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

Good morning, ladies and gentlemen at the conference call for the media, for the investors, for analysts concerning the result of the TAURON Capital Group for 9 months of 2021 and third quarter of this year. Due to the pandemic our meeting is in online form but we got used to it, I suppose. The host of this meeting are our CEO, President -- CFO Krzysztof Surma; Jerzy Topolski, responsible for Asset Management. My name is Lukasz Zimnoch. I'm the spokesperson of TAURON Polska Energia. The presentation that you are about to see is going to be presented in Polish and translated simultaneously into English. Outside of transmission, you will be able to listen to the meeting in the conference mode. You're welcome to ask questions via a form on the website of the transmission. I can see there are already some questions coming in. So now I give the floor to the President.

Good morning, ladies and gentlemen. At the beginning, I will present the operating data for third quarter and the 3 quarters as compared to the analogous period and some results of financial -- some financial results, which will be presented in detail by Krzysztof Surma. As for the 3 quarters as compared to the analogous period of the previous year, starting from distribution of energy, this increase for the 3 quarters in TAURON Group has amounted to 8%, which is quite significant because throughout the country in the post-pandemic period, the increase was 6.4%, which shows us that in the south of Poland, where we operate as TAURON Group, the increase has been quite significant after the pandemic, so the recovery as well. As production of energy, it dropped by 12% -- from RES dropped by 12%, 1.23 terawatt hours. The main reason for that is that wind mills in the first quarter of this year, they recorded record low production similarly to other areas in the country. It's quite a common phenomenon. Water did quite well actually. It was better than in the analogous period of the previous year. But in total, the result was worse by 12% as for electricity production from RES. In our group, TAURON Group, it was also affected by the biomass unit switch off in Stalowa Wola where last year, it was operational. This year, it was switched off. As for coal-generated electricity, the increase is by 39%, and it was influenced by the economic recovery after the pandemic as well as the specific conditions that were generated in the third quarter, as for the energy balance in our country. But I will tell you a little bit more about it later on. Another reason for this dynamics is the production from Nowe Jaworzno. As we know, it's been operational -- was operational from first January to 11 of June this year. And last year, it was only from the 11th of November until the end of the year. As for heat generation, there's a 7% increase, which was affected mainly by the weather in Q1, which was discussed at previous results conference. As for retail electricity supply, it's an increase by 3%. This is affected by competition does not reflect the economic trends in the area covered by TAURON supplies. Commercial coal production 3.7 million tonnes for 3 quarters, and I will speak a little bit more about it later on. As for financial results, revenues from sales almost PLN 17.8 billion, which has increased by 17%. EBITDA increased by 9%, PLN 3.7 billion; net profit, 15%, plus PLN 437 million. CapEx 28% lower, PLN 1.963 billion, I will explain it in detail later on. Net debt-to-EBITDA ratio 2.0, which is a significant drop by 0.5. If we take a look at the results for the sole Q3, the distribution of energy is quite similar, plus 8%. Electricity production from RES, 15%. So all the phenomena that I mentioned before for the 3 quarters are visible also in the third quarter. For the same reasons, electricity production by hard coal-fired units, 3.3 terawatt hours, 35% increase. As for heat generation, 4% decrease. Retail electricity supply, 2%, similarly to the 3 quarters. And commercial coal production, 9% decrease in the third quarter, which was mainly due to preparation of the front for -- preparation of TAURON Group and TAURON Wydobycie for the winter season. As for financial results for Q3, revenues plus 19%, PLN 5.99 billion. EBITDA, 22% increased PLN 787 million. Net profit PLN 101 million, decreased by 73%. CapEx, PLN 676 million, 26% lower and net debt-to-EBITDA ratio 2.0, stable. If we take a look at the macroeconomic situation and the trends and dynamics of recovery, we can see kind of saturation. These dynamics are flattened with a downward tendency in Q3. We can also observe it in the production sales and consumption of energy by industry year-to-year. You can see it in the diagram in the top right-hand corner. As for the prices for CO2 allowances. It's worth to note that 2021, it was a record year here in the first half, it was 150% increase, and the peaks were even like EUR 63 per tonne. At present, it's a little bit lower. As for the structure of electricity production in Poland, it's worth to note that both coal-fired energy production and lignite fired thermal power plants, it's 16%. Heat, we can see a decrease here as for gas-fired thermal power plants is related to the an operational unit in Plock and not the very demand for heat. As for renewable sources of energy, there's an increase by 14.2%, and it's mainly due to dynamic development of photovoltaics and reasonably good conditions regarding water. So these are the elements related to energy production, and they are justified by the economic situation of our country. And fuel and energy balance that we observed, specifically in the third quarter.

