow based on clean energy. We are planning to invest in onshore wind farms, photovoltaic farms. And also, we want to be involved in the offshore wind farms construction. The transition of our energy mix will be reinforced by the optimization of our portfolio of our assets. Our strategic goal is to increase up to 2/3 the share of low and 0 emission sources in the energy mix of our growth and a 50% reduction of the CO2 emissions over the time frame up to 2030. The first very significant initiative in line with the Green Turn of TAURON is the September acquisition of 5 wind farms completed in September, that the details of which we are showing on the next slide. As part of the transaction shown on this slide, we acquired 5 wind farms located in the North of Poland with a total capacity of 180 megawatts. Thanks to this acquisition, we almost doubled the wind-based capacity of TAURON Group, and the value of the transaction reached EUR 137 million. What is important, apart from acquiring the wind assets at a technical price, we also discontinued the lawsuit brought against the TAURON Group's subsidiaries worth PLN 500 million. We are estimating that the assets acquired will increase the total EBITDA of TAURON Group by more than PLN 100 million per annum. Since September until the end of December last year, this asset generated us PLN 58 million in additional EBITDA. Let me emphasize that we are analyzing on an ongoing basis to purchase more -- further wind and solar farms offered in the market. So we also are expanding our own assets on land on TAURON. In December last year, we purchased a solar farm project construction in Choszczno, a 6-megawatt photovoltaic farm. We're also expanding our own products in solar farms -- our own products in Stalowa Wola. In March this year, we signed with the Polish Development Fund an agreement cooperation with respect to investments in onshore wind farms and photovoltaic farms. The cooperation that we commenced is an important step aimed at getting flexible financing for the Green Turn of TAURON. According to the agreement, further investments of TAURON in green energy will be supported by the financing from Polish Development Fund were at least PLN 50 million each. It is also worth mentioning that we are actively getting involved in activities aimed at reducing the CO -- greenhouse gas emissions in Poland. Last year, we connected to our distribution grid a record breaking more than 30,000 micro installations -- solar photovoltaic micro installations with total capacity of more than 200 megawatts. Traditionally, let me hand over now to the CFO, Mr. Wadowski, who will present the details about the financials position of TAURON Group.

