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

Welcome, ladies and gentlemen to the conference call for investors, media and analysts. Today's conference will be [indiscernible] of TAURON Capital Group for the first half of 2021. Due to the pandemic, our meeting is organized in the form of a video conference. We have 2 hosts today. I would like to welcome CFO, Krzysztof Surma, responsible for Finance; and Mr. Jerzy Topolski, Vice President for Asset Management. My name is [indiscernible], I'm the spokesperson for TPE. Now please ladies gentlemen, we would like you to have a look at the presentation. It's going to be given in Polish, but translated simultaneously into English. And so the translation -- after the transmission, it can be replaced in the mode of the conference. We already received the first question. You can use the form on the transmissions website to ask questions. The first part of the presentation will be given by Mr. Jerzy Topolski. The floor is yours.

Ladies and gentlemen, in my part of presentation, I'm going to present the results of the group for the first half and the second quarter of this year as compared to analogous period in the previous year and then investment activities of TAURON Group that has been carried out -- that were carried out in the first half of 2021. If we could focus now on financial results for the first half of 2021, I am happy to inform you that the group's EBITDA has reached almost PLN 3 billion, which is more by 21% than in the first half of 2020. And the net result is PLN 356 million, which is more than -- 1,000% more than the analogous period last year. Revenues from sales amounted to more than PLN 11.8 billion, and they increased by 16% as compared to the first half of 2020. Net debt-to-EBITDA ratio is 2.1 which is quite a safe level. Investment outlays were about -- CapEx was about PLN 1.3 billion, which is a drop by 29%, which I'm going to explain further during the presentation. As for operating data, the volume of distribution of electricity and sales, that's something that should be noted, 9% more in electricity distribution to -- and customers, and retail electricity supply increased by 4%. As for production of commercial coal, it increased by 8%, and I'm going to develop on this later on. Production from renewable sources dropped, which is quite symptomatic for the first half. But I'm going to develop on that later on in the presentation. Heat production, heat generation increased by 8% in the first half of 2021. If we look at the results of the second quarter as compared to the second quarter of the previous year, we also have increase in revenues from sales by 15%, EBITDA dropped by 18% to the level of PLN 1.2 almost billion. And at this point, I would like to give a brief comment. Last year in the second quarter, we released the actuarial reserves, and they actually affected the results in the previous year. It was a one-off event. This year, we have not had such events. If we clear this release of provisions, even the EBITDA would be probably more -- higher, more or less, by 29% as compared to the analogous quarter for 2020, apart from this one-off event regarding provisions release. CapEx, almost PLN 650 million. And net debt-to-EBITDA, again, 2.1 As for operating data in the second quarter of 2021, we see -- what we see here is the events in -- what is going on in our country are reflected in these data. We see all this phenomena related to increased energy supplies and recovery of the Polish economy after the COVID period. So distribution of electricity is almost 13 terawatt hours, which is higher by 14%. Renewable sources energy dropped by 5%. Electricity production from coal-fired units increased by 39%. I'm going to discuss it later on. Heat generation, 20% higher. Retail electricity, supply higher by 10%. And commercial coal production dropped by 3% to the level of a little bit less than 1.3 million tonnes. Macroeconomic situation of the group, I think you are aware of it. It's reflected in the GDP growth rate in Poland and PMI index for Poland. Especially in the second quarter of 2021, we can see revival of economy, which has been growing from the end of the last year, which is after the third wave of the pandemic, or in other words, after the third lockdown. CO2 emissions, prices, you know very well the dynamics, probably, from January to June increased by 150% or unit price for allowance -- CO2 allowances. As for the structure of electricity production, it shows us several phenomena that will accompany us in Polish economy and in the energy sector, in particular. We see the energy mix in Poland, we can see an increase in production based on hard coal by 15% as compared to the first half of the previous year. Energy based on lignite increased by 13.6%. And there's a drop of renewable sources derived energy all over Poland. What is it due to? This is the first year, from January this year, where the rate of wins has decreased significantly as compared to the previous years, which translated into lower production of wind farms, regardless of their location. So we observed this phenomenon all over the country. We observed that in our assets, wind production assets. Water was a little bit better. We have a positive trend as compared to previous years due to higher precipitation level, which is high as compared to previous years, which allowed us to produce a little bit more energy in water power plants, but it did not compensate for the losses on wind energy. As for lignite and hard coal-fired units, these increases are due to the dynamics of demand for electricity. After -- due to the recovery period, the need for the demand for a great amount of electricity required to recover and increased level of activity in households, which is related to remote work, to lockdown, where workers would stay at home and work from home, so we could -- you can see the tendency of growing demand, which has maintained in households. It has increased all over the country. Another phenomenon is something that we have not observed for many years, namely increase in exports of energy outside the country so that the balance of exchange, international exchange is close to 0 or actually slightly with the tendency of us becoming an exporter of energy. That's something we have not observed for many years. This is related to increased demand on one hand, but also the process of phasing out power plants, specifically those based on hard coal in Germany and announced phasing out of a further power-generating plants. But also prices from the beginning of this year, the prices at our neighbors in Germany are quite higher than in Poland, so it encourages imports from Poland. So the price situation related to the dynamics of prices of allowances and the structure of demand resulted in this new phenomenon where we see increased production from conventional power generating plants all over the country, including TAURON's assets with a simultaneous drop of renewable sources. Now I would like to give the floor to Krzysztof Surma, who's going to present financial results for particular business lines.

