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

Good morning, ladies and gentlemen, on this beautiful summer day. The earning conference is for the analysts, media and analysts with respect to the TAURON Group's H1 2023 Financial Results. The host of today's meeting is Mr. President, Krzysztof Surma, responsible for the finance, CFO. My name is Lukasz Zimnoch. I'm the press spokesman of TPE. The presentation will be conducted in Polish, along with a simultaneous interpreting into English. Outside of broadcast, you can also listen in to today's meeting via the teleconference mode. I'd like to invite you already now to ask questions using the form available on the broadcast website. Let me just note that this is the only option that you have to ask a question, is to send a question via using the form that's available on the broadcast website. Mr. President, the floor is yours.

Good morning, ladies and gentlemen. I'd like to present the earnings, the financial results of the group, overall results, and then broken down by individual segments. With respect to the financial data alone, the results of first half of this year have been very good. The company generated more than PLN 4 billion of EBITDA in the first half of this year. The net profit came in at close to PLN 2 billion, thanks to these good financial results. The net debt to EBITDA ratio came down to 2.04. Operating data, they are under the big impact of the overall economic situation in Poland. Therefore, the operating data are at weaker level year-over-year. I will elaborate on that in more detail further on in the presentation. However, it's worth noting here that we experienced a 5% decline in the distribution line of business. Also, a 5% drop in the generation of electricity from renewables. Here, the main factor being the production using the biomass fired units. As far as other units are concerned, the operating data were better year-over-year. With respect to the production of electricity from the -- by hard coal fired units, here a very significant change year-over-year. I will elaborate on that when I will be describing the situation on the market. In terms of heat generation, here the situation pretty much flat year-over-year. And here if we are talking about the retail electricity supply, it's slightly lower year-over-year. If we look at the data for Q2 alone, they are similar to the data for the entire first half. The EBITDA in Q2 went up by more than PLN 2 billion. In terms of net profit, it came in at around PLN 840 million and the net debt-to-EBITDA ratio, as I mentioned before, stood at 2.04x. In terms of the operating data, again, the trend was declining, a downward trend in Q2, a particularly significant change we can observe with respect to electricity production by hard coal-fired units. Here, quarter-over-quarter or -- I mean, Q2 2023 versus Q2 2022, with decline by as much as 41%. As I mentioned, I will elaborate on that in detail when I described the situation -- macroeconomic situation on the market. In terms of the key highlights, key events that we observed recently, let me present those highlights that we didn't discuss during the previous earnings conference. Here, we began the construction of another wind farm, 30 megawatt capacity. Additionally, we signed a letter of intent with the Orlen Group. That letter is related to the confirmation of the further works on the potential divestment of combined heat and power plant in Stalowa Wola. This letter was signed before with PGNiG, but due to the major equity ownership changes in the Orlen Group, we confirmed the 2 parties -- we confirmed our attention with a new owner of Orlen Group. And the novelty in this letter of intent is the possibility of a potential swap of these assets with assets -- heat assets of PGNiG TERMIKA here in Slaskie area in return for the assets of our CHP in Stalowa Wola. In addition, we obtained the decision, a permit for the erection and use of artificial islands, structures. As a matter of fact, in offshore farm -- wind farm, the permit was granted to PGE Baltica 4, where we have our joint venture, specifically related to this license and TAURON's share is 45% in this venture. And finally, I left out a key information for our group. As a matter of fact on July 15, we received the key transaction terms of the acquisition by the State Treasury of the assets related to the N-A-B-E, NABE, the coal assets, coal units and on the -- excuse me, on the 10th of August, we obtained all the corporate approvals for these terms of the transaction that we signed with the State Treasury. The key terms, according to which potentially these assets will be sold, will be divested. Those terms were then reflected in the SPA agreement, purchase agreement. Here, we are at the final stage of negotiating those terms. The group is also working on the fulfillment of all the suspensive conditions related to the national agency for energy security, NABE