Ladies and gentlemen, in 2019, the macroeconomic situation was good, but systematically, gradually, it was deteriorating over the year. As a result, in 2019, the consumption of electricity was lower by almost 1 percentage point. In terms of electricity production, we observed a decline in the region of around 4 percentage points. And also, a very important element that can impact upon the operations of the electricity in Poland was quite a significant increase of electricity imports by almost 86%. It's also worth to know 2 important elements, the first one being the increase of renewables generation, almost 19 percentage points up, and a significant drop in the production from the conventional electricity generation sources. In total, the conventional sources -- I mean, here, the coal, hot coal-fired and lignite-fired sources produced 75% of total electricity in Poland. In 2020, currently, we are dealing with an extraordinary situation, unprecedented situation. We are facing a pandemic, a COVID-19 virus pandemic, which means that we are not able at this point to indicate to you our forecast or our views on what will be 2020 like. Therefore, we are not presenting this view in this presentation. We assume it will be impossible to give you such a view and an outlook in the presentation of the earnings for Q1 2020. In terms of key financial data, it's worth to draw your attention to 3 elements, the first one being the increase of revenue up to almost PLN 20 billion, which was mainly a consequence of an increase of electricity sales prices rather than increase of exchange obligation up to 100% level versus 2018, when it was 30%. The net profit, both in 2018 and 2019 was under strong pressure from the impairment charges, write-downs on our assets. In 2018, it was PLN 695 million; 2019, PLN 1.056 billion in write-downs. The EBITDA comparable adjusted, excluding the one-off events, year-over-year went up by slightly more than 1 percentage point. In Q4 alone, the increase of sales revenue is, first of all, the consequence of the price due to the fact that TAURON Capital Group, starting from the second half of 2018, increased significantly, the volume of electricity sold via the exchange. The net profit, as I mentioned before for Q4 was impacted by the impairment charges. EBITDA was comparable for Q4 alone adjusted. Excluding the one-off events, it went up by almost 2 percentage points. On this slide, we are showing to you the results of our 4 segments. Let me also indicate to you, highlight to you that the Generation segment will be split in 2 parts beginning of 2020. We'll show it in the presentation for Q1 2020. We will spin out of this segment the renewable energy sources segment to show in a more transparent way our -- the effects of our implementation of the Green Turn of TAURON's strategies, they're different vis-a-vis EBITDA in the Generation segment, the Mining segment is the consequences, first of all, the impairment charges. The Distribution segment in 2019 or the segment that generated the largest portion of EBITDA, 70% of EBITDA came from the Distribution segment. In Q4 alone of 2019, we were dealing with similar trends as in the entire 2019. Let me just add a comment about the result of Supply segment. In that segment, we set a provision for the amount of PLN 240 million for onerous contracts, which was due to the tariffs approved by the President of the Energy Regulatory Office level that did not fully cover the cost of purchasing electricity. Two segments had a positive impact on EBITDA in 2019 was the Generation and Distribution. The Mining segment had a negative impact upon the EBITDA. In Q4 alone, the situation is similar. Moving on to the individual segments. Our largest segment, namely, the Distribution Segment, in 2019, let me draw your attention to the fact that the tariff of the segment was approved practically starting from Q2. So the entire Q1, the Distribution Segment was operating using the 2018 tariffs. The main factor behind the improvement of the EBITDA result was the price, the price related to the tariff increase. Nevertheless, the cost went up as well, especially the cost of purchasing services from the Transmission System Operator. The volume had a relatively neutral impact upon EBITDA, which was also related to the structure of the changes, namely that we can say that the margin that we generated on the electricity supply did not change much. In Q4 alone, the situation is similar. Also here, the main factor that had an impact upon the Distribution Segment's earnings was the price, namely, the tariffs. The key parameters that are taken into account by the President of the Energy Regulatory Office with respect to the quality of electricity distributed, when they evaluate the volume of distribution service overall, we are presenting those features on this slide. It's worth noting that all those parameters that we are displaying to you, namely, the time of new connection installation, interruption duration, frequency of interruptions are within the standards that the President of the Energy Regulatory Office set. So we are not expecting the negative impact of the implementation of those parameters on the tariff in the subsequent period. In the Generation Segment, it's worth nothing that on one hand, we are dealing with a decline in electricity generated volume by almost 20% in 2019 in the conventional sources area, namely, hot coal-fired ones, and quite a substantial increase on the other hand in the renewables segment. In total, the wind farms reported a [ 66% ] increase. We are assuming that in 2020, we will be able to boost the full effect of the acquisition of the wind farms that took place in September 2019. We are expecting that as a result of the acquisition of those wind farms, the EBITDA will go up by more than PLN 100 million per annum. In the conventional electricity area in 2019, we were dealing with a higher margin. Let me remind you, in 2019, we were selling electricity in a large portion coming from or based upon the contracts signed back in 2018. Therefore, the spread that we generated on the electricity sales was relatively at a good level. Also, the margin of electricity generated from renewable energy sources was -- also helped the EBITDA in 2019. Because though the prices were good, the winds -- prices were good as well as wind conditions were good. As a result of the transaction of the acquisition of wind farms, we reported almost a PLN 100 million result, which is the result due to the opportunistic acquisition of assets. In Q4 alone, the Generation Segment looks similar. The main element was the booking of the opportunistic acquisition of the profits due to the opportunistic acquisition of the wind farms in the amount of almost PLN 120 million. Also, margins generated both in conventional electricity as well as renewable energy sources were higher than in 2018. The Supply Segment in 2019 was operating practically under the pressure from the electricity act, the act that was passed in June in its final shape. Let me just put it this way, that the impact of this electricity act upon the result of Supply Segment, to that degree, it depends upon the reference point. Because based on our plans for 2019 and analyzing what was the impact of that act upon our position, we can overall say that this impact was basically neutral. Therefore, despite the changes that we are showing on this graph, on this chart, ultimately, this result on the EBITDA level is even higher than in 2018. The compensation that we received compensated what we lost due to the decrease of revenues, due to the decrease of the prices which was based on the passed law. Q4 alone was also under the impact of that act. It's a little bit different here because Q4 had a bit of a time frame out of the entire 2019, and it's better to analyze the impact of that act and the operations of the Supply Segment based -- looking at the entire year not just one quarter. But in Q4, both 2018 and as well as 2019, the EBITDA was negative because in 2018, we set up a provision for onerous contracts. And also in 2019, we set up such a provision. The reasons for those provisions are different in both cases 200-plus million, but those provisions will have a substantial impact upon the EBITDA coming out negative. In the Mining Segment, the main reason of the EBITDA coming in as it did was volume practically. In 2019, we can say, speaking very briefly, that the Janina Coal Mine was in line with the budget. What is the -- Brzeszcze Coal Mine was in line with the budget but with some problems. However, the Sobieski Coal Mine was definitely -- was deviating from our budget, difficulty in mining and the weather conditions. That's one of the reasons. Whereas at the Sobieski Coal Mine, additionally, those additional factor was a fire that also led to the decline of the volume. Currently, this volume is higher. Nevertheless, we assume that in 2020, a greater challenge for the Mining Segment will be to adapt the production to the purchasing made by the group, not just the production itself in 2020. We are simply dealing with a decline of electricity production from conventional sources, which leads to the lower consumption of coal, hot coal, where inventory levels are very high. Now therefore, in 2020, it will be a big challenge for the Mining Segment to adapt, to align to the market situation. Q4 alone also is looking similar. In Q4 alone, we are dealing with a substantial increase of the unit mining cash cost, which was due primarily to the decline in volumes. In terms of the financial situation of our group, the situation of the group is stable. Let me remind you that in 2019 -- at the end of 2019, we acquired financing from a new partner, a new financial institution, Intesa Sanpaolo Italian banks. In 2020, up to now, we have acquired financing for a total amount of PLN 1 billion also from that bank and from another 2 banks, the SMBC Japanese bank and the Chinese -- China Construction Bank, which demonstrates that we are obtaining new sources of financing. This shows our stable financial position. The net debt-to-EBITDA ratio was at a safe level, 2.8. Of course, nevertheless, we should remember all the time that the situation due to the pandemic is unprecedented. It's difficult to estimate its implications. It's difficult to say what will be happening in the subsequent months. Therefore, TAURON Group is preparing all the time. It's adequately responding to what is happening. So if we're exchanging the level for also here in terms of financing, we are taking actions that are aimed at the stable position that we're dealing with now that it should continue also further on moving into 2020. Let me hand over again the floor to our CEO.