So now let's move on to key financial data for the 3 quarters of 2021, some good news. At the beginning, the increase of revenues for 3 quarters is almost 17%. The level we reached for the first quarters is almost near to PLN 18 billion, which has been affected -- influenced by several factors. We've been dealing with new revenues from the capacity market. There have been some one-off events, mainly restructuring the portfolio of CO2 allowances and there's also been some positive phenomenon a significant increase of distributed in energy that affects our the increase of our revenues. We also observed an increase in energy sold. And there's also an overlapping price trend, which resulted in a significant increase in revenues year-to-year. As for net results, it's even better. If we compare the 3 quarters of last year and this year, we need to mention that the result has been strongly affected by write-offs made in previous quarters. If we look at the EBITDA year-to-year, it's on a better level. We're mainly speaking about elimination of one-off events. Let us remember that last year, there was a significant one-off event, namely the release of energy equivalent provisions and therefore, the cleared EBITDA cleared of one-off events increased by 11%. And this cleared EBITDA reached the level of PLN 3.415 billion for the first 3 quarters. As for Q3, the tendencies are similar regarding revenues. It's been mainly affected by revenues from sales of energy. To a lesser degree, it was the matter of distribution of energy. Let us remember that Q3 last year, it was also after the first wave of the pandemic. So it, to a degree, reflected the situation, and it was a sort of recovery after Q2 of the -- which was the beginning of the pandemic. So after clearing the one-off events, it's a little bit different than last 3 quarters last year. As for the segments, our main segment is Distribution. Most of the EBITDA has been generated in this area. I will give you more details about reasons for it when I discuss the segments, in particular, in a moment. But what's significant is a significant leap in generation, which has been affected by one-off events, the CO2 that has been mentioned -- that was mentioned in the previous quarters. But the result of the segment was also affected strongly by a contract of sale of energy Nowe Jaworzno Grupa at TAURON and TAURON Polska Energia, which is a cost-plus contract. I will discuss it in a moment in detail. As for Q3, the tendency is maintained. The key segment is Distribution with evenly high supply -- production generation segment. The supply result might be a little bit of a surprise, but I will discuss it in detail when discussing the cost-plus contract in a moment. Now moving on to the distribution of EBITDA in particular areas, we can clearly see that the main cost for the increase of EBITDA in the 3 quarters is generation. A positive result has also been influenced by RES which I will discuss in a moment. As for Q3 2021, we can see a similar tendency to the 1 from the 3 quarters. And now let us move on to the discussion of the Distribution segment and particular segment. If we look at EBITDA in Distribution segment year-on-year, we can see that our result is worse. But what's of key importance is a one-off event which was, like I mentioned, the release of the provisions for energy equivalent. If we eliminate this event, we can see a significant increase of EBITDA year-to-year. Last year, EBITDA in the Distribution segment in the first -- in the same analogous 3 quarters was below PLN 2 billion, now it's PLN 2.251 billion, which has been -- which is comprised of 2 items: increase in the volume of distributed energy, that's one thing. Obviously, on the other hand, the decrease of tariff has had a negative impact on the results. It was last year and the negative impact of -- negative reaction of the offtakers. But also, there's another aspect, this high revenue regarding the consumption of passive energy. And we also reduced losses regarding distributed energy, which also contributes positively to the results of the Distribution segment. As for in the Distribution segment, we also see similar events that have a positive impact on the segment. But there is no -- this one-off event, and therefore, this EBITDA is comparable year-to-year in Q3. Here, we can see the result of remuneration -- negotiations and increase of remuneration. Therefore, this increase of EBITDA is not that significant, but it's still there. And that's another quarter of the year with increase of distributed energy. As for RES of -- sorry, some ratios quality indices that are assessed by the President of Energy Regulation Authority. And consecutive years if the quality parameters are not met, the tariff might be reduced, it might have a negative impact on the tariff in consecutive years. But the good news is that all the goals that are imposed regarding the quality by the President of the Energy Regulation Authority are maintained by the Distribution sector. So there are -- there's no risk of reducing the tariff in consecutive years for this reason. Now going back to -- moving on to another segment, which is renewable energy sources. It has already been mentioned that the level of production is affected -- has been affected, like I said. The production for the first 3 quarters for this year is a bit lower than production than for the first 3 quarters of last year. This was due to the fact that in Q1 2020, there were very strong wins. So production of wind energy was, as a result, higher, much higher than it is now this year. But we can see a positive trend regarding hydropower plant production. There's an increase as compared to last year. As for the results, the volume has been affected in a negative way, but the results are affected by high prices of energy on the energy market and due to those high prices, even despite low volume of RES, we have a positive impact on EBITDA generated by this segment. And the green certificates have a negative impact on this result. The number of those certificates is lower for -- one reason is the volume of energy generation. And one of our wind mills, Zagórze, is not covered by green certificates any longer. That's the other reason. And hydropower plants below 5 megawatts are not covered by the system of green certificates. That's another reason. The capacity market also has a positive impact on the results. Some of hydropower plants are covered by the capacity market. So the EBITDA that has been generated for 3 quarters, reached PLN 250 million, and it was higher than last year. As for Q3, we have a similar tendency. We can see the elimination of this factor being strong wins in 2020. We don't have it here. So we can see an increase in power generation from RES, both from wind mills and from hydropower plants, which has definitely a positive impact on EBITDA generated by this segment. And higher prices also, most of the increase of the EBITDA that has been generated year-to-year for the 3 quarters of 2021 as compared to 2020, has been generated -- was