program. One of the preconditions was recapitalization of TAURON Wytwarzanie conversion of a portion of the debt. The group has already met this condition. We also applied for appropriate according permits to -- consents to cover with respect to this transaction. So, one can say that on the side of TAURON Group, the majority of the issues of what we're supposed to be finalized to prepare for the NABE transaction have been fulfilled. However, the key issue here is the decision of our parliament regarding the providing of financial guarantees, first of all, of financial institutions. And this, as a matter of fact, will be the moment when NABE, national agency for energy security, will be able to come to being. With respect to the CapEx, here we have a major acceleration year-over-year. We are implementing the fully [ subsidy ] announced last year. The CapEx went up year-over-year by 26%. However, the most important 2 lines of business that we indicated in our strategy, namely, the distribution, the renewables. In these 2 lines of business, which are the pillars of the future of TAURON Group, as a matter of fact, the capital spending in these 2 segments went up significantly in terms of the renewables. CapEx, here we have more than tripled increase year-over-year. Historically, our group has never spent that much on the renewables. In addition, the capital spending on the distribution line of business came in at more than PLN 1.2 billion, which is almost 40% more year-over-year. Here, the key portion of capital spending was the new connections, new consumer connections to the grid and also the refurbishment of the lines and partly also the installation of the smart meters. Now, what I already mentioned before, the macroeconomic situation in Poland and its impact upon the operating results of our group. As I mentioned, the financial results are good. However, the operating results are weaker year-over-year. And this is the result of the macroeconomic situation. Now in Poland, we are dealing with a decline with a contract -- economic situation over the last 2 quarters, the declining PMI index, which also indicates further deterioration of the economic situation activity in Poland. What's key for our group? In the first 6 months of this year, we are dealing with a 5% decline of electricity consumption. This decline of electricity consumption is calculated nationwide. However, it has a direct -- translates into results of our distribution line of business. And the amount of electricity distributed with other indicators, production of electricity in Poland automatically leads to the -- translates into the decline in our TAURON generation. The decline of production year-over-year is 10%. One can divide this decline in 2 parts. One part stems from what I already mentioned, the decline of the consumption of electricity in Poland. This is 5%. Whereas the other 5% is the reversal of the situation in terms of imports and exports of electricity, from export in Poland and then to import electricity and a 5% decline of electricity production is due to electricity imports into Poland. As I mentioned, our units, especially the 200-megawatt units are units that close out the system and are most sensitive to the declines in the electricity consumption in Poland. And as a matter -- and therefore, due to the cost -- the operating expenses, we are first to be shut down if there is a decline of electricity consumption. That's why we saw such a significant drop of electricity production year-over-year, 41%, as I mentioned, despite the fact that our Nowe Jaworzno is operating in a stable manner and its production year-over-year is better. However, in terms of 200 megawatt units, they were not utilized frequently by the system. That's why the production decline is so substantial. Let us move on now to the segment-by-segment data and in individual categories. Here, we are dealing with a strong upward trend regarding the revenue. But let's remember that the first half of 2022 was not really affected by the war effect yet. Therefore, the price of electricity, in particular changed quite significantly after the outbreak of the war and therefore, especially the first quarter of 2022 did not include the high electricity prices. That's why there was such a strong increase of revenue year-over-year. It's a result of an increasing electricity prices and to a certain degree, the increase of revenue due to the distribution services. In terms of EBITDA alone, as I mentioned, EBITDA is very important in terms of growth. We have an 80% plus growth year-over-year in nominal terms, EBITDA in year-over-year. However, if we adjust this EBITDA and strip out the one-off events or non-typical events, then this growth is a bit lower, slightly more than 20%. It is worth mentioning the one-off events. They will also be mentioned when we discuss the results of individual segments. In 2022, the key one-off event was the provision for onerous