Thank you very much, ladies and gentlemen. A few words about the work progress on the key projects, investment projects. The largest investment project of TAURON is the construction of a 910-megawatt unit in Jaworzno. According to information received from a general contractor, the unit should be commissioned by the end of July this year. Current work progress is 98%. Another important undertaking is the CCGT unit construction in Stalowa Wola, the installation of the steam piping and the auxiliary installations and the other power plant units and systems. The first pressure test was completed successfully of the new cooling water ducting on March 4, the first synchronizing of the gas turbine took place. This unit should be commissioned in Q2 of this year. On the slide, you can also see the products that involved implementing the heat production at Lagisza power plant, 460 megawatt, and construction of the peaking and backup boilers at Lagisza power plant. The project was completed in Q1 of this year, and the heat generated by the refurbished unit will heat about 20,000 flats. The last item on the slide you can see is the additional 5 wind farms that I already described when I was presenting the Green Turn of TAURON's strategy at the beginning of the presentation. On the next slide, we are showing capital expenditures by segment. It's worth noting that the CapEx of TAURON Group in 2019 came in at more than PLN 4.1 billion. Traditionally, the largest spending was allocated to the upgrading of the distribution grid and connecting the new customers to the distribution grid. The distribution CapEx came in at PLN 1.8 billion. The CapEx in the Generation Segment was PLN 1.7 billion with more than PLN 1 billion spent on the Jaworzno products. In the Mining Segment, the CapEx came in at almost PLN 500 million and related to the construction of Grzegorz shaft at the Sobieski Coal Mine related to the investment program at the Brzeszcze Coal Mine and the construction of an 800 meter level at Janina Coal Mine. Ladies and gentlemen, this is where we'd like to end our presentation of TAURON Group's earnings for the full year 2019, and we are ready to answer any questions that you may have. Thank you very much.