Ladies and gentlemen, as Mr. Topolski has said, this is a half of the year of good results. This good results, obviously, are due to the postpandemic revival all over the country, both in sales and distribution. We can see it in the revenues. Half year to half year revenues increased by 16%, and they reached almost [ PLN 20 billion ] in the first half of 2021. So this increase of revenues from sales is observable in distribution and retail supply. Net results exceeded PLN 350 million. It's a significant increase as compared to the first half of the previous year. And it's still affected by important losses in the sector of assets related to production in where impairment losses reached PLN 1.1 billion. As for EBITDA level, we have very good results. Normalized EBITDA half year to half year increased by 30%. Mr. Topolski has just said, we had the one-off events related to the release of provisions for the equivalent of energy. This was -- this year, we had a one-off event on transactions regarding CO2 allowances. They were discussed in the first quarter at the conference. Hence, the increase of EBITDA has increased by more than PLN 0.5 billion. As for the second quarter, we see a similar tendency increase at the level of normalized EBITDA of 30%. I've mentioned the impairment losses, they affected the net result for that quarter. As for the revenues, they have increased significantly both in distribution and in sales. Moving on to particular segments. As always, our main segment contributor to EBITDA is Distribution. But what's also interesting in this first half of the year, this share is a little bit smaller as compared to the whole group, which is quite unusual. In consecutive years, probably it will not be like that, distribution will be 52% of EBITDA and will probably be more. But this is due to the fact that we have above-normative results in production related to those one-off transactions concerning CO2 allowances that I -- that we mentioned in the first quarter. As for Q2, we can clearly see that this segment of Distribution has a bigger share in the total of results. And we can still see that Generation is still a significant part of the EBITDA achieved. And it's a transfer of results between sales and Generation, which I'm going to discuss further in the presentation. Here, if we have a look at the comparison of EBITDA from the first half of 2020 to the first half of 2021, we can see the biggest contribution was that of Generation area. But like I said, we had those significant one-off events and the power market implemented this year. But as the negative distribution effect was due to the provision that was released in 2020, like we said, and lack of proficient profitable repurchase of energy from a unit in Jaworzno that was nonoperational. As for EBITDA for Q2, all the factors that are significant are quite similar. We can see that the impact there, the influence of Generation is smaller because the transactions regarding CO2 allowances happened in the first quarter of the year. In the second quarter of the year, there were no such transactions. So the main growth factor were the revenues from the power market. And going further to consecutive segments. Like I said before, we have very good results in the Distribution area. We have 9% increase of distributed -- energy volume, which translates into significant increase in revenues. It's a little bit smaller due to decrease of a unit price for offtakers, but the result is positive for Distribution. We can see half year to half year that it's a decrease due to this one-off event regarding the provisions that we mentioned, but there's a positive tendency in other services, the consumption of energy by the customers. There's a growth and increase in volumes in all the areas in all tariffs A, B, C, and G. We can see this postpandemic revival in the results of our Distribution. As for Q2, we can see identical tendencies to those of the whole half of the year. The result was a little bit affected by this one-off event, namely the dissolution of provisions in the second quarter of last year. As for quality parameters, an important piece of information of quality parameters achieved by Distribution meet the requirements of the President of the energy authority -- regulation authority. They're not going to affect the tariffs in the coming years. As for Renewables, like Mr. Topolski said, we had smaller wind rate in this half of the year, specifically during the first quarter. This is due to historically high wind level in 2020, so the benchmark was quite high. And this year, we're coming back to normal conditions regarding the level of wind. But hydrological conditions have increased significantly. Energy produced from water -- hydro power plants is higher half year to half year. We also noted increase in prices, which, after balancing the poorer volumes in wind, by better results in water and higher prices, it gives us a slightly positive