generated in Q3. Now let us move on to Generation segment. I think this is -- the most important thing is to understand the situation regarding transfer of the result between Generation segment and Supply segment. In the Generation segment, what we deal with is a positive phenomenon for this segment, namely the cost-plus contract between Nowe Jaworzno Grupa TAURON and TAURON Polska Energia. The whole result from the cost-plus contract is there in the Generation segment -- is acknowledged in the generation segment and due to the fact that the contract must cover the repurchase and the operation of Nowe Jaworzno, the cost of these operations. We don't see any possible impact of the halt of the unit in Jaworzno. So the -- if we did not have this contract for the take of our energy between Nowe Jaworzno and TAURON Energia, we would not see the difference in results. But we need to emphasize that the contract made between TAURON and Nowe Jaworzno Grupa TAURON. It does not affect the consolidated result of the group it affects the transfer of results between generation and supply segments. Now we've had historical high EBITDA for the 3 quarters, which has been affected by the -- which is due to the capacity market, we see this. If we reduce the effect of OCR and CIR, then the result would be PLN 250 million. And the positive impact is also that of the restructuring of the portfolio of CO2 emission, which was discussed in more detail at the conference for Q1. This is a positive event, but it's a one-off event. If we move on to Q3 alone we don't have this one-off event anymore. We have the positive impact of the capacity market. We have the positive impact of the volume of energy sold. And the positive impact of the cost-plus contract between TAURON and Nowe Jaworzno Grupa TAURON. So here, these results for the segment would have been much lower if it weren't for that contract. Now moving on to the Supply segment. Like I said, what's of key importance is to understand the transfer between Generation and Supply segments. Supply segment, when you look at the very result of EBITDA, it looks quite poor. But if there was [ Nowe ] transfer, if there was no cost-plus agreement, the result of the segment would be much more than PLN 600 million for the 3 quarters. And thus, the result of Supply segment year-to-year would be similar on a similar level. And it's worth to note that last year, in the Supply segment, there was a positive effect of repurchase of energy of the nonoperational power unit in Jaworzno, the energy in 2020 -- the price of energy was much lower than the price contracted in 2019, about PLN 300 million of EBITDA for the segment was generated for this reason. So if we reduce EBITDA last year by PLN 300 million, and if we eliminate the cost-plus contract, the sales segment would have had more than PLN 600 million. So we could say that its result is very, very good. And it's been mainly generation -- generated by TAURON Sprzedaz and TAURON GZE, which are our sales companies. As for Q3 alone, once again, we can see the impact on the negative result of the segment of the cost-plus contract. Since the result is trusted in TAURON Polska Energia, which is part of the supply segment. And therefore, it reduces the result for the whole segment, but the very supply companies have positive results of about PLN 200 million in this quarter. Now Mining segment, which is quite interesting this year. I must say we've observed a fluctuating situation, specifically regarding the amount of inventory. In the first half of the year, the group was very much worried about how to produce and where to put the surplus of coal while in Q3, we dealt with a significant change in the tendency on the market, which was mentioned by the President already. Poland from an importer turned into an export of energy because the prices were much lower than in the neighboring markets. And due to that, our units, specifically those of the capacity of 200 megawatts started producing much more energy than in previous quarters and even in the 3 quarters of the previous year. And hence, a significant increase of -- in consumption of coal and exhaustion and depletion of inventory next to coal mines and those -- and the inventory of power plants, which affected positively the volume of sales and revenues from these sales, but it also had a negative impact because we allocated costs that was until this -- until now, they were acknowledged in the balance sheet as inventory. So if we -- from the bookkeeping perspective, it has a negative impact on the result, but from -- with regards to liquidity, it has a positive impact. But from the bookkeeping aspect, the results year-to-year for 3 quarters of this year and 3 quarters last year, it's a negative. But the positive phenomenon that we've observed is the volume of sales and the recovering prices, increasing prices on that market because in the first 2 quarters, the prices were decreasing. So after that, after 3 quarters, it had a negative impact. But now we'll -- can predict it's going to have a positive impact in consecutive quarters. As for Q3 alone, we can see the tendency that I've mentioned, namely production that was similar year-to-year but the volume of sales is totally different -- at a totally different level. We see a significant decrease in inventory year-to-year. And what's important in Q3, production was not as high as we would like it to be, but it was mainly due to reequipment of longwalls in that area. As for refinancing and debt, it's net debt-to-EBITDA is a little bit less than 2. As for net debt, it's below PLN 9 billion. We're talking about net debt less PLN 2 billion from hybrid bonds and the resources that we had, the funds we had available at the end of the 3 quarters. As for maturity dates, what's significant, the significant date is 2022 December, where a PLN 6 billion worth program will become mature. But the use of this program alone at the end of Q3 is quite similar to -- is close to PLN 1 billion. So we're not talking about refinancing PLN 6 billion. Another piece of important information is that by the end of October, we made a contract with EIB for PLN 2.8 million (sic) [ PLN 2.8 billion ], which is a favorable contract with a long maturity date with 3 years to use the funds. It was the longest contract of that type in Poland. Obviously, well, we could have had some more financing in the structuring area, but it's been the longest financing and biggest financing for companies regarding this type of contract. So we're quite happy about that. As for risk, TAURON Polska Energia is not exposed to interest rate risk, only 16% of our debt. It's not secured or it's either based on fluctuating interest rate. The rest of it is either secured by forward contracts or is based on the fixed rate. We also mitigate the risk due to correlation, high correlation of calculating the distribution-related factors. So the company does not really see a huge risk of interest rate changes on the results in this area. And now I will give the floor to the President regarding CapEx.