Thank you very much for the presentation. [Operator Instructions] And in this part of the conference, you are also -- you can also ask questions to our experts, Mr. Dariusz Niemiec, the Director for Trading; as well as Sebastian Gola, Executive Director for Controlling at first and he's the Director for the Analysis. We have received more than a dozen questions so far, so let me now move on to those questions. Does TAURON has set its specific date when it's going to depart from coal?

Ladies and gentlemen, we didn't set such a deadline, such a date. Of course, currently, we are working on how the Generation and Mining Segment should operate in the future. We do realize how the capital market is working. Until what time it will be working? We realize how those units should be operating. However, we don't have a fixed deadline as of now.

The next question is related to the date for the commissioning of individual coal units. Can we indicate the deadlines, the dates of the commissionings of shutdowns of individual hot coal-fired units?

As, ladies and gentlemen, I just said, we don't have a fixed deadline. We haven't set such a fixed date yet. We presented in the strategy that we assume the commissionings of the coal units between 2025 and 2030, it, of course, depend upon the economic situation of Generation Segment, depending on how these units will be able to operate in a profitable manner. As of today, looking at the impairment charges results, impairment test results, we can clearly see that versus our recent analysis, the prospects of such units have deteriorated. Therefore, we assume that those units will be decommissioned close probably to 2025 and 2030. However, at this point in time, we are not yet able to give you such a specific piece of information indicating the specific deadline for each unit. Thank you.

Can you see any risks that the capacity market will not work in 2021 due to the large burdens on the consumers' bills? Related to that, too, I would like to ask Mr. Sebastian Gola to comment on that.

Ladies and gentlemen, as we know very well, we have completed auctions for 2021 '25 delivery. This is notified by the European Commission legal solution, statutory solution. So from the formal point of view, legal regulations, it doesn't seem that such a state aid should be suspended in 2021 on the subsequent years, irrespective of the pandemic and the impact on the economization of other countries. So it's difficult in our opinion to state -- make up a statement as an electric utility operator on the market because these are issues within the area under the auspices of the regulator and the legislator, legislative at first. Thank you very much.

Another question is related to the Stalowa Wola unit, how the results of Stalowa Wola units will be consolidated? How much will that be, the earnings?

The Stalowa Wola units currently has not been commissioned yet. However, the 4, we are not consolidating yet its earnings. However, let me remind you that the consolidation is only -- as the share level because the unit is implemented under the off-balance formula. So therefore, we can consolidate the dividend if we receive a dividend and/or net profit. But we're not consolidating the EBITDA of that unit due to the approach that we took when we were implementing that investment project. Thank you.

Will TAURON be claiming compensation in the delay in the commissioning of the Jaworzno unit?

Currently, we are -- first of all, the Jaworzno priority is, first of all, to commission this unit as soon as possible. Currently, all the time, we are conducting discussions, negotiations with the general contractor of this unit. We are interested in getting this unit online as soon as possible because this unit is a high-efficiency unit that has very good parameters in terms of its profitability. However, it's difficult for now to predetermine what will be the final outcome of settlements with the general constructor. We don't want to predetermine that because we are in the process of our discussion, negotiations and discussing the completion, the commissioning of the unit. This is what we are focusing on. So the time will come to discuss that after the unit has been commissioned.

Next question is related to the contracts on the CO2 emission allowances and the sales of electricity for this year and the next year. What are the contracts on CO2 emission allowances and electricity sales looking?

I would like to ask the Director, Dariusz Niemiec, to answer this question, please.

Good afternoon, ladies and gentlemen. In terms of contracting for the current year, it was mainly hedged last year. So when we were closing our portfolio. So in terms of the current year, we are not making any contracting. In terms of contracting for the next year and the subsequent years, in accordance with our strategy that was adopted by the group successively as with contract sales of electricity, we also are contracting CO2 up to the level that is based on our strategy.

Thank you. My question is related to Laziska, Siersza and Lagisza power plants. Have they been refurbished due to the BAT conclusions coming into force? I would like to ask Director, Sebastian Gola to answer this question.

Continuing the capacity market topic, the adaptation to the BAT conclusions is one of the main parameters that we have to comply with by the end of this year. We are in the process of a broadly -- broad-ranging campaign to adapt those generation units. But it's worth noting that some of those units already comply with the BAT conclusions due to the fact and the derogation that you obtained, but also some kind of replacement solutions that allowed us to upgrade or adapt to those units to emission requirements without deeply changing the designs of those units. So we don't see any jeopardy, but we are not afraid to us -- getting us in compliance with the capacity market's requirements and the BAT conclusions as well.