outcome for the whole segment. Green certificates had a slightly bad idea. Water or hydro power plants lost those green certificates. There are no such certificates available anymore. And one of our wind farms reached a moment -- it's farm in Zagórze, which reached a moment where they cannot apply for more certificates. As for Q2, it's much better, EBITDA doubled quarter-to-quarter. It's due to bigger volume from water-generated energy and comparable wind volume quarter-to-quarter. And obviously, it was all affected by elimination of provisions for real property tax, and thus, EBITDA doubled due to all the these factors in -- as regards renewable sources of energy. Here, another segment that we started talking about is Generation, very good results in the first half of 2021. EBITDA is very high, PLN 1 billion. But like I said, this is due to one-off events, transactions for CO2 allowances. We had a positive result in the power market. If we eliminate the effect that affected the results in the previous year, it also contributes to the positive result this year. And the positive margin for energy and positive results for heat, still, a huge part of this growth year-to-year is due to a contract between Nowe Jaworzno and TAURON Polska Energia. It's a contract based on the formula cost plus. And here, we're dealing with a tranche of results from sales to Generation. So this transfer amounts to more than PLN 200 million. So if we eliminate this factor, this result in the Generation sector would be comparable year-to-year, well, as regards electric power margin. As for Q2, in the Generation segment, the difference is that we don't deal with those one-off events anymore that I mentioned regarding transactions on CO2 allowances. The other factors are the same as for the whole half of the year. As for Supply segment sales, what we can see, the first bar shows a negative impact of margin upon electric power. Well, we need to remember that this negative effect is due to 2 premises, first of them being the results of the previous year. Last year, in the first half of the year, the group repurchased energy from a nonoperational unit in Jaworzno, and it achieved positive results on those repurchases that were accumulated in the Supply segment. But this year, in this segment, the company accumulates results under the contract between Nowe Jaworzno and TAURON Polska Energia, and they are accumulated. The cost plus contract is accumulated for the supply segment. But on the consolidated level, this result is of no import because if we have it in supply or in generation, it's neutral for the group. But the positive impact of margin generated on sales of electric power, it's due to slightly lower prices last year and contracting for this year's sales. This has a positive impact on margin on electric power. If we also look at the sales company, its results year-to-year are very good. We don't see any decrease of results, which is quite significant in the context of the second quarter of 2020. One were the EBITDA results in Supply segment is lower than when we could have expected from the very results of the supply company alone, which is due to those one-off events from last year and repurchased and the contract between Nowe Jaworzno and TAURON Polska Energia. As for Mining segment, what we deal with here is a positive tendency of increased volume of energy sold with a slightly worse price in the first half. There was oversupplies of coal, specifically in midsized grades and fine coals. Something that has also had impact on the result was bigger allocation of cost related to a relatively smaller amount of coal being put aside as inventory. Therefore, EBITDA half year to half year is a little bit smaller this year. As for the second quarter in the Mining segment, we have similar factors, a slightly better volume of coal sold and the negative impact of the price reduction. And additionally, the results are worsened by the issue of small -- bigger allocation of costs in the result with decreased amount of coal that is put aside of inventory. As for debt and financing, we have a stable situation in the group. Our liquidity is very good, almost PLN 5 billion available. The indebtedness ratio is very good as compared to previous years, which shows the very good position and financial standing of the group. The results are due significantly to a program with the maturity date in December 2022. And here, the group is actively involved in negotiations with a multilateral bank concerning new financing. We've also started preparation work to get new financing on the domestic market. And in the coming weeks and months, we can expect information from the group on refinancing that program that is much -- is going to be mature in December 2022, amounting to PLN 6 billion. So much for the segment and financial results. Now a small piece of information on investments in the group. I will give the floor back to Mr. Topolski.