Like I said at the beginning of our presentation, we've observed a decrease in CapEx for 3 quarters of 2021 as compared to the 3 quarters of 2020. Obviously, it has been most significantly affected by lack of investment outlays for Nowe Jaworzno unit, which is above PLN 500 million, and hence, this significant drop observed in the main part of the structure. If we see -- if we look at Distribution, there's an increase of PLN 1.316 billion to PLN 1.362 billion. So there's an increase. There's an increase of -- in the segment of renewable sources from PLN 7 million to PLN 49 million. And similarly IT and broadband system. We also have slight changes here. So we can see that the investments are implemented according to schedule, and the drops are due to the closure of a huge investment in Nowe Jaworzno. So I think this is it as regards explanation of CapEx per segment.

So much for the presentation. And now let us move on to questions. We see a lot of them have come to us. I tried to group them to be able to answer them easily and not to answer them repeatedly. So let us start from Jaworzno 910 unit. There are several questions about it. So I will ask you the questions regarding this area. So it's going to be easier to answer them all together. What's your approach to the valuation of 910 Nowe Jaworzno unit, related to the failure, in 2022. How is it going to affect the package for PFR and the package for NABE? TAURON wants to buy shares from PFR. Is it related to transfer of shares to NABE? And when can we expect finalization of the transaction of takeover of -- acquisition of shares of Nowe Jaworzno that are owned -- held by PFR? And how will they be valuated when repurchased from PFR or when transfer to NABE, how does TAURON -- what's TAURON's approach regarding the difference in prices when transferring to NABE as compared to the price when repurchasing from PFR? So if you could please answer these.