Thank you. What does increase of the extraction, coal extraction up to 20,000 per day, what has been -- will it continue over the next few months? What will be this impact upon the results of Mining Segment?

Mining segment in 2020 will be under a big pressure from the market situation. What I mean here is the situation related to the coal consumption by the coal-fired units. And the big challenge will definitely be the fact that the entire production will be consumed by those generation units. I'll be frank here. Now the situation in the Generation Segment is maybe more difficult than in 2019 as a matter of fact. Additionally, we are not able yet to indicate in detail what -- how does the situation evolve due to what's happening now, so that coronavirus pandemic actually. So we will be ready for that in terms of production capacity. But whether this production will reach this level on a continuous basis, it's difficult to say now because of the fact that there's no -- it doesn't makes sense to produce coal into stock and freeze your cash into high inventory levels.

Thank you very much. What level -- what size of CapEx can be expected in the renewables? And over what time frame by how many megawatts you wanted to increase your ultimate installed capacity in wind farms?

Over time, we are implementing a strategy that we called the Green Turn of TAURON. The objective, as what we presented to you, in this Green Turn of TAURON, namely, 900 megawatts in wind farms and 300 megawatts in photovoltaic farms are still valid with those objectives. We are not able to tell you now what will be the subsequent investment projects. If such major investments come up, we'll be informing the market of that. But over time, we're analyzing, reviewing the market. We are looking where we could build new units because we are also looking for those projects as well intensely as well as where we can acquire existing wind farms or photovoltaic farms. It's too early to speak about specific details, but let me assure you that those works are underway over time. It may turn out that the impact of a pandemic will slightly slow down and we might be forced to slow down these efforts, but it will be only periodic occurrence, temporary occurrence. And ultimately, we uphold what we presented to you at the end of May last year.

Thank you very much. We have a question from the representative of Raiffeisen Capital Management from Vienna. They request to comment, how the lowered demand for electricity we've been observing since the crisis broke out in Poland, what is its impact upon the manufacturing industry now region, and the request from investor to estimate the financial impact if we see lower demand for electricity. For instance, a 10% decline in demand, what will be its impact upon the drop in EBITDA?

Let me start answering this question, and then I ask to continue with the answer Mr. Director, Sebastian Gola. Let me start by saying that, first of all, what we've been observing now is an unprecedented situation. So an attempt to make estimates is that we make error. Of course, we are seeing -- we are monitoring the consumption of electricity by the individual groups of our consumers. We are able, of course, to translate the results of those analysis on our financial results. But the situation is changing very rapidly. In fact, it is changing every day. We're observing it all the time. So therefore, saying -- speaking about an impact on the EBITDA over a longer time frame impact on the full year, for instance, we are not able to see it now that we have a big -- we're in charge of the larger. Or we may -- of course, we must say that it might not be possible yet. We may not be able to say what will be the outlook for -- the economic situation in Poland in 2020. We want to present such a view when we will be presenting the earnings for Q1 2020. In the case of the analysis, that 10% increase of electricity consumption, it's difficult to describe what will be the impact upon the earnings for simple reasons, which consumers will observe a decline. There's a big difference between margins that we have on supply to individual consumers. So depending upon what will be the structure or the composition of a statistic consumption as a result of a decline, we'll be able to say whether it has a major impact upon the earnings or no. Let me also draw your attention to the fact that the Polish government, the governments of neighboring countries are working -- are implementing substantial government programs. Eight programs will be put in place very soon aimed at providing support for the economy. And definitely, the result, the consequence of those programs will also be visible in the consumption of electricity. Therefore, we also hope that the positive impact of the anti-crisis shield, the so-called government program, will have an impact upon our capital group. Let me now ask Mr. Director, Sebastian Gola, to comment on this question as well.