As for investments, in the Distribution segment, there's a slight increase, PLN 992 million has been spent. And we should mainly note that this concerns new connections and new power. And this concerns connection of consumers for voltaic installations and new connections for new facilities, big industrial facilities, but also households. As for refurbishing and recovery of assets, we have spent almost PLN 400 -- PLN 400 million on that. As for Generation, we see a drop from PLN 693 million to PLN 114 million. This is mainly due to the outlines, which are about to come to an end and concern adjustment to the VAT requirement and in Nowe Jaworzno in finishing the 910 unit, PLN 13 million were the drops in the first half compared to the previous year. The difference is more than PLN 415 million. As for heat, we have spent for new -- for connecting new facilities and new offtakers, that's PLN 9 million and refurbishment and maintenance of heat system is PLN 7 million. As for investments in renewable energy sources, we see an increase. It's not a big one because the development processes from -- starting a development process until starting construction, it requires some, it's not as dynamic. But we can already see it like a wind farm in [indiscernible], 30 megawatts. We spent PLN 13 million in Jaworzno 1 and Jaworzno 2 wind farms, PLN 2 million in the first half of this year. As for Mining, it's comparable to the first half of the previous year. The significant outlays involve preparation of production, which is PLN 70 million. And like I said before, an increase in consumption of energy and in Generation forced us to increase the amount of coal supplies to our units. And therefore, we need to prepare production capacity because we see -- we have been observing this trend for quite some time now. Hence, the largest outlays in this sector. And the construction of Grzegorz shaft and level 800 in Janina coal mine for Grzegorz shaft is mainly maintenance until resolution of disputes with a general contractor. And as for level 800 is the final stage of investment, and we spent PLN 3 million on that. Then IT investments for broadband Internet, almost PLN 50 million for the POPC III program and other investments related IT and gas and powered engines in -- that's PLN 9 million and lighting maintenance and expansion, it's PLN 15 million.