I will try to answer all those questions. As for valuation itself and failure and the impact of failure on the valuation of the unit in the context of transfer to NABE, according to the government scheme, the assumed date of transfer of coal assets to NABE is end of 2022. Taking into account the principles of valuation. Valuation is usually based on discounted cash flows which are generated after the sales date. So as for today, we're assuming that the unit is going to be repaired in April 2022, and the sale is planned for Q4 2022. So the failure should not affect the valuation of the unit and the cash flows that will be generated after the date of sale. As for PFR, we are in the course of negotiations of the sales contract sales -- disposal of shares by PFR and for us it's acquisition contract, obviously. These negotiations are to a high degree dependent on the investment agreement made with us and PFR in 2018. There's been also a question about the reason for it. And the main reason is the transfer of assets to NABE, an attempt to create one entity that will be transferred, and some freedom to sign contracts on energy which has been -- and the cost-plus contract that has been emphasized a number of times during conference because after the purchase of those shares, this cost-plus contract will be excluded. And therefore, when assets are transferred to NABE, it's not going to be valid anymore, and it will no longer affect the results of TAURON Group. I think this is it regarding the answer to these questions.

Now another question, was approach the return from model -- return on investment and blank CapEx. What's your approach to it?

As we know, the long term of reimbursement process has not been yet discussed with the President of the Energy Regulation Authority. So it's the same for now, but the consecutive years will only be covered by a 5-year model. And therefore, we're in course of negotiations with the President of the Energy Regulation Authority on the return of investment for the future for the model will be probably similar to 2021 to the one used in 2021 or it might be even more beneficial. But it's a little bit too early to speak about that. These are the last days for final discussions now. As for the CapEx plan for distribution, for 2022, is quite similar to the one implemented in 2021.

Thank you. Another question. Why is the company not able to increase coal production despite of leaps in demand? Are these geological problems or just omission -- investment omissions.

I will try to answer this question as well. Like I mentioned during our teleconference, production, specifically in Q3, you saw a huge drop. It's due to the fact that the longwalls are being reequipped. We are being prepared for new investments. We saw this demand for energy in our country increasing, and so coal production will be increasing. But having inventory after -- inventory of coal after pandemic that we pointed out during previous conferences. We've decided that Q3 would be a good time for work -- to carry out works that would decrease generation, but they will prepare us for Q4 and Q1 of 2022, which is the winter season. So with these assumptions and having taken these decisions, we reduced the level of stock of inventory, which due to a reasonable level, specifically in heaps by power plants but also in storage yard and heaps next to coal mines. But now we'll be maintaining this production till the end of the heating period, and we're not having any general geological problems and there's no omission investment-wise, we're preparing the longwalls for further extraction. So it's ongoing.

Another group of questions. Are you evaluating the mining assets in the process of potential sales? When can it happen? And how does the company look at approving the contract with miners, the agreement with miners, does -- is it a factor that influence the sales of assets? And when are you planning to sell TAURON Wydobycie, the mining part of the company to the state.