Referring to the first part of the question, continuing also the statement of my predecessor, that's true. But as of now, it's difficult to estimate the impact of a pandemic, its depth, number of people infected. It's difficult to estimate also the impact of the anti-crisis steps undertaken. Let me just give you a few words, comments urbanization that we can see in the power sector. After the declines of around 1% last year, we are observing further decreasing trend though in terms of electricity consumption in January and February. The first readings from March also indicated downward. It's not much bigger than in the first 2 months of the first -- of this year. It's difficult for us to compare a direct impact of both the tightenings [ just ] into measures that we introduce and the growth of pandemic crisis virus in Poland because as the CFO mentioned, the structure of consumption varies in those segments. As of now, we can see minor decreases in the industrial segment, consumer segment and an increase in the household segments. As of today, it's difficult to make a clear and equivocal conclusion out of the situation how it will evolve until the next -- the end of the year. But definitely, the pandemic will have an impact upon the macroeconomic situation, but it will definitely amplify the declines that we've been observing over the first 2 months of this year. The second part of the question is related to the situation of the manufacturing industry and the impact of -- price on the impact on the manufacturing industry. As you can see in the press releases, some structuring, manufacturing plans have slowed down or have shut down even their production. You can see, for instance, the car factories in Poland, you can see it on the websites, information websites, news websites and the websites of other companies. We can see a big slowdown in the steelmaking industry. And definitely, the situation will have an impact on the slowdown in the SME segment. As far as the financial situations are concerned, as the CFO mentioned, it's too early to describe this issue from the point of view of our EBITDA because probably as the situation evolves, there'll be a factor that will have a negative impact on the group, but also some factors that may have a positive impact on our group. Here we should look at the price of electricity and the prices of CO2 emission allowances. Because the panic on the market, the crash on the commodity market, financial markets led to the drop of CO2 emission allowances prices on the markets, which will have a positive thing with the reduction of our costs. So I would suggest following month-by-month and quarter-by-quarter the changes of the situation, we probably will come back to attempt to estimate the situation in the subsequent earnings conferences.

The Polish Press Agency presented a statement on the possibility of a payout of a dividend in 2021. Could the president indicate what commissions should be met for the company to be able to pay a dividend in 2021? That was a question to Mr. Wadowski.

In 2021, we are assuming a continuation of our dividend policy, which clearly states that we want -- that the company will be paying out a dividend. However, first of all, looking at our abilities to pay out a dividend, we are taking into account mainly the 2 elements, our financial situation, where the financial situation allows us to pay out the dividend. And the second part is the situation related to investment projects. In the year that we'll bring out the dividend, well, the CapEx will allow us to implement it. Therefore, we are assuming that in 2021 will be analyzed, where the dividend payout will be possible. And let me emphasize that we want to continue this dividend policy. And I do hope that it will be possible level as we want to take out the fact that this dividend is subject to analysis, subject to review, will be possible only once the financial position of our group will make it possible as well as the CapEx levels will make it possible.

Thank you. Two more questions. What will be the impact upon the earnings of the company might the latest interest rate reduction may have? And when will TAURON Cieplo will be sold -- subsidiary will be sold? And what would be the result of the heat segment in 2020?

The reduction of interest rates in 2020 has 2 impacts upon the earnings of our group. On one hand, it should be remembered that a major portion of our debt is the debt based on a fixed rate. On Slide 28, you can see which -- what portion this is related to. So only with respect to the floating rate that this reduction of interest rates may lead to a reduction of the financial costs. However, the reduction of interest rate may -- doesn't have to, but it may, according to the model adopted for the tariff, may have an impact upon the distribution tariff for 2021. Because when the weighted average costs of capital are estimated, the President of the Energy Regulatory Office takes into account the interest rates on the market, specifically the 10-year bond interest rates. I'm saying it may even have to because it's difficult to say as of now whether this interest rate reduction will have a direct impact upon the decrease of the profitability of those -- of the yield of those bonds. As Director Gola mentioned already, we are dealing today with a lot of confusion on the market while seeing a lot of changes occurred on the financial market. And we expect that the weighted average cost of capital in 2021 may decline. So on one hand, a positive impact. However, one can also expect a negative impact.

Thank you very much. Since we have practically exhausted the list of questions that you have sent us, I -- we thank you very much for all the questions. I'd like to invite you all today to the conference call after we have presented the earnings for Q1 2020. Now you're welcome to contact our Investor Relations teams of TAURON Polska Energia. Please contact us directly. And thank you very much. See you next time. [Statements in English on this transcript were spoken by an interpreter present on the live call.]