contracts. And here, at the end of first half of 2022, we set up such a provision. It was the result of a very significant increase of hard coal prices, which didn't have an impact yet upon the electricity prices, whereas the contracts on electricity had been concluded way before, whereas the coal contracts were renegotiated. The second one-off was the settlement of excess of CO2 emission allowances. These 2 one-off events resulted in more than PLN 500 million lower EBITDA last year. If we look at the one-off events this year, here, the key issue is the upward adjustment of grid losses. As a matter of fact, the price effect of this balance that I already mentioned when I discussed the Q1 earnings and the additional key factor in this quarter is the settlement agreement concluded with RAFAKO and its impact upon EBITDA for the first half of this year. Additionally, we are dealing with a regulatory account here. This decline of consumption means that we have a decline of -- volume decline of EBITDA. And this regulatory account, as a matter of fact, it will be adjusted as a matter of fact over the next 2 years. Therefore, we recognize it as not so much as an one-off event. It will always be there. There will be deviations from the volume, but due to its magnitude, we treat this now as an one-off. An additional small factor of provisions for onerous contracts, as a matter of fact, the PLN 60 plus million is the dissolution, dissolving of provision release of a provision that we set up at the end of 2022. If we now move on to the data for Q2 alone. Here, we have a much higher increase of EBITDA, comparable EBITDA. Here, the factors are exactly the same as I described on the previous slide. If you look at revenue alone, this revenue, the growth rate of revenue is not so strong. We are talking about the 20% growth rate. Let us remember that we are just entering more into the quarter that already reflected the effect of outbreak of war. So growth rate quarter-over-quarter, year-over-year will be getting lower and lower. And additionally, a positive impact from the company's point of view, as a matter of fact, revenue for the distribution service had a favorable impact. One should also note a good result at the net profit level. Let us remember that in this quarter, we did not announce any impairment charges. We didn't set up any significant provisions. Of course, there was a provision for the wages. But apart from it, we didn't set up any other provisions. Therefore, the operating results, the financial results at the EBITDA level had a strong impact upon the net profit in this quarter. If we look at the results of individual segments, invariably, the key segment is the distribution line of business. Its results -- whereas the results of all of the segments are good. Therefore, the contribution of a distribution line of business, slightly more than 50% versus 70% that we observed in the previous periods from this line of business as far as contribution to the full results of the group. One should also note that the results are good, both on the EBITDA as well as on an EBIT level. And a similar station we have, if we look at the Q2 results. Looking at the Q2 alone results. Here also, the results are good. As I mentioned, distribution continues to be the key line of business with slightly more than 50% contribution. Also worth noting the good quarterly results of supply segment. I will elaborate on this later on in the presentation. Let's move on to the comparison of the results year-over-year. You can clearly see that practically, all of the segments generated good financial results, good earnings, except for renewables. Here, we have a slight decline year-over-year. But here you have to remember the price caps that were introduced by the according -- based on under the law at the end of last year. And this is the main determining factor of slightly weaker results of the renewables segment year-over-year. If we look here, the biggest jump, of course, in the generation line of business. However, let us remember that in generation, last year, as I mentioned at the beginning, we set up a provision for the onerous contracts. And this provision, as a matter of fact, consumed to the entire result of the generation line of business last year. That's why there was such a surge of the earnings in this segment. The results for Q2 alone practically confirmed the same thing. All of the segments had a positive impact, except for the renewables, the distribution the same. And let me repeat that the generation line of business where we set up a provision for the onerous contracts, that's why there is a substantial change year-over-year, substantial difference year-over-year. And in Q2, the issue of settlement agreement with RAFAKO, where we had 2 big one-off events, '21 and '23, that led to such a big surge change of results year-over-year. If we move on to the distribution segment now, we have both positive and negative