So this time, perhaps I will answer this question. As for the valuation being carried out according to the letter of intent signed mid-September, One of the elements was valuation, commissioning valuation. Like we said, we commissioned it. We appointed a team to prepare all the works and the termination of those work according to schedule, agreed schedule, should take place no later than by the end of December, 31st of December this year. And the same goes for the valuation. As for the social agreement, the trade union agreement. It was made in April and signed in May, actually, this year. This contract, this agreement is being discussed by the government and the European Commission, they're in the process of pre-notification. So TAURON is not involved in the discussions regarding this area. So it's hard for us to say, to tell whether this agreement could change in any way. But the agreement has been signed already. So we're waiting for the outcome of the discussions of the government and the European Commission. As for the date of disposal of assets, our team, like I said, is working on it, and we'll be ready to show the work regarding carving out the company from our structure by the end of this year. And the transfer itself will probably depend on the process of prenotification and the discussion between the Polish government and the European Commission.

So we have the answer to both these questions here. Another question, does the company encounter remuneration pressure? What are the expectations from the trade unions regarding pay salaries for 2022?

I will try to answer this question. Let me remind you that in 2021, the company made an agreement with the trade unions regarding salaries in TAURON Group companies. And hence we extinguish all the collective bargain that appeared in 2021. And according to this agreement that was made on the central level with the Trade Union Board. And based on the central agreement, there were some agreements signed in particular companies. We committed to have a first meeting regarding salaries in 2022, in Q4. So this is our arrangement with the trade unions. We have not had any meetings yet. We have the date for the first meetings and then -- and discussions, and then we will be able to analyze the proposals of the trade unions. But for now, we don't see any signs of any salary-related pressure that might occur at this stage.

One more question. Is the -- will the European Commission have to notify the plan of creation of NABE?

It's worth to mention at this point how the question of preparation looks like. As you probably know, at present, there are ongoing works on preparing the model of transfer and operation of NABE. And based on that, model regarding the operation and transfer, then can we tell -- then will we be able to tell whether notification is going to be required or not. For now, we cannot answer this question.

One more question. I'll combine 3 questions regarding the same area. What investment [ highway ] should we expect in 2022? What trends regarding EBITDA should we expect per segment for next year? And what's the outlook for conventional energy for 2022, year-to-year, based on cleared results less the CO2 emission allowances and the same goes for distribution for 2022?

As for the model, the President has said a few words about the distribution model. But as for the outlook and the result expected for next year in particular segments and investment outlays for next year. As for today, we are working on the financial plan for 2022. And this outlook for the next year will be presented together with the annual results in 2022. Obviously, when presenting the results for 2021.

Of course. Now another question. Where do we get, one, such a huge EBITDA increase, 1,000%? How much is the capacity was operational in that third quarter of this year?

Well, it seems to me that I addressed this question during the presentation. This result was to much degree generated by the cost-plus contract. And also, it was generated by the one-off event regarding the restructuring of CO2 allowances. And also there was a positive phenomenon concerning the capacity market and revenues from that market. So these are the key factors. And apart from that, in that period, specifically in Q3, we've had increased production in 200-megawatt units. So if I may somehow guess the capacity operational in particular periods, I should emphasize that in Q1, we had the new unit in Jaworzno operational. And in Q3, there was increased production from 200-megawatt units due to the export input situation. Like I said, Poland from an importer turned into an exporter. So our units that close up the system were much more use in Q3 than in the first 2 quarters of the year.

Another question. Does the contract between PGE and TAURON, does it only relate to offshore cooperation? Or is the application to competition -- customer competition authority? Does it only refer to a -- does it refer to creation of a new entity?

No. So I will answer. So we're not thinking about any concentration. It's only about offshore cooperation. I must say that neither the government -- on the government level nor on any other level, we're talking about concentration for these 2 companies, apart from the offshore area.

Now the repurchase of energy for Jaworzno unit, is it going to be carried out in Q1 2022. Have you got some contracts signed for 2022 for that unit? And to what extent?

TAURON obviously, uses -- applies a conservative policy, so signs contracts much in advance for all the units, specifically when there are favorable conditions, so CD positive. So some part of energy from the unit in Jaworzno has been contracted for 2022. So until the unit is operational, again, they will have to -- we will have to repurchase energy for that unit. But we've included in our announcement regarding transfer or -- postponed date of repairing the Jaworzno unit, we shared the estimated amount of loss margin of first degree for this year and for the next year.

When should we expect deconsolidation of the Mining segment in 2022 from which month, from which quarter?