Ladies and gentlemen, thank you for the presentation. Now let us move on to questions. I browse through the questions. During the presentation, there's quite a lot of them related to the new power unit in Jaworzno. So maybe let us answer these questions because I think half of the questions you've asked concerns this situation in Jaworzno. Question one, what are the plans regarding further development of Jaworzno? Are you planning to enter with the capital to Rafako company in order to finalize the work and to launch and commission the power plant? And a similar question, another one, is TAURON planning to be an investor in Rafako? And one second, I'm just trying to find another similar question. What's the level of negotiations with Rafako regarding repairment of the unit in Jaworzno? Is Rafako going to finalize it? Or is it going to be carried out by another entity? Is year 2022, a realistic date of returning it to functionality? And one more question, taking into account the failure of 910 units in Jaworzno, can TAURON increase production if the situation on the market and export favor it?

I will try and answer these questions, ladies and gentlemen. As for Jaworzno power plant, our main goal of TAURON Group is to make it operational again. I want to remind you that it was commissioned on the 3rd of November 2019 until June, where we -- this year where there was a failure. So when looking at this situation, the most important goal for us is to repair the failures and to relaunch the unit, make it operational again. According to today's situation with Rafako, we are in the process of mediation, involving the general prosecutor's office, and it's ongoing. Based on mediation advances, there's been a schedule presented on removal of failures, which has been communicated to the market by 25th of February 2022 as the date of recommissioning the 910 units in the Jaworzno. For now, there are no premises -- confirmed premises, that this date is somehow endangered regardless of the fact that the disputes are ongoing and the mediations are ongoing. Where we're talking about expectations of Rafako that are published by the media regarding our involvement -- capital involvement, I can announce that TAURON has not carried out any negotiation, significant negotiations concerning such an involvement. Our strategy does not provide for investment in construction, on engineering and construction companies. Our goal is to make the unit operational again. So as for today, we are not planning any capital involvement in Rafako, which is supposedly to be a condition for continuation of Rafako works to remove the failure. But these works are ongoing. So the information that Rafako leaves the site has not actually materialized. So we can say that the date of the 25th of February is going to be maintained. Is TAURON planning to transfer the new unit? Yes, it is taken into account. We assume that the deadlines, based on the assumptions of the Ministry of State-owned Assets regarding transfer of generation units based on coal to Nowe is the end of next year. It's going to be met this deadline. And by that time, I think that the unit in Jaworzno will have worked operated for several months. So we're not envisaging any disturbances in this process.

Thank you. We have more questions concerning Rafako and Jaworzno. Now due to the fact that the Jaworzno unit has stopped energy generation, should we expect losses on EBITDA in the third and fourth quarter of 2021 regarding sales and EBITDA? And one more question, just a second. In the current price situation, consecutive records are going to change the -- regarding the situation in Jaworzno, is it going to change some -- the results as presented in the communication?

As for the first question, like I said before, during the presentation, it is a kind of a transfer of results between generation and supply which is due to a contract concluded between TAURON Polska Energia and Nowe Jaworzno. As for the question, whether it is going to affect the supply segments results, well, if we remain -- if we stick to the formula of the presentation, these results are going to affect significantly the Supply segment. But from the point of view of consolidated results for the whole group, this will not be of any significance. As for the second part, we're going to change it. Well, yes, in the communication in the current report, we provided the estimated value of loss of the group due to the stoppage of the unit. If there are any premises to this, the group will recalculate the loss. If we know the final deadline of the repairment and what the repurchase market is going to look throughout that time, we will adjust this value. However, looking at the assets we have in the group, we can say that at the moment, when we lose funds on potential higher prices of repurchase from Jaworzno, these units from TAURON generation could take advantage of higher energy prices. Obviously, if we assume that there's a positive tendency on CDS, that energy prices are growing, but not necessarily meaning that -- well, like I said, the energy price grows, but CO2 prices do not go up. So this is a positive CDS. If we have this situation, then part of the units in the conventional area will be able to generate a higher margin that will be consumed by the repurchase of energy from Nowe Jaworzno.

Thank you. I think we are going to return to other questions. I think we have abundantly discussed the situation of Nowe Jaworzno. How does the management board assess the EBITDA -- distribution for 2021 for the end? What are -- in the management board's opinion, what are they going to be the volumes and the tariffs in the coming quarters?

As for distribution, as we have shown, the results were quite good. The volumes were significantly higher. The results of the second half of the year will depend to a large degree to the volume of distributed energy. So the answer here depends to a large degree on the next wave of the pandemic. Is it going to affect the consumption of energy, or is the level of distributed energy going to be maintained at such a high level as in the previous quarters, or is there going to be a slowdown. For now the current -- based on current information from the government, it seems there's not going to be another lockdown and limitation to business activities, and therefore, volumes should be at significantly good level. So I think that the results in distribution should be quite stable in the second half of the year.

Another question, is TAURON expecting that sales and mining will reduce the debt of the company? The assets and part of the assets are going to be transferred to Nowe? It's going to reduce the debt of the company?

Well, first of all, we need to separate 2 things. One thing is sales of TAURON mining and the other issue is Nowe. These are 2 separate processes in governmental programs. They are separated, these 2 potential sales. So first, I will refer to TAURON mining and then I will say a few words about Nowe and TAURON generation and coal-fire units in TAURON generation. As for TAURON mining, yesterday, we signed a letter of intent with the treasury, which will allow us to start works on disposal of shares in this area. Then we'll have to find the assessor. And based on the pricing of the assets, it will be sold to the treasury. But before the transaction is finalized, prenotification process is going to be crucial and the commission has to approve the program for Poland regarding mining, obviously. As for the pricing, the appraisal, its level, obviously, is of some importance. And taking into account how it's acknowledged, how the loans granted to this area are acknowledged in the books and the loss of value of the segment, if we take that into account, we should not expect very high appraisal. And therefore, I think we should also take into account the adjustments in the balance sheet regarding the loans. So I think that the company will be -- well, the debt will be eliminated at the moment of disposal. But when we look at that level of debt in the group, I would not assume any significant change of indebtedness for the whole group at the consolidated level after this transaction. And a few words regarding Nowe. Obviously, here, the situation is similar. But we are at a very preliminary level. There's no letter of intent signed between us and the treasury for now. We're in the process of selecting a joint contractor. And in this respect, an agreement has been signed. And we're going to select an entity, an adviser to support both the government and the energy sector companies in the preparation to spin off those assets and to finalize the concept of the spin off. We should assume probably that like in the mining company that we will have these assets appraised. But when we look at the level of adjustments in the financial statements, the appraisal of this segment is significantly different than the segment of mining. So this might affect potential disposal of power, fired-power units -- of coal-fired power units, it may affect the net results at the group level.

What are the main factors of risk for Distribution business line in 2021 and 2022?

Like Mr. Krzysztof Surma has already mentioned, when we talk about 2021, the risks that we identify is merely the volume risk. The prices are approved in the tariffs. It's -- they're not going to be changed until the end of the year. So only the volume-related risk is significant, which might be related to the fourth lockdown if it appears. It's not assumed in the projections, the government projections. But if the dynamics of development of economy, we see that this risk seems to be mitigated. As for 2022, this risk -- regulatory risk, -- let me remind you that 2021 and consecutive years are not covered by a set regulatory model. In 2021, there was a model -- a transition model for Distribution only for 1 year. And until today, there has been -- there have been ongoing works on the model for consecutive years. So we worry this model might not be prepared in a way that might provide a basis for the consecutive 5 years, for instance, for the functioning of Distribution period. There probably will be another transition period for 2022. And this is the main risk factor, specifically the level of -- the rate of return on investment on the invested capital and the rates are going to be set for 2022. And all the cost factors should be taken into account by the President of the Energy Regulation Authority. And from 2021, we have a regulatory account where all the deviations are compensated in consecutive tariffs. So in R plus 2 years, so the regulator is not worried about modeling these areas. Regarding costs, they should be transferred into tariffs according to the model.

One more question regarding Jaworzno. Is TAURON planning to transfer to another the new unit to Jaworzno -- from Jaworzno to Nowe together with the contract that generates the losses? Is it going to remain in -- or is the contract going to remain in TAURON after these assets are spinned off?

The main assumption in this respect is to dissolve the contract before transferring the assets to Nowe. The key here is to elaborate the program with Nowe and transferring the assets. But once it's done -- or before it's done, we're planning to dissolve this contract. We are -- we have ongoing works regarding purchase of shares in Nowe Jaworzno by an investor. It's one of the determinants regarding the possibility of dissolving the contract before transfer to Nowe.

Another question, regarding fine coal. Now at a higher level of generation of energy from coal, do we still have oversupply of fine coal? Is there a risk that there will be not enough resource from Polish coal mines? Is it going to affect TAURON's prices?

For now, we still have oversupply. Like we said during the conference for Q1, due to the pandemic, in 2022, there was a drop in energy demand. So there's quite high inventory of coal in heaps and by power generation units and at coal mines. So we had oversupply of thermal coal indeed. However, today's situation of increased production leads to these oversupplies being reduced, so we hope that by the end of the year, we will be at the normal acceptable level due -- or related to the requirement regarding inventory levels. So we are planning to reduce the inventory to normal level for TAURON. But like I said, production and investments in workings and preparation of production should generate production of enough coal of increased production as it was in the first half. We are not expecting these dynamics to change even further. We are planning these increased dynamics compared to 2022 should be the same as in the first half of the year. And we are prepared to secure our coal -- thermal coal supplies from our own mining. So this makes us -- protect us against changes of price in the whole country. But obviously, when we look at the whole country, we see increase in prices of coal in our [indiscernible] and in the bids. But these dynamics are mainly related not to thermal coal because thermal coals, the price dropped actually for this coal as compared to half 1 of 2020. This will change probably soon. But from the point of view of TAURON, it's not significant because our production is secured for our own purposes. In a longer perspective, we assume that the coal price path will be growing, but the dynamics are hard to determine due to significant changes of the situation on the Polish and European market as for the level of demand for energy.

Another question concerning discussions with the energy regulation authority, what are the -- what's the situation about the new tariff? Are we going to expect -- can we expect a new 5-year model or another transition solution?

Like I said before, I would rather expect another temporary solution for one year. The level of negotiations is not finalized yet. So we don't expect a 5-year model. But it's not due to the relations between operators and the regulator, but it's due to the volatility of the market and the President of the Energy Regulation Authority sees that there's a significant change of relations between volumes and prices. He is going to rather be reluctant about a 5-year plan. I think he will be more flexible. So we're expecting rather another 1-year model for 2022.

And another question regarding the price -- regulated prices of energy. What do you expect from regulated energy prices for 2022? Will the regulator take into account the whole increase of cost of energy in the new tariff? Can we add anything?

Probably tariff G in [ retail ] supply. I assume that the President -- well, first of all, we're in the phase of preparation of a tariff application. So the first issue is that we should look at what happened on the market as compared to the previous year. We see an increase in demand of energy. So it's hard to forget about that when you file applications regarding tariffs. So we know that the President of the Energy Regulation Authority expects some increase. But talks between the President and the regulator and energy companies, including TAURON will be carried out in autumn. And after we finalize contracts for energy and when we file application at the end of October, we will know a little bit more about the size of the change. But we need to observe the market and see the changes of prices year-to-year.

We're about to finish the conference. One question, one last question. Which might cause future increase of CDS on TAURON [indiscernible]? Are there any chances that this might happen in the future?

Well, obviously, like I said, we're dealing with a significant increase on CDS in the coming years. CO2 prices did not go up, but electricity prices went up. So there's a chance it might happen. But to a large degree, it depends on a few factors, namely the development of renewable sources of energy in the country and the level of weather conditions, hydrological conditions. It all depends on how much wind and how much water we have. This will translate into the level of energy generated from renewables. And another thing is the level of prosumer installation. Then prices in the neighboring countries, we had a situation that we did not experience in the previous years, much higher prices in Germany than on the wholesale market in Poland. So reduced imports or no imports and exports of energy from Poland, these 2 factors might, to a large degree, determine the level of CDS in the coming years. When the prices of energy on the Western market and the demand in Poland maintain at a stable level, there's a chance that the units that complete the system like coal-fired unit in TAURON will result in a situation where CDS is slightly higher than what we observed in the previous quarters. Because in the first and second quarter, there was a negative CDS on the spot market and on the term market. And these results in the situation where units -- plus 200 units were forced to be operational. But then if CDS changes, we can expect a bigger generation by this unit. It will depend on the situation in neighboring countries and the decision in Germany on switching of nuclear power plants. If they decide to do that, probably high prices of energy will maintain in Germany for higher -- for a longer period, which will translate into higher CDS in Poland.

This was the last question. Thank you very much for your participation. Let me remind you that we'd like to invite you to another question shortly after publication of the report for Q3 2021. Obviously, the investors and analysts and the media, you have at your disposal the teams of -- for Investor Relations. Thank you. Thank you very much and goodbye. [Statements in English on this transcript were spoken by an interpreter present on the live call.]