factors, events that have an impact upon the results. Let me start with upward adjustment of cost of the grid losses. And let me put it this way. The first effect, namely the price effect, I mentioned already in Q1, this is the effect. It's a one-off due to the significant change of the prices. So this year, this effect is very visible. So, that's why we're exposing so much and showing as a one-off event. But of course, this event is a recurring event. Every year, it will be recurring and it may reverse in the subsequent years if the price trends are maintained on the market as we can observe them now. The second effect of this upward adjustment is the volumetric effect. And here, it will be fluctuating over the year. Therefore, on purpose, we are showing the price and the volumetric effect to show -- to demonstrate that one part of this upward adjustment will be fixed over the year because of the -- whereas the other portion will be fluctuating over the course of the year. But the total effect, the price and the volumetric one gave more than PLN 460 million of a positive impact upon distribution's results in the first half of this year. The second effect, one may say over the reg count, a negative one, which I already mentioned when I described the one-off factors. So, we are dealing with very untypically strong decline of demand. And in total, it has an impact upon the decline of sales volume versus this bar, and we are dealing with the issue of regulatory account that dates back to 2 years ago. These 2 factors are combined with another. The volume issue runs sometimes negative. And then the negative effect on this regulatory account is PLN 128 million, is a positive impact of the volume, which occurred 2 years ago. Now it has a -- it's a charge to the results of distribution and the decline of volumes [ PLN 127 million ] is an impact upon the results of distribution. Now in the 2-years' time, we will have a positive impact upon because the negative difference is posted on the regulatory account. These are non-typical events, but they will be adjusting, especially the ones related to the volume will be adjusting the results of distribution line of business in the subsequent years. And the positive impact on the distribution segment is the result of increase of distribution services charge, which is indicated here is a margin on the distribution service. In terms of Q2 alone, in the distribution segment, here some events are similar, as I mentioned before, the volumetric impact of upwards adjustment is even greater in Q2, while the regulatory account in terms of the reversal of its positive volume from 2 years back contributed PLN 64 million to the charge to the results of companies results, whereas the decline of volume and distribution gives a PLN 85 million charge to the result. And as I mentioned, this PLN 85 million over next 2 years will then have a positive impact upon the distribution segment. Also worth mentioning here in a few words, the margin on the distribution service and this -- this item also includes the balancing difference. And here, this balancing difference, especially in Q2 was on a statistically low level as compared to previous years is very low, which may mean that in the subsequent quarters, a part of this difference also will be reversed non-statistically. And so the part of the result might deteriorate in a significant way if this balancing difference returns to its statistically recorded levels. In terms of the key quality parameters, here, they have changed a bit. If you compare the presentation year-over-year, whereas the key piece of information is such that all of them are fulfilled, are met, all the conditions and we are not foreseeing any big risk of a negative impact upon the tariff in the subsequent years. In the renewables segment, a simpler segment to discuss, the key impact upon the results comes from the price decline. As I mentioned, it's partly related to the price caps that were introduced last year. In addition, we had a positive impact upon the results coming from the increase of the volume. First of all, volume of electricity generated by the hydropower plants. The negative impact came from the green certificates, generally slightly lower production, slightly worsened wind conditions and the lower production from the pipelines that are covered by the green certificates. Additionally, the prices declining year-over-year, and the positive impact came also from the end of court litigation, which was adjudicated in favor of TAURON green energy subsidiary [indiscernible] renewables segment results. Q2 alone, here, the results are also the result of those price caps, so the decline of revenue, the decline of the prices. At the same time, with a slightly higher production volume from the renewable sources, practically neutral, flat results in terms of certificates. The price of certificates quarter-over-quarter went up a bit, while the volume declined a bit. So the result is neutral. And that's all practically regarding the renewables segment. Let's move on to the generation segment now. In the generation segment, as I mentioned, a lot of one-off events, provision for the onerous contracts we already mentioned, the issue of excess of CO2 emission allowances and the settlement agreement with RAFAKO is all included in the one-off events. If we stripped out all the one-off events, then as a matter of fact, the EBITDA result year-over-year will be higher by PLN 160 million. And what's worth noting here, I think that in the segment itself, it's worth to note the declining profitability rate of heat segment, especially Q1 and first half of this year because of the fact that the tariff -- heat tariff did not fully cover the increase of fuel prices, first of all, the increasing cost of CO2 emission allowances. However, in terms of the units, as I mentioned, the decline of the volume we discussed. However, it's also worth to mention the buybacks. So last year, 2022, the potential buybacks led to large losses in the generation segment. This year, buybacks generated profits when the units were shut down or were buying back electricity on the market. Then the main result was achieved in this segment because the margins, the CDSs themselves were declining this year much lower than last year. Regarding Q2 alone in the generation segment, here, you can see even better this one-off effect of provision, the RAFAKO issue. All the other factors are the same. Here, additional impact on the production came from the increased production from the photovoltaic installations. So, we are dealing with a rising number of installations year-over-year. And in addition, this part of the year is characterized by high production. So additionally, it pushes out our 200-megawatt units from the merit order, which as I said, have incremental units of the more renewable productions you have, [ that's up ] and we operate the 200-megawatt units of our generation segment in operation. If we move on to the supply segment, here, we are dealing with several factors. Let me start with the ones that are less, the minor ones that had impact upon the results of segment, positive impacting from the assets located abroad, the same, the Ostrava, the Czech subsidiary, the positive impact of PLN 22 million in terms of year-over-year earnings. Good result in this line of business. Negative impact came from a slightly larger write-down related to the receivables, related to overdue, lack of payment by some of our customers, a normal increase in the accounts receivable. These are the 2 minor factors that had an impact, whereas the key factor on the core business, the substantial significant increase year-over-year, what were the reasons? The key issues I remember last year, the costs under the G tariffs were not fully covered. This year, G tariff covers all the costs. So, we have a full coverage of the cost. Costs are fully passed on according to the law. In terms of the other issues, also partly the company is having gains on the open position. Electricity price on the market was declining this year. It has an impact upon the positive impact upon this line of business. In addition, one should also remember that here, we -- and even hedging of a profile over the course of the year might have a non-uniform impact upon the results of the segment over the course of the year. That's why those results don't have to be uniform individual quarters. In terms of Q2 alone, situation is similar. Here, also, you can see clearly the positive impact. As I mentioned, those factors that have a positive impact upon the results of the supply segment are similar. And here, of course, we are observing very carefully what will be happening in the subsequent months of the year and in particular, in the context of a declining volume, we will see what happens. As I mentioned, we don't have to have this uniform distribution of earnings. And finally, the debt and financing issue, as I mentioned very beginning, because of the good financial results, we have a major increase of EBITDA and so a substantial decline of a net debt-to-EBITDA ratio. It went down to 2.04, much lower than last year when it came in at 2.9. And situation was similar at the end of the year. Therefore, we have a significant decline, as I mentioned, it is practically fully generated by a much better operating data. I'm talking about the financial data and EBITDA. In terms of the maturities, the maturities, one may say this and next year, they are quite moderate in the region of PLN 1 billion. And the key issue now for TAURON Group for its debt level and obtaining of financing is the NABE, national agency for energy security program and the potential sale of the assets will have a major impact upon the level of net debt-to-EBITDA ratio and the debt level in the subsequent year. That's all regarding the presentation. Let's move on to the Q&A session.

Ladies and gentlemen, traditionally, let me repeat and remind you that the questions can be asked only via the form on the broadcast website. We have quite a number of questions. And each time I will read a question and then the President will provide an answer. The first question from Mr. [ Hunarski ], [ DMP ] does start on plan to take part in this year's renewables auctions. If so, with what projects; wind, PV or other? If it's not planning to take part, then why?

Well, we are in the process of performing market evaluations and analysis, whether to take part in the renewables auctions. You know that in the previous years, we were not taking part in those auctions due to the price levels. We are conducting analysis of market, what risks we are facing here in the market. Especially on the photovoltaics market, we will be potentially evaluating the participation. As of now, there's no final decision yet. The analysis are underway.

And next question, Rembelski, DM PKO BP. What would be the indicative, approximate net debt, excluding the coal assets of TAURON Group? As of Q2 2023, how is TAURON prepared for the operation under the potential failure of a project -- of another project?

Well, regarding the Q2 ratio level, let us remember that the debt ratio, let us remember that spinning over, yes, the settlement, the full settlement accounting for divestment, these are 2 different things. We provided information in our regulatory filing. The impact, the influx of funds should not take not later than within 90 days from the transfer moment. As a matter of fact, that for even -- if as of the end of the quarter, you would spin-off funds, the influx of funds will be coming in the subsequent months. So the ratio would be exactly the same as we reported. Potential impact upon the leverage ratio, just trying to think about the sense of this question, will depend upon the level of debt of TAURON generation as of spinning off moment. We in the message that we published, we demonstrated what was the level of debt as of September 30. And let us remember that we are dealing with a provision based on the locked box method, which means that to a large degree, all the movements that are taking place during the period from the valuation date until the transaction date. Then the revenue or the cost of buyer, therefore, indicatively, I indicated in which direction the debt ratio could go towards, what direction it should take, what should be the trend because the funds that we receive automatically will reduce the amount of debt and the same then depending upon the EBITDA level will be also accordingly adjusting downward of a leverage ratio.

Another question. Last week, PGE Management Board at the Strategic Conference indicated whether they expect the increase of WACC in the distribution segment to above 10% over current 8.5%. It seems surprising in the context of a decline of interest rates on the market over last year and diversification of energy [indiscernible] forward target for 2023, the regulator indicated that its intention is to average WACC for 2023-2028 timeframe. Does TAURON also expects such a strong growth in the distribution tariff in 2024?

Well, first of all, in terms of the estimates, usually, they come during our full-year results earnings conference. So at this point in time, we are not showing any estimates for 2024. There are talks with the regulator underway. As a matter of fact, until they have been completed, we will not be publishing any estimates or expectations regarding the tariff for the next year.

Next question. TAURON announced its planning to launch in 2024 a new portfolio of investments in renewables with a capacity of more than 300 megawatts. How many projects that come from in-house development? How many from the project -- acquisition of projects? What is magnitude of acquisitions? How much in PV and in wind? Please specify the names of specific projects.

I think this topic will definitely not be presented in such detail, such as giving the names of projects. But since some time, we've set up a special subsidiary, [ TAURON Ekoenergia ], TAURON Green Energy, one of its goals is to develop its own products. So we have a chance that next year, we'll be able to build our own development project, not only the projects that we buy under the ready-for-construction projects from the market. Therefore, here, the chance that some of those projects will come from our in-house development, I cannot give you now the answer what portion of the 300 megawatts that we announced will be under this or what portion will come under another formula? However, here, of course, we are working very intensely to have those projects also coming from our own backyard. So, implemented on the territory of our distribution line of business and developed and prepared by our subsidiary dedicated for this purpose. Hypothetical spinning off of distribution assets out of company would be possible taking under investment plans in the renewables and heat lines of business. I already discussed this topic during the conference. Generally, the distribution line of business is a key segment in terms of TAURON Polska Energia. During each conference, we are emphasizing the EBITDA from this area, from this line of business, 50% to 70% based on that. It's a key asset indicating all the financing agreements anyhow. So any spinning off of this asset will require an approval of all the financial institutions or constitutes violation and breach of financing in interest of the group. Even in addition, investment rating is granted to the group. Investment-grade rating of the group is based on these assets. So as of now, it seems it's not possible that the group could survive in such a configuration if we were to spin-off distribution assets and could easily finance its operations on the market.

Another question. Why the return on RAB and distribution is high versus an PGE? What is the reason for that?

It's difficult to specify so directly, especially with the results as well as I know the results of PGE have not been announced. The results are just estimates. So it's very difficult to understand what is -- without getting into the details, what is the difference between the individual areas. One could say that the distribution line of business of TAURON Group is the high-density area, both in terms of the population as well as the industrial density, which gives certain competitive advantages in the context of CapEx versus OpEx. But it's difficult for me to answer directly why the return on the regulatory asset base is better in our case, especially if you don't have the data to make a full comparison. So, I cannot give you an answer to this question.

Clear. And next question. The cash generated by the hard coal fired power plants since Q4 2022, until the segment is consolidated, will be transferred to NABE in the first quarter of 2024 in case the process has been finalized.

Well, as I said, this is in line with the locked box method. The cash generated in the TAURON generation line of business will be adjusting the balance of debt. So the higher the amount of cash generated in that line of business, then the potentially -- the lower the potential -- potentially a lower debt according to the offer we received for the NABE assets, the entire debt of TAURON generation will be paid back from the funds received by NABE from the banks. Answering directly, the cash generated will be adjusting the debt balance.

Next questions are coming from Mr. [ Bartomisvski ]. As part of a next stage of NABE transaction, preliminary agreement is foreseen to be concluded and then the pledge agreement of asset sales, when can we expect those steps?

So in terms of -- as I mentioned during the presentation, in terms of preparing our group for the transaction, we practically are ready at the home stretch, one can say in our process. The [ SPE ] documentation, the key terms of which were included in the term sheet. It's practically ready in terms of the suspensive conditions that were indicated to be fulfilled by TAURON Group. But I mentioned during the presentation, those conditions have been, to a large degree, basically implemented or completed. We are just waiting for clearance from cover and some minor things that need to be completed, but I would say are more in the -- of technical operational nature, not so much material. So we are ready, not so much substantive. But the key, especially for the transfer of assets agreement is obtaining the approval for the guarantees for financial institutions and for us as loan providers for NABE. And this part is outside the company. So it's difficult to speak about the legislative process. Of course, we are keeping our fingers crossed. As I mentioned, we are fully supporting the NABE project, and the spinning off of the assets will enable us to complete the transition as a whole group.

Next question is related to the coal. Are you receiving the full volume of hard coal orders earlier? Is there space at storage facilities of TAURON to store it? What are the inventory levels of TAURON with respect to 2022 -- 2021, 2020? Are you importing coal? I think I will combine those 2 questions related to the coal. If so, do you import it in what quantity and what will be the answer to yesterday's letter of trade unions at TAURON Mining?

Let me answer as follows. Let's start from the beginning. In terms of inventory levels, we are implementing the contractual issue in 2 areas. First of all, we can use this coal to burning our power plants. Secondly, we can store it at the storage facilities, at the power plants. Taking in account the first part, the matter of burning coal, as I mentioned, we showed the difference in the production output of electricity by the hard coal-fired units and it declined 40% year-over-year. So, you can clearly see the level of burning despite the fact that let us remember that we have one unit was just starting. It was not fully operational at that time. But in spite of that, the production is significantly lower. So the burning is much slower this year. So if you look at the storage facilities at the power plants, as you can see in the report, they are practically full, fully replenished. So the possibility of a significant increase of receiving coal are limited now. However, we are doing our best to burn a little more of hard coal. It's also known, we are dealing -- we'll be approaching autumn and winter conditions. And this burning -- the level of burning will be significantly higher due to the fact that PV, photovoltaic installation will be producing accordingly less electricity. So the consumption of coal by our units that are closing out the system will be higher. So, we will accelerate the burning process. So contracts are for 1-year contract. So no monthly volumes are determined in those contracts for receiving. We can see a certain delay. If you look -- if you assume the linear consumption of coal under contract, so you can see certain delays in the implementation performance of those contracts, but this is due to the system demand, the decline of consumption in Poland, electricity consumption imports of electricity into Poland. And here, as I mentioned, the units that are closing out the system have this feature that we are not able to burn this coal in a linear fashion during the course of the year. In case of import contracts, some of the contracts outperformed with the aftermath of a shortage of coal last year. At that time, we did not have coal available from the domestic sources. However, now we are not considering at all any further new contracts for importing of coal. We will be focusing definitely only on the domestic sources due to the fact that the coal is available -- generally available in Poland.

Time for another question. The cash generated by the hard coal-fired power plant starting from Q4 2022 until the consolidation of the segment will be transferred to NABE in Q1 2024 in case the process has been finalized.

I think I answered this question or let me confirm, the cash adjusts the bad debt balance. So anything that's happening, both positive or negative in this area, based on today's transaction terms will have an impact -- a direct impact upon the result of a transaction for the buyer. The result in the supply segment for Q2 2023 will be repeated in Q3 and Q4 2023. I already answered partly this question during my presentation. I said that individual quotas are not fully representative, are not fully uniform. So, I will not confirm the fact that the results in the subsequent quarters could be so good.

Will the renewables segment in 2024 also be limited based by price caps and at what level?

Well, I think it's not to the question to our company. This is a question probably to legislator and we don't have any knowledge regarding this topic.

What are the costs now of onshore wind farms per megawatt hour? What is the cost of the ready-made wind farms?

It's a matter of timing and the acquisition. TAURON recently -- is usually, based on the projects that it had purchased before ready-to-build projects. Recently, we haven't made any acquisition of ready-made wind farms. So, I don't want to say exactly what is now the estimate, the cost of acquiring such a farm. The conditions keep changing. Electricity prices keep changing. Last year, we had very high electricity prices. So renewable sources potentially could generate very good financial results. Then the price caps were introduced for renewables, for renewable sources. As we know, this factor of high electricity prices and then highly limited price level from renewables had a dramatic impact up on the way you calculate the profitability rate at the end of the day because of acquiring those wind farms. So, I cannot tell you today without any detailed analysis, what will happen to the price capture next year. It will be the cost of purchasing ready-made wind farms.

A question regarding the actions of the parliament. When do we expect that the parliament will approve formally the NABE project?

And here, as I mentioned before, generally, this part is outside or beyond the control of the jurisdiction of our company. From our side, we are doing our best to be ready at any time for the NABE deal. However, here, we have to follow the parliamentary process, and that's where the answer lies when this may happen. We do hope that it happens as soon as possible.

Next question. When does TAURON plan to publish the update of the strategy?

I understand the example of PGE excludes the date before the elections. Let me remind you when TAURON published the update of the strategy? In June last year. So the question, why should there be an update? The update was published last year. So, we are not even thinking about an update as of now.

Is the company expecting the increase of WACC for 2024, taking distribution in account the higher average interest rates for the treasury bonds over 12 months?

This answer was already asked before, partly. Of course, we are involved in the discussions with the regulator. It seems that as of now, the issue of such a simple passing on of interest rates is not taking place. You already have seen a substantial increase of the rate for distribution last year, for this year. And they didn't quite -- wasn't fully correlated with increase of interest rates. So, I think it's a broader discussion here of equalizing or averaging of a WACC of longer timeframe. I think we'll be able to say something more after further talks with the regulator. And first of all, in terms of the outlook for our distribution line of business, annually, we do it together with the full-year earnings conference.

And now ladies and gentlemen, the last question. When TAURON wants to depart from hard coal?

Here, the full decarbonization issue was indicated in our strategy. Of course, it's a matter of a NABE issue. We are supporting this process. We hope that hard coal-fired units will be spun off as soon as possible in the context of entire NABE deal. In terms of heat line of business because after those units of TAURON generation will still have some hard coal left in the heat line of business. We are connecting analytical work regarding the [ Wytwarzanie ] unit as well as the other units potentially. And here, the decarbonization efforts will continue. I can't give you an exact date of departure from coal. But the issue of decarbonization was indicated, is in line generally with expiration of all the coal mines in Poland.

Last refresh. No more questions. Ladies and gentlemen, thank you very much for the meeting. I'd like to invite you already today for the next meeting directly after the Q3 report is published. We'll provide you with information about the date of the conference in a traditional manner. Thank you very much. Have a nice day.

Thank you very much. Bye. [Statements in English on this transcript were spoken by an interpreter present on the live call.]