As for deconsolidation of the mining segment, like we mentioned, is the matter of the trade union agreement is specified. We're in the course of arrangements with the European Commission prenotification and there's a letter of intent with the Treasury and Ministry of State Assets. It specifies that deconsolidation might occur in 1st January 2023, the earliest. And according to that letter of intent and actions taken by the company and by the group, such actions are being carried out to keep this date. But what the date is going to actually be, it will all depend on negotiations and discussions with the Ministry of State Assets.

How much did TAURON earn sales of CO2 allowances that were originally purchased for Nowe Jaworzno. And how much does it cost for TAURON for this unit not to be operational after the failure?

I think we've -- during the previous when answering previous questions, I think I've partly answered this one, we've already partly answered this one. But as for revenues, for sales of CO2 emission allowances, it was PLN 59 million, more or less. But I believe this is about sales of allowances for the current period. So until the failure is repaired, TAURON has not sold the allowances on the market. But by contracting the energy sales from TAURON Wytwarzanie 2022, we, at the same time, use these allowances to -- for hedging -- And I'm talking about the allowances that are in the company's reduced -- due to the failure of the Nowe Jaworzno. So do you -- the result of contracting those allowances will be known once we know TAURON Wytwarzanie result in consecutive year.

And again, to questions. The Energy Regulation Authority has informed everyone that the level of heat and coal are below the required level. Does it refer to TAURON? And due to the production of energy in coal-fired power plants, do you expect that you will have to import coal? And one more question. I'd like to ask about coal inventory in power plants, have TAURON companies had some problems -- reported some problems with coal stock, coal inventory from power plants year-to-year, what's the amount of inventory?

I will try to answer the question. Like I said, the process of planning in TAURON and TAURON Group, has been a range in such a way that the third quarter is the time of preparation for increased mining for Q4 to secure the winter season. Because it's an undeniable fact that we, as TAURON, mainly rely on our mining group and supply for -- with regards to supply of coal for our power plants. So this policy let your situation where our stock, our inventory of coal, which was quite high after the COVID pandemic, we reduced them to the, let's say, normal level. So there's no risk of reducing them below the level of strategic level. So we're -- we don't have any surplus there. It's an optimal management of inventory, both in power plants and in the heaps next to coal mines. So we're not expecting any extra events that would force us to import coal. We are analyzing, obviously, all the risks like the operation of Jaworzno unit. We'll have to secure coal for the unit, but also other events that are outside our capacity and responsibility like the problems of carriers, so we're trying to secure these risks as well. So by the end of first quarter, by the end of winter season that is, we're not identifying the risk of lack of coal supplies or reducing the inventory below the required level of strategic inventory. Obviously, if we take into account all the -- we must think about all the failures regarding some problems of carriers or any other situations and events, but we are thinking about emergency plans in this respect.

Is the abandoned project in [indiscernible] unit is going to be there in the capacity market in 2026?

We're analyzing the issue of units in [indiscernible] in the context of sector transformation or heat transformation from coal to gas. So [indiscernible] unit could be highly connected to heat. So if we analyze this decision, it's in terms of profitability, in terms of investment outlays, if the market conditions and support systems, specifically the auction system are favorable, then this decision is not totally excluded.

And again, 2 questions combined. What are your plans for consecutive years regarding RES development? Should we expect significant investments in this area, in 2022? Could we get some more details regarding investments in RES? What are the perspectives, new projects for the consecutive quarters?

As for RES projects, like you saw there's been a huge dynamics of increase. So the numbers are not like very shocking. But as you know, the preparation of such an investment, specifically accessibility of area, local investments, is hampered by the [ 10a ] law. So we don't see those at late. But the organization, this development is carried out by the organization. In 2022, we should see some results of this development reflected in specific CapEx positions, items and a significant increase in CapEx in this respect. As for details, we should mainly point to the fact that if it's photovoltaics and also local projects, these will be the 2 directions of the dynamics as for CapEx and in RES.

So thank you, President, for your answers, and thank you. I want to thank all the participants. It was a record number for questions, I think. And I would like to invite you to our next meeting right after publication of the report for 2021. We will inform you about the conference in our traditional way. So thank you very much for today's conference and meeting and have a